Policy Study

Citizens’ Budget

How to Balance CA Budget without Tax Increases

Executive Summary

It is amazing what a difference four short years can make. In 1998, California was running a $12 billion surplus-economically on the rebound and adding nearly 500,000 new jobs to its economy that year. Yet, in the past four years, California has fallen from the most jobs-friendly state to the least jobs-friendly state in the nation. Instead of saving record-breaking one-time surpluses produced by the stock bubble of the late 1990s, the state went on an unsustainable (and undeniable) spending spree in 1999, 2000 and 2001. As a result, today California faces a monumental budget deficit of between $26 and $34 billion dollars-and its economy has shed over 489,000 jobs alone since March 2001!

The state’s budget deficit is merely a symptom of an overall decline in our quality of life in California. Indeed, in terms of cost of living and quality of life, the average Californian is finding living in our state harder and less satisfying.

Businesses are leaving the state in droves-not because consumers are not spending, but because the price of operating in California has skyrocketed due to higher costs for energy, workers’ compensation insurance, and regulation. Mismanagement of the state’s finances only contributes to a growing sense of uncertainty for businesses. In a sick cycle, as more jobs leave the state, the deficit gets worse with fewer and fewer taxpayers contributing. If every Californian that wanted a job could get a job, the state would actually face a budget surplus this year.