California Needs Budget Reform, Louisiana Offers a Model Agenda

As Stu Woo writes in The Wall Street Journal today, it’s not really a question of if, but rather how much, California will need to further cut spending to address next fiscal year’s projected budget deficit:

California’s fiscal woes aren’t over yet.Only months after state lawmakers in February had to raise taxes and slash spending to close a $42 billion budget deficit, legislators in May will begin work on filling a new multibillion-dollar shortfall. A state agency projects an additional $8 billion budget gap for the fiscal year that ends in July 2010, a result of declining tax revenue amid the recession. The figure could grow if revenue plummets further.

In yesterday’s Contra Costa Times, Cal State-Northridge econ professor Robert Krol proposed a sensible (and IMO, politically realistic and necessary) mechanism to identify and implement the necessary (and way overdue) budget cuts—a BRAC-style, bipartisan commission to develop a package of budget reductions, program cuts, and privatization.

If California wants to be economically competitive, government spending must be brought under control. One solution is to establish an independent bipartisan commission to propose a package of budget cuts.

To minimize the ability of special interests to secure favorable treatment, the Legislature and governor should be required to accept or reject the whole package, with no amendments allowed.

There are political advantages associated with forcing an up-or-down vote on an entire package of cuts. When a spending cut is directed at a specific program that benefits supporters of a particular legislator, it is political suicide for the legislator to support such an action. This problem repeatedly comes up in the budget process. […]

A similar approach was used by Congress in dealing with military base closings. […] A bipartisan commission was set up to hold hearings and recommend a group of bases that should be closed. Congress and the president had to accept or reject the entire set of proposed base closings, with no modifications. The commission has closed or downsized 706 military bases since 1988. […]

A California budget commission would evaluate the performance of all government programs: Has the program become outdated? Is the program or agency redundant? Does the program really deliver? Can the service be more efficiently provided by the private sector? Do the program’s benefits outweigh the costs? […]

[The commission] could propose lower funding, outright elimination or privatization of state programs and agencies. As part of the budget resolution process, the Legislature would have to vote and the governor sign off on the commission’s recommendations — the entire package with no amendments. This process could also provide state agencies clear performance standards. The possibility of program elimination or privatization would improve the quality of government services and lower costs.

Dr. Krol is right on target here. In fact, Louisiana Governor Bobby Jindal is already out in front on this issue, having recently announced something very similar to what Krol proposes as part of a larger package of budget reform proposals in the Pelican State (emphasis mine):

The second major reform initiative proposed by the Governor is the formation of a “Commission on Streamlining Government” to examine each state agency’s statutory and constitutional duties in an effort to reduce the size of state government.

The Governor said this commission will target programs and agencies whose functions can be consolidated, in addition to identifying opportunities for privatizing and outsourcing current state functions. He said the commission will propose recommendations for reform for an up or down vote to the Joint Governmental Affairs Committee before the next legislative session. Once approved, the Governor said he will work with the legislature and stakeholders to prepare the appropriate legislation needed to implement the recommended reforms into law.

Governor Jindal said, “This overhaul of state government is extremely important, especially in these times of national economic turbulence, to ensure that state tax dollars are being spent as efficiently and effectively as possible. Many state agencies were created 30 years ago and served a purpose that may or may not be relevant today.”

The idea is also very consistent with the government competition/efficiency boards (modeled after Florida’s Council on Efficient Government) that are on the legislative table in Arizona and Illinois right now. And what we know from Florida’s experience with its Council on Efficient Government is that it works.

More on this subject here, here and here, and be sure to revisit my colleague Adam Summers’ recent study on spending and revenue trends in California.

And on Louisiana, I’ll be focusing in on Gov. Jindal’s proposed budget reforms in the coming days and weeks as Louisiana’s legislative session gets underway. IMO, it may indeed be the most comprehensive package of proactive budget reforms that we’ve seen in some time. The aforementioned commission is impressive in its own right—now combine that with civil service reform and the Governor’s other annouced proposals, and you have a powerhouse set of policy initiatives in the making.