August 2002

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State Budget 

Tim Leslie is a member of the California Assembly, representing Alpine, Amador, Calaveras, El Dorado, Mono and Placer counties. This is a sequel to his commentary “Candy Over Compromise” that was published in the September 2001 issue of Cal-Tax Digest.

One year ago, I wrote an editorial comparing the state budget to a corpulent child whose over-indulgent grandparents continue to stuff him with sweets despite his ballooning waistline and declining health. Given the majority party’s inability to accept almost any form of fiscal restraint, it comes as little surprise that we now find our not-so-little lad in the emergency room.

The cause of his poor health is quite obvious: unrestrained appetite. Over the course of Governor Davis’ term, State expenditures have swelled 37%. To set that number in context, note that California’s population has grown only 5% in the same timeframe. As a result, state spending as a percentage of personal income is higher than ever before.

California’s fiscal condition, in contrast, is at an all time low – our budget deficit stands at $23.6 billion. The Golden State’s budget shortfall, in fact, is equal to the total deficits facing 38 other states combined. Our chubby chap is sick indeed.

Two years ago, State coffers were overflowing as windfall revenues poured in from record capital gains. Republicans, knowing that markets both rise and fall, warned that becoming accustomed to such excess would be dangerous.

The spending that ensued, however, was gluttonous. Growth in government expenditures outpaced the growth in Californians’ personal income nearly 2 to 1.  Worse yet, despite California’s desperate need for infrastructure investment, relatively few of these dollars were committed to our most critical needs: highway improvement, water projects, school buildings, and the like. Instead, the bulk was frittered away on new programs, bureaucracy growth, and political pork – expenditures that can be taken back only over the screeching protests of interest groups who have come to expect the money.

As a result, despite the fact that capital gains revenues have indeed ebbed, the governor and the majority party find thoughts of spending cuts appalling. The governor’s budget proposal called for only a hair’s breadth less spending than budgets he designed in the years of plenty. Most of the “cuts” he suggested were actually just decreases in the scheduled growth of expenditures. Instead of making substantive reductions – say, cutting back to 1999 or 2000 levels – Davis wants to raid the state’s highway account and other special funds, increase taxes, and enlist Enron-style accounting tricks to paper over the deficit to get himself through November.

Democrat legislative leadership has made things even more difficult by reversing many of Davis’ “cuts.” The budget proposal they are currently pushing actually calls for spending more than last year – despite the massive deficit.

A physician who has examined our bloated boy – the non-partisan Legislative Analysts Office – has warned that if no changes are made to the current budget plan, we can expect a structural deficit of at least $10 billion dollars next year and for many years beyond. This may not seem too bad, given the size of the current deficit.  But since Davis is using up all the fund transfers, shell games, and accounting tricks this year, by next year it will be too late for mere diet reductions. Major surgery will be unavoidable.

Even so, Davis is still doing everything he can to avoid depriving our chubby child of his treats. Just like last year, he and legislative Democrats have laid the table for a pork feast, hoping to buy four Republican votes so they won’t have to compromise at all. (It’s rather like the emphysema patient two doors down who keeps sucking on her cigarettes.)

Given their minority status, Republicans won’t be able to force any “liposuction” this year. But thus far, at least, they are holding firm on demands for a minor dose of Jenny Craig – $5 billion in cuts and a constitutional amendment to limit the growth in future state spending to no more than the percentage of growth in personal income. If we’re to have any hope of future fiscal fitness for our tubby tot, let’s hope they refuse to take food from the king’s table.