The state budget, a missed opportunity

In 25 years, California will be very different from the state we now know.
There will be nine million more Californians, and aging baby boomers will
double the current number of older state residents. Students in today’s Los
Angeles school system–73 percent of whom are now Latino–will be in the
middle of their work career.

Yet our state budget, the economic-investment blueprint for meeting these
challenges, is created each year through a dysfunctional process that leads
us further away from a balanced, long-term plan for the future.

A two-thirds vote is necessary to approve the budget in both legislative
houses, a requirement shared only with Rhode Island and Arkansas. And as
Proposition 13 redirected property-tax money back to property owners, the
state has relied primarily on personal-income tax and sales tax to fund the
budget.

As money has become more limited for each budget, voter-approved initiatives
have earmarked portions of the budget for education, transportation,
after-school care, local government and even the prison system–with the
“three strikes” initiative becoming a de facto minimum for the prison
budget.

Though expenses are relatively constant, revenues from sales and income
taxes fluctuate wildly with the economy, creating a boom-bust budget cycle.
Items the voters did not protect through initiative–primarily higher
education, environmental protection, and health and social services–are on
the chopping block whenever the economic picture turns downward.

Given this Rube Goldberg budget obstacle course, the Legislature does its
best to focus on California’s future needs. However, the governor last year
proposed an initial budget that would have taken us further away from
meeting the challenges of the future with our growing population, expanding
number of seniors, and need to adapt our education system for a changing job
world.

Specifically, the governor proposed cutting home care for seniors and the
disabled, cutting senior tax assistance and not passing along the federal
social-security increase. He did not propose a dime for Proposition 42
transportation projects. He walked away from his deal with the education
coalition to fund public education. He also proposed more borrowing and
would have left a structural deficit in place for future years.

In response, the Legislature started the budget process earlier and took
hearings on the road to ensure that Californians understood what was at
stake. By the time the budget was adopted in early July, after 100 budget
hearings, we had drawn the governor toward us on almost every one of these
issues.

While the Assembly was willing to raise taxes on wealthier Californians to
fund education, we could not get the needed two-thirds vote, even though
nearly two-thirds of Californians supported such a move.

This year, the governor proposed a budget that was much closer to where we
ended last year’s discussions. But his budget is predicated on taking
increased revenue for three fiscal years and using it all to cash balance
next year’s budget, still leaving a five billion dollar structural deficit
for the next Legislature and governor to resolve.

The governor’s proposed budget does not include money for almost three
billion dollars of “risks.” For instance, the state could lose major
lawsuits on CalWORKs and teacher retirement, and a federal judge is taking
over the prison health system and will require big spending on improvements.
Plus, the latest federal budget cuts have yet to be figured into the state
budget.

The governor’s budget proposed a reserve of just $153 million, which already
has been cut in half with additional spending proposals presented to the
Legislature at the beginning of April. While there have been increased
revenues since the January budget proposal, they might barely cover these
“risks” and a few budget tweaks, and have the potential of increasing the
“outyear” budget deficit.

We are able to patch together a budget that will work this year because of
an economy on the upswing. Assembly Democrats will maintain focus on key
priorities, including universal health insurance for children, college
access, environmental protections and full funding for transportation. But
under the current system, when the economy next turns down, we will have to
make big cuts that are counterproductive to meeting California’s future
needs.

It is time to reform the budget system, invest in education and
infrastructure, prepare for the graying of our population, and keep
California’s position as a pre-eminent world economy. But it looks as if
we’ll put off that opportunity at least one more year.