Jerry Brown unveiled his budget.  I haven’t had a chance to review it all, but I will before tomorrow.  However, I thought I would first start with principles to guide my Republican friends in the Legislature on how to analyze and deal with the budget issues they will face.  What I propose here is a little outside the box, but it can work in their favor if they choose to follow it.

The first thing for most legislators to understand is the lingo used by budget gurus.  What people hear from these budget types is noises that sound like English words, but those words don’t have English meanings.  For instance, a cut is not a reduction in spending, as most people would think.  It can be a fund shift, or it could be a decrease in the amount of projected spending increases.  Republicans cannot fall into the trap of using the words of the left or the budgeters.  Republicans must use real English to describe what is going on in the budget process.

A couple of important words:

(a) "Base" or "Current Year Budget" – That is how much money the state is spending on programs this year (2010-11).

(b) "Baseline" – That is what the state wants to spend in the budget year.  That may or may not be the budget plan.  The baseline takes the current year budget, and adds all the spending increases that "the law" requires.  When budgeters and the left talk about cuts, they are talking about cuts to the baseline, which, more often than not, are not reductions in spending at all, but rather, reductions in projected increases.

(c) "Budget Change Proposal (BCP)" – these are the documents that reflect the changes from the current year budget (the 2010-11 spending plan) to next year’s budget (the 2011-12 budget plan).  BCPs are the changes, line item by line item, to the baseline budget, and usually where the alleged "cuts" are defined, if there are any cuts at all.  These documents are nearly unfathomable, because they don’t usually explain how much was spent last year, what programs are in the line item, and how those programs are working.  The BCP will say "we had fifty positions (not even employees, since many positions are left unfilled), those positions cost us $XX amount in the budget year, and we will need four more positions next year to do the jobs you want us to do, but we only have money for 1 more position, so we are asking you to cut 3 positions."  Note, there was an increase in one position, but if you read the newspapers, they will report a cut of three positions.

These are basic mechanics in the budgeting process, and words used all the time.  It took me about three years to understand these things since I was not actively involved in the budgeting process in my first couple of years.  The next step is to analyze the budget using key principles.  First, don’t analyze the budget using the Governor’s or the LAO’s budget numbers.  They, quite frankly, are used to "sell" you on voting for the budget.  That is true whether the Governor is a Republican or a Democrat.  Most legislators get "suckered" into voting for a budget because they buy the budgeter’s language and figures.

The way to analyze the budget is first look at the current year revenue numbers, and compare those with the projected revenue for next year.  Since most budgeters look at the spending, then try to figure out a way to get the revenue to cover it, Republicans can be most effective at getting the revenue and figuring out a way to make the spending fit the revenue.  Looking at this year’s revenue, and then next year’s projected revenue gives you an idea of whether or not there will be a need for actual spending reductions (not cuts to the baseline).  Since this year’s Governor’s plan includes tax increases, you will have to first back those revenue projections out of the revenue number to get a real revenue number.  It may also be helpful to see what the current year spending would have been if those increases were not in effect (which can be done by backing those revenues out of the current year spending numbers).  All of these numbers exist, you just have to find them.  That is, by the way, why you have so many staff.

If there is a need for actual spending reductions, then the easiest method of figuring out what to do is to find a base year where the revenue is closest to the projected revenue in the budget year.  There really is no reason to use the current year as the base.  All of the documents, BCP’s, spending plans and questions can be answered by looking at the year in the past (usually less than five years ago) whose revenue numbers are similar to those in the budget year.  Your spending plan is then based on those number and proposals.

The public relations of that is really simple.  When the Dems or the unions start screaming about starving children and old people living on the street, your response is "Well, our budget is patterned exactly after the budget in 2005-06 (as an example).  I remember that year, children weren’t starving as a result of that budget, and old people weren’t losing their homes then, and quite frankly, the economy was better then" or words to that effect.  The spending reductions necessary are now understandable, and reasonable, to people.  They now have the tools to analyze their choices.  Do they want their taxes to go up, or a government the same size as it was two, three or four years ago.

Obviously, if after you analyze revenue projections, you find that you are spending more than the current year budget, then you set priorities and allocate the increased revenue to the programs, line items, or departments you believe are the most important.

Most important, DO NOT use their words.  Cuts to the baseline are not spending reductions, they are reductions in the amount of the increase government is demanding. 

One of the things most legislators will find is that even Republican budget staff use the budgeting language of the left.  They were trained in that language, and they haven’t broken away from that template because no one has pushed them to do it.  You will be told that I don’t know what I am talking about, but it is because I don’t speak their language, I speak English, not budgetese.  Trust me, what I have explained to you is exactly what happens.  If you understand this, you will not be deceived by the budget plans into doing something stupid, like vote for a tax increase in a year when revenues are increasing.  Until Republican legislators think outside the box, that is, focus on revenues, and not spending, they will be continually caught in the tax and spend mindset that feeds the government and the rhetoric of the left.  The language and the process of the current budgeting system often drives the outcome that leads to tax increases.  This is the first step in breaking out of that process.

Tomorrow, I will apply these simple principles to the Governor’s budget, and give the Republicans a means of coming up with an alternative budget that does not need tax increases, and gives them a public relations tool to overcome the rhetoric of the left.  Republicans should not be afraid of coming up with a plan.  They just need the tools to explain the plan to the public in a way the public understands.  Tomorrow’s blog will show that plan.

This entry was posted on Wednesday, January 12th, 2011 at 12:00 am and is filed under Blog Posts.