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"There's Always Next Year" for a Sound California Budget

Adam Summers
June 26, 2012, 1:58pm

As a long-suffering Chicago Cubs fan, one thing came to mind as I pondered the latest state budget that California legislators are in the process of finalizing: there's always next year. Each year Cubs fans get their hopes up that this will be the year that they break the Billy Goat Curse and end their long World Series drought, now up to 104 years. Alas, each year hopes are dashed (oftentimes early in the season) and fans are left to hope that next year things will be different.

It is much the same with the California budget. Every year taxpayers hope that this will be the year legislators and the governor will get their act together, act like adults, and address the fundamental, long-term problems that plague the state's budgeting process in an open and honest manner. And, just like Cubs fans, they are always disappointed as policymakers ignore the important issues, money is wasted on failed or useless pet programs, and the accounting gimmicks and overoptimistic revenue projections quickly unravel to reveal a substantial deficit (which is usually followed more proposals to increase taxes).

This is the subject of my most recent commentary. Below is an excerpt of that column.

While the usual special interests will bemoan supposedly severe budget cuts, as with the struggling European governments, claims of austerity are illusory. The budget passed on June 15 calls for $92.1 billion in (General Fund) spending, an increase of more than 6 percent over the current budget. This would be the biggest budget since the recession, eclipsed only by the 2006-07 and 2007-08 fiscal years at the height of the financial and housing bubbles.

The budget also estimates that General Fund revenues next year will total $94.4 billion, more than 10 percent higher than the $86.8 billion received this year. Keep in mind that the new budget bill assumes passage of Gov. Brown's tax increase proposal in the November election, and the resulting $8.5 billion in additional tax revenue. In other words, without the tax increase, revenues would be about $87 billion, basically the same as this past year. This is hardly a crisis—unless you continually spend more money than you have.

[. . .]

Yet, what has been the reaction of the legislature and the governor? They are planning to waste more money by spending over $2.8 billion this year (and untold tens of billions in future years) on a high-speed rail boondoggle that everyone and their mothers, from both sides of the political aisle, have criticized for its lack of feasibility, ridiculously optimistic assumptions, and poor management. In addition, the legislature has opted to punt on even the modest public pension reforms offered by Gov. Brown when the Senate refused to approve putting Brown's 12-point pension plan before voters on the November 2012 ballot. According to the Stanford Institute for Economic Policy Research, CalPERS faces an unfunded liability of $170 billion, while CalSTRS has a $104 billion deficit. Local governments are looking at an additional $136 billion in unfunded liabilities. Moreover, according to the State Controller's Office, unfunded health-care benefits for retired state employees are an additional $62 billion.

Yet the legislature continues to put its head in the sand and hope the problem will go away. Perhaps it is expecting to tax the state to prosperity, despite the fact that this never has worked in the past and never will work. Even Democratic State Treasurer Bill Lockyer, who has indicated his support for Brown's tax increase, is growing wary of the increasing tax burden being placed on the state's richest and most productive residents. Addressing the effects of additional tax increases, particularly on the wealthy, Lockyer noted: "The potential for out-of-state migration is substantial enough that we have to be very sensitive about those rates."

At least California residents have a power that Cubs fans do not: they can change the players and even the rules of the game. If lawmakers do not start taking their responsibility to produce an honest and responsible budget more seriously, they may find that the taxpayers will make more and more of those decisions for them.

See the full article here.


Adam Summers is Senior Policy Analyst


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