“We have wrought in just two years a solid and enduring budget,” Gov. Jerry Brown declared in his State of the State address, Jan. 24. “Against those who take pleasure, singing of our demise, California did the impossible.”
In reality, Gov. Brown’s budget increases unsustainable spending by relying on revenue that is unlikely to materialize and by simply ignoring most of the state’s debt. It also violates promises Gov. Brown made to voters leading up to the November 2012 election.
Gov. Brown says his proposed budget is “a balanced state budget” that “keeps California on a long-term path to fiscal stability” while eliminating the deficit and creating a $1 billion reserve. We’ve heard it all before. Just seven months ago, the governor’s press release for the current budget said it would close a $15.7 billion deficit and build a reserve of nearly $1 billion. None of that turned out to be true. And in January 2011, Gov. Brown released yet another “balanced state budget” that “slashes spending by $12.5 billion.” That budget reduced spending by $5.5 billion and the state deficit grew.
The 2013-14 budget Gov. Brown is now selling as a series of tough choices and fiscal discipline actually spends more money than the record-breaking, budget-busting levels of 2007-08.
Gov. Brown manages to increase spending while claiming to balance the budget by forecasting astonishing revenue growth. He waves away the state’s, and the country’s, current economic stagnation and envisions large buckets of tax revenues coming Sacramento’s way. He also ignores California’s 9.8 percent unemployment rate, predicting large job gains, and assumes a boom in the state’s housing market and real estate values.
If there were ever a time frame that offered a lot of reasons to be very conservative about revenue growth projections, the coming year would be it.
The housing and real estate markets in California have crawled out of the negative and, if the foreclosures don’t send it spiraling back down, this year may see some continued improvement, but not the hot market Gov. Brown’s budget assumes.
Jobs growth fell in December, and California’s unemployment rate remains at 9.8 percent with little job creation optimism about the coming year. And the state doesn’t have any major data yet on how Californians will react to the tax increases passed in November.
Also problematic is the way Gov. Brown’s proposed budget sets aside most of the state’s debt and the spending associated with it.
He only counts the state’s $34.7 billion in short-term debt, but ignores the rest of the “Wall of Debt,” including the $80.7 billion in general obligation bonds and the roughly $500 billion in unfunded government worker retirement liabilities. Those bills have to be paid and will almost certainly push this budget out of balance.
The new twist this year is how Gov. Brown’s proposed budget brazenly violates the promises he made leading up to the November election.
Gov. Brown stumped vigorously for the Proposition 30 tax hikes, saying, “You vote for Prop. 30, you know you’re getting six to eight billion dollars pumped into California schools.” Yet his proposed budget spends just $2.7 billion out of the $6 billion tax hike on schools. The rest goes to state workers’ pay. Gov. Brown compounds this sleight of hand by then proposing to spend Prop. 39’s $1 billion in new taxes raised on schools, even though the law clearly says that money has to go to “green energy” projects.
Gov. Brown’s budget is not balanced and will not reduce the debt. It doesn’t even use the new tax money voters just approved as they were promised. In May, voters will likely be told that “unforeseen” circumstances have caused another round of budget woes.
Gov. Brown claims balancing the state’s budget was an “impossible” task.
It is very possible to fix the state’s finances, but California will never get back on the right fiscal track if people don’t start holding the governor and Legislature accountable for their budgetary gimmicks and trickery.
Adrian Moore is vice president of policy at Reason Foundation. This column originally appeared in the Orange County Register.