Longtime FR friend Jim Brulte, the former Leader of both the Senate and Assembly Republican Caucuses, penned this commentary after reflecting on the Governor’s May budget revisions, announced yesterday.
Fiscal Conservatives Have Got To Rally Around The Governor’s Budget And His Call For Rainy-Day Fund
By State Senator Jim Brulte, Ret.
Before this year’s state budget gets picked apart by the interest groups who always want more funding and spun up by legislators who have to position themselves for re-election, I want to note a few things about the Governor’s May revision.
A Governor is the only elected official in Sacramento who has to make a budget work. Legislators of both parties will find reasons to support and oppose certain elements of any governor’s budget. But with very few exceptions, legislators never put together a complete budget….and with even fewer exceptions almost everyone in Sacramento (and DC for that matter) tends to overspend.
But back to the budget. Conservatives should like that the Governor reaffirmed his call to make real reductions in spending…mostly in healthcare and social services. They should like that the budget is not predicated on tax increases. They should like his desire to get more value for state owned assets….but what conservatives should love is his call for structural budget reform…..the Revenue Stabilization Fund.
Arnold has correctly assessed the major structural problems with California’s budget process: 1) volatility of revenue and 2) chronic overspending. The revenue Stabilization Fund will serve to limit state spending now and in the future.
I cannot stress enough how important this element is. Budget reform is needed to curb the out-of-control spending that happens year after year. Politicians are human beings and it is important to recognize that this reform is needed to protect politicians from their overspending tendencies. Both Republicans and Democrats are guilty of overspending. It shouldn’t be lost on anybody that the legislative leadership of both political parties have held press conferences over the last few weeks calling for MORE spending than the Governor called for in his January budget proposal.
A rainy-day fund is the best process to limit spending and prepare for future revenue shortfalls.
At the end of the day, if California comes away from this budget year with a solid rainy-day fund in place, fiscal conservatives can claim a huge win. Let me explain how that rainy-day fund – the “revenue stabilization fund” – will work:
First, we’ll establish a 10-year average revenue level. When revenues come into the state above that average level of increase, that excess will be deposited into the revenue stabilization fund. Instead of spend-happy legislators grabbing that extra revenue and creating new programs, California will be forced to save in good times. Then, in years of slower economic growth, those funds will be available only to help balance the budget. The mechanism would control the rate of revenue growth and, effectively, control spending growth.
Now, in the current budget year, Gov. Schwarzenegger has already proposed deep cuts that, themselves, control spending growth in many areas. Funding to many human services programs, for example, has grown over the past decade at a rate more than twice the growth of General Fund spending. The Governor’s proposal ratchets back that rate of growth. Another good indication of the nature of the cuts is the sharp attacks it has generated from Democrats. In sum, the Governor is attempting to slow the rate of spending growth across the board.
What’s more – and this is a hugely important point – he’s doing it without the normal Sacramento tricks of raiding pension accounts, robbing from local government or stealing the Prop 42 transportation funds.
Conservative will be able to find items we do not like in the budget…..but we should keep our eyes on the bigger ball of structural budget reform. Not only is that the long-range budget fix that will control wild spikes in revenues and spending, but it is also the tool that fiscal conservatives in the Legislature can use in future years to hold firm against those who clearly want to raise taxes and balloon the size of state government.
So, I see a lot of wins for fiscal conservatives. And before we get to picking this thing apart, I think we ought to keep that perspective.
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