Much has been written about the August budget put forward by Governor Schwarzenegger last week. At his press conference announcing his plan, the Governor said that his budget plan was “a fiscally responsible compromise” and will “put our state on the road to fiscal sanity.”
In reality, after spending some time looking it over, and discussing it with state policy experts in more detail, the Governor’s proposal will do nothing of the sort. It includes more borrowing and higher taxes on hard-working Californians so the liberal majority in the Legislature can increase spending by billions of dollars. Worse for taxpayers, his plan will still leave California with a $7 billion deficit next year.
The Governor said that more borrowing in the budget is “not a wise idea and I will not do that.” This is very confusing because on the face of it — well, it’s not true. When I look over the plan, I see billions in borrowing. Maybe the Governor means that he won’t close the addition gap between what Democrats thus far have put forward and fiscal reality, that Republicans would like to see closed with spending cuts, with more borrowing?
From my read on the plan, the Governor would balance the budget by issuing $3.3 billion from the Economic Recovery Bonds approved by voters in 2004 (remember = bonds are borrowing from future generations). Then in 2009-10, the Governor skips the state’s scheduled $1.5 billion repayment on the Economic Recovery Bonds, using that money instead to fuel spending.
In 2009-10, the Governor’s budget is built with close to $5 billion in sales tax increases on hard working Californians, $5 billion in borrowed funds from the lottery (they call it "securitizing" – a fancy word for borrowing) and skipped scheduled payments for prior year borrowing. On that sales tax increase that the Governor calls "temporary" – I’m still waiting for a list of "temporary" tax hikes around the country that did NOT end up being permanent increases.
From what I understand, his plan borrows $650 million from special funds, which are dollars paid by user fees and dedicated for one specific program or another. It also would permanently take away $225 million from local government to help balance the budget, despite claiming that his budget does not “borrow or steal money from local governments.” Yep – more "borrowing" – this in the "no borrowing compromise budget" he put forward…
The Governor argues that his plan includes reforms that will “set up the strongest rainy day fund in the nation, so that we could be required to put money aside in the good years and stabilize revenues in the tough years.” That sounds great — but I understand that his budget proposal for 2009-10 would not transfer even one penny from the General Fund to the budget reserve. How would this make any difference in building a reserve to protect essential services? This sounds like a case of “do as I say, not as I do.”
He talks about how his compromise budget contains more cuts than proposed in other budget plans. But his budget will allow the government spending spree to continue next year. It rejects a planned $3 billion debt payment, freeing up money to continuing feeding the spending addiction of the liberal majority that has brought our state to the brink of bankruptcy.
In agreeing to raise taxes and "revenue" by over $9 billion next years through a one-cent sales tax increase on working families and continuing the massive borrowing, the Governor is simply giving in to the irresponsible budget priorities of Sacramento Democrats. Years of reckless overspending by Democrats caused our $15 billion budget deficit in the first place, and the Governor’s compromise budget allows them to keep spending more on bigger government.
Democrats are not interested in real reform, nor are they interested in fiscally-responsible solutions to our state’s budget problems. You can count on them to marshal whatever resources are necessary to defeat any reform put on the ballot. By giving in to their demands for higher taxes, the Governor is paving the way for higher spending and higher future deficits, not to mention breaking the most consistent and straightforward promise he made to California voters. But it is not too late to reverse course, and keep his pledge, and force Democrats to cut billions more in state spending…
I know we can do much better than the Governor’s "compromise budget" introduced last week. Californian expect and deserve a flexible state government, capable of downsizing as quick as it "upsizes" when funds are just not available. The Governor is correct that our woes will continues without real budget reform — which must include a real spending cap, to ensure that we don’t get into this trouble again — assuming that we can fix out current problems, which will only happen if the Governor joins his fellow Republicans in the legislature, and demands a balanced budget without higher taxes and with budget reform. Nothing less will do.
Care to read comments, or make your own about today’s Daily Commentary?
Just click here to go to the FR Weblog, where this Commentary has its own blog post, and where you can read and make comments.