The California State Budget — some thoughts…..
In general, I think the Governor has made a respectable effort to implement a 10% cut to state 
agencies – a level of cut that should have been taken years ago to eliminate the structural deficit.
There are fewer gimmicks than previous budgets – which is good, but because he has included $430 million in revenues from the 2007 Tribal compacts, it is critical that these compacts go into effect this year and that the voters approve Props 94 – 97. And speaking of Indian gaming, I am flat stunned that the Governor would fail to include any funding for local gaming mitigation grants from the Special Distribution Fund. This is a breach of the agreements reached between
The Governor is also wrong to include public safety within his budget axe. Releasing 22,000 felons early will not save money, but will jeopardize the safety of our communities. Crime costs far more in physical damage to lives, property damage, lost economic opportunities, and general community deterioration then does incarceration. This policy proposal is a dangerous mistake and one that the legislature should flatly oppose. (I know I will)
While I strongly disagree with this new prison proposal, I am thrilled the Governor continued funding for the Internet Crimes Against Children program which I championed last year. The additional million dollars in funding will allow this cutting-edge program to continue to target the spread of child pornography and sexual abuse over the internet. Governor Schwarzenegger deserves a big THANK YOU from all of us on this one. He did good.
Unfortunately, the Governor’s proposal is also wrong to embrace a tax increase as a means of funding our state’s firefighting activities. It is wrong to punish taxpayers, many of whom have been directly impacted by fires this year, with higher insurance premiums.
The Governor’s budget also continues the fiction that public works projects are healthy for our state’s economy with another $40 billion in bonds proposed for 2008. Our state simply cannot afford billions of dollars in extra debt payment right now. We should be reducing debt, not expanding it. The Governor seemed enamored with FDR’s public works program when he spoke about
We need to go back to the bold plans that the Governor came into office promoting. We need to relentlessly ferret out waste, quit our reckless spending ways and make a commitment to selling surplus property.
Some other thoughts:
On the budget itself: The deficit is STILL growing, which continues to validate the Senate Republican’s position last year. As of today, the deficit is now up to $14.5 billion ($3.3 billion this current year)
All those people / editorial pages that criticized and condemned Senate Republicans for holding up the budget last year owe us an apology. They should now wish we had held up the budget then for more cuts.
Here are some of the Governor’s general solutions (and my thoughts on them):
He’s proposing a 10% cut to most programs – excluding debt service and pension obligations. This is, for government, a decent cut, although since it’s taken from the "working budget", which includes caseload projections, it’s not as real as it should be. For example, if an agency budget is $10 million and it’s going increase to $20 million next year because of caseload growth. The 10% cut is taken from the projected $20 million, not the existing $10 million. This means the "cut" is $2 million (instead of $1 million), but the overall budget increase is from $10 million to $18 million (plus the $2 million cut makes $20 million). Thus goes the machinery of government budgeting. We still spend $8 million more then we did last year, but less then we would normally. This is just a hypothetical budget example, but the policy is accurate.
Puts a suspension on virtually all COLAs. Good move.
Declares a fiscal emergency – this is somewhat benign: it’s new territory, and the law is so vague, no one knows how to implement it. It won’t be bad, but it’s not going to help our present situation. It will help the Governor in his PR battle with the Democrats.
Spends the remaining $3.3 billion of Economic Recovery Bonds to bolster this year’s reserves – this is designed to help with the Revenue Anticipation Note problem (the rest of the RAN problem is addressed by delays in payments for various state programs). This is an issue where the state will literally run out of cash by the end of the fiscal year. These Notes are used to "smooth" out our annual cash flow, but Wall Street won’t issue them anymore because of the chronic deficits.
Proposes another (presumably tougher) Budget Stabilization Act to reform the budget process – surplus revenues are held in reserve, "automatic" spending cuts when mid-year projections show a looming deficit, spending is capped. As before, the devil is in the details. If the Dems water it down, which they likely will, the Act is meaningless.
Indian Gaming: The budget assumes $430.4 million from Tribal gaming revenues; $396.8 million comes from the 2007 compacts and points out the need to approve those compacts in February.
Bonds: the Governor is proposing ANOTHER $48 billion in infrastructure bonds (my head is spinning), to target high speed rail, courts, schools, water, and universities ($40 billion proposed for the 2008 ballot). Stop the spending! ‘Nough said.
There is a proposed 10% legislative cut of $26.5 million – he includes all the state constitutional officers as well in the 10% cut. Any, and every, state agency (except public safety) can easily absorb a 10% cut – the legislature included.
Taxes are raised: a 1.25% surcharge on all residential and commercial property insurance in the state to fund the state’s firefighting capabilities. Nope. Nope. Nope. Let’s stop punishing taxpayers for our inability to show spending restraint.
Public Safety: His 10% also hits various public safety programs like COPS, booking fees, and the small / rural sheriffs program. I know this isn’t "fiscally conservative" of me, but we should be spending more money here.
What are your thoughts? How do we solve this epic budget crisis?
It will be a loong hot summer – for sure.
BTW — (Thanks to my Legislative Director, Mark Reeder, for all his work on this with me today – I have great staff :-)