According to the State Controller's reports, last year, our tax structure produced $96 billion in actual revenues -- a record year. We budgeted $103 billion and spent $107 billion. In short, our spending exceeded our revenue by $11 billion and exceeded our adopted budget by $4 billion. This year, if the economy gets no worse, we can expect to produce $97 billion in tax revenues. Claims that the revenues will be higher are based on accounting gimmicks that mask the numbers but do not change the underlying reality. This budget authorizes $104 billion and if last year was any indication, we can expect to spend at least $108 billion. So the next budget will see us $11 billion further behind than we are right now. I have often been criticized for opposing the budgets that have brought us to this sorry point. But I think you will find that my budget predictions have been pretty close to the mark over the years. So I leave the Senate with this warning. I believe that last year's budget pushed this state beyond a fiscal tipping point. The unsustainable growth of spending pushed us beyond a point where neither tax increases nor conventional line item reductions can bring us into balance. As I have warned, our tax burdens have for some time placed us beyond the point where tax RATE increases produce tax REVENUE increases. Quite the contrary, as we proved in 1991, increasing tax RATES produces decreasing tax REVENUES. But through those years, fiscal restraint and conventional reductions could have kept our finances in balance. Unfortunately, that was the road not taken. I believe we have now also passed the point where conventional budget reductions can restore our state's finances. I believe we have now reached the terminal stage of a bureaucratic state where our bureaucracies have become so large and so tangled that they can no longer perform basic functions. This fiscal crisis will now only get worse until we are willing to tell the prison guard's union, "Sorry, but we're putting our wardens back in charge of our prisons." It can only get worse until we are willing to tell the teacher's union, "Sorry, but we're putting our teachers back in charge of their classrooms and putting our principals back in charge of our teachers." The bureaucratization and the centralization and the unionization of our service delivery systems have simply priced our government beyond our economy's ability to support. Revenues CAN be increased, but not by increasing tax rates in one of the most heavily taxed states in the nation. Revenues can be increased by reducing the regulatory burdens that are choking off our commerce and producing both the biggest domestic out-migration in our state's history and one of the highest unemployment rates in our nation. We have a model that we know works -- because a generation ago, it produced a very high quality of public service at a much lower cost than see today. It maximized management flexibility and it required accountability at the service delivery level. It minimized the burdens on commerce and enterprise. It recognized that only when commerce and enterprise flourishes can we finance the basic responsibilities of government. It maximized individual freedom and it minimized intrusive governmental interference in productive pursuits. I am painfully aware that the political will does not exist to restructure our bureaucracies in this manner. So I close my 22 years in this legislature tonight with this final warning: California's budget crisis will only worsen until the public elects a legislature and a governor willing to restore the governing principles and practices under which this state once flourished, or until the credit market finally stops lending the state money. But I also close those years on this note of hope. California has everything in the world going for it -- the most equitable climate in the Western Hemisphere; the most bountiful resources in the continental United States; we are poised on the Pacific Rim in a position to dominate world trade in the next Century. The only thing we lack is wise public policy. And it is only a matter of time before those policies are changed and we can recover our rightful place as the Golden State of our nation.
Sen. Tom McClintock: Budget has pushed California "beyond a fiscal tipping point"
Below are the remarks of California State Senator Tom McClintock, longtime champion of limited government, fiscal responsibility, and individual liberty, on the condition of California's budget and the likely future of state government, barring an unlikely dramatic departure from the path it has taken for many years (reprinted from Chris Reed's San Diego Union-Tribune Opinion Page blog). As Mr. Reed notes, McClintock was one of just 11 no votes on the "compromise" budget deal in the Senate.