The Dimensions of the Disaster: 21-28-36
January 8, 2003 • Speech by Senator Tom McClintock
Three numbers tell the entire story of California's fiscal meltdown: 21, 28 and 36. Understand them and you will have transformed the Byzantine mysteries of the state budget into precise mathematical order.
In the last four years, population and inflation have grown at a combined rate of 21 percent. California general fund revenues have grown 28 percent. General fund spending has grown 36 percent.
The spending lobby insists that California got into its budget mess by irresponsibly slashing car taxes, thus leaving the treasury dangerously vulnerable when the recession struck and state revenues plummeted. Without offering such specifics, Gov. Gray Davis on Monday flatly said the state wasn't responsible for the red ink.
The facts paint a quite different picture. Even after taxes were cut and after the economic bubble burst, general fund revenues have still outpaced combined population and inflation growth by fully one-third during this administration. Obviously, California isn't suffering a revenue problem.
What it has suffered is a monumental spending problem: growing 36 percent in four years.
Not that we've seen a 36 percent increase in highway or school construction or water storage or electricity generation or anything else that government is responsible for providing. We've paid for it. We just haven't gotten it.
What we have gotten is a 38 percent increase in state payroll costs, a 38 percent increase in health and welfare spending (even though the welfare caseload is down 20 percent), and a 16 percent increase in prison costs (even though the prison population is down 0.6 percent).
In fairness, local government assistance has increased to replace lost vehicle-licensee fee revenues (even while local property tax collections have ballooned).
Yet even ignoring these subventions, state spending has still streaked nine points ahead of inflation and population.
According to Democratic Assembly Speaker Herb Wesson, "If we fired every state employee—I mean every Highway Patrol officer, every UC professor, every parks patrol officer—we would still be more than $6 billion short."
That's one way to look at it.
Here's another: If spending had merely kept pace with combined inflation and population growth, today's budget would still be a hefty 21 percent bigger than it was four years ago. But instead of an expected $35 billion deficit, we would today have a $5 billion surplus.
Or another: If the current year's budget was reduced just 9.5 percent across the board starting now and held there for 18 months, the entire deficit would disappear.
That would require deferring some pay raises, postponing some projects, eliminating duplication, (combining the Franchise Tax Board with the Board of Equalization, for example), selling surplus property—the same sort of things that any family would do in similar circumstances.
But of course, most families wouldn't have gotten themselves into this fix. Most families would have told you that if you spend every dime that comes in during the good years, you're going to be in big trouble in a bad year.
And that's where California is today. But instead of dealing forthrightly with the problem, California's officials will raise taxes. We already hear the ransom demand: a dollar of taxes for a dollar of cuts. If that happens, an average California family doing its best to cope with a serious recession will feel its tax bill hiked $1,800 to continue the state's spending binge.
The next time you hear that California's fiscal problems were unavoidable, or that it has already cut to the bone, or that it can't deal with the problem without some "revenue enhancements," remember how to measure a prodigal state: 21 percent increase in inflation and population; 28 percent increase in revenues; 36 percent increase in spending.
Ronald Reagan liked to say that "facts are stubborn things." And those are the stubborn facts.
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