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Larry McCarthy is president of the California Taxpayers’
Association. This
commentary is based on a report that Cal-Tax has prepared for
consideration by the state Legislature. This document will be posted
at Cal-Tax Online (www.caltax.org).
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In
the face of yet another projected multibillion-dollar general fund deficit,
California’s state and local policy-makers have opportunities to make the state
more competitive for jobs and at the same time meet priority spending needs of
residents.
Unfortunately, the budget process in
Sacramento, which allocates nearly $100 billion a year, is inadequate to the
needs of Californians who depend on public services and to taxpayers who pay for
these services.
The California Taxpayers’ Association
urges state and local policy-makers to proceed with the following:
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Remember that the largest revenue opportunity for the state of
California is an improving economy. Avoid new taxes
and fees – and more budget gimmicks. Higher taxes carry with them high
risks with long-term consequences that could cause serious harm to the economy,
particularly split-roll property taxes and schemes to tax high-income investors
in the California economy. New taxes and fees will further destabilize the
economy, slow recovery, and reduce revenue to public agencies over time.
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Take advantage of opportunities
for positive steps to steady the state’s financing system. Improved financial management and planning will help protect this state from
the impact of vast swings in revenue during economic turbulence. California
must do a better job of managing its boom-and-bust revenue system. Surges in
revenue can be invested to move the state forward instead recklessly
over-committing taxpayers to ongoing programs.
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Avoid committing to new
programs that will further obligate this state’s taxpayers. Until state finances are brought into balance, policy-makers must avoid
loading new obligations on taxpayers, like paid family leave. This enormously
expensive new program is paid for with new taxes and was enacted as the state
faced a massive budget deficit last summer.
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Review new programs, reports of
fraud and out-of-control spending, and lower-priority spending.
There must be greater
accountability in government budgeting. Cal-Tax has compiled press reports
that identify billions of dollars in fraud or mismanagement of tax dollars at
state and local levels. These cases demonstrate the need for a complete
evaluation of the spending base in California. (See details at
Cal-Tax Online,
www.caltax.org, and click on
Tax $$$: Fraud and Waste.)
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Apply economic stimulus to create
jobs and expand the state’s economy. Private-sector jobs and investment result in increased revenue to the state
and local agencies. California’s economic health and the flow of revenue to
public agencies depend on the state’s ability to attract investment.
Unfortunately, policy-makers in the state have gone the other direction by
substantially increasing the cost of business operations for workers’
compensation insurance, unemployment insurance and other employer costs.
Piling on more tax burden is short-sighted and further damages California’s
ability to compete for jobs.
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Consider performance
contracting to bring competition into the public service delivery systems. This strategy has produced savings ranging from 10 percent to 40 percent in
jurisdictions that have used this option. Jurisdictions around the country
and in California are improving the quality of public services and controlling
costs by bringing competition and performance measurement into delivery of
services.
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Beware of the “spending lobby.” Special interest spending advocates often resist financial management,
including performance standards and cost-effectiveness measures. Advocates for
public-sector spending, such as public employee unions, refuse to be realistic
about California’s financial problems and agree to any belt tightening, which
is a reality for the private sector in an economic downturn. Regardless of the
special-interest lobbyists protecting them, lower-priority government programs
cannot be immune from review.
The budget
deficit should be seen as an opportunity to rid the books of lower-priority,
wasteful and mismanaged spending. Until that happens, most Californians cannot
be expected to pay higher taxes on their cars, their phone bills, their income
or their purchases.
The $75 billion
in general fund revenue expected to flow to the state in 2003-04 would more than
cover the state budget for the 1999-2000 fiscal year. This was hardly a medieval
state 48 months ago. Obviously, costs have been driven up by an increasing
population, putting pressures on social services and education. However,
spending has grown at a faster pace than inflation and population,
over-obligating state taxpayers. Adjustments must to be made on behalf of those
who depend on critical public services and taxpayers. The place to start is
with blatant examples of mismanagement public spending, not raising taxes to
sustain unjustifiable practices. |
