My Turn: California budget reform is all about fiscal discipline
Gov. Arnold Schwarzenegger recently released his draft of the 2008-2009 budget where he outlined his proposed budget reforms to correct automatic overspending in the budget due to formulaic budget spending requirements.For many years I have worked with my Republican colleagues to reign in spending and advocate for much-needed structural reforms to the budgeting process. California suffers from onerous auto-pilot spending requirements, undependable revenue sources, and misplaced fiscal priorities.Last year Republicans were successful for the first time in negotiating a healthy budget reserve of $4.1 billion, the largest in our states history. This is greater than or equal to the entire annual budget of 11 states in this country. Yet only a few months later, we find ourselves with a $14.5 billion deficit projected over the next 18 months. This illuminates two fatal flaws in our state budget structure. First, it underscores the degree of volatility that exists in our existing revenue sources. According to the Governor, this volatility is a direct consequence of the fact that in our revenue structure, the top 10 percent of income earners pay nearly 80 percent of all of our taxes. Changes in economic conditions like the recent housing market down-turn, and the stock market decline before that, have a pronounced effect on this relative small group which, in turn, has a pronounced effect on the revenues to the state. Second, we have experienced an increase in revenue of 40 percent over three of the past four years, but spending increased 44 percent during that same time period. Formulaic spending requirements that raise spending obligations during economic booms take no account of the spending adjustments required during flat revenue years which almost always inevitably follow such a revenue boom. The minimum required funding based on these voter-approved formulas only goes up. This simply cant continue.I support the Governors proposed 10 percent across-the-board spending reduction for next years budget. But unless we address the larger structure and volatility issues, we are merely working around the edges of the causes of the fiscal problems that confront us.In response to the budget crisis, Democrats as a start have proposed $500 million in higher Internet sales taxes, a $6 billion car tax hike, and eliminating homeowners mortgage interest tax deduction; which will essentially result in a $5.3 billion tax increase. I have made it clear that I will not support any tax increase to solve the states budget problems. As I have said before, and as a 44 percent increase in spending over the last four years has demonstrated, we have a spending problem first and foremost; tax increases would only result in more spending in Sacramento and wouldnt result in any real or long lasting budget reform. It would be merely feeding the problem.As a cost-saving measure, the Governor is proposing the early release of over 22,000 inmates from prisons across the state. While current prison overcrowding and correctional costs are a concern, we must never consider endangering the public by releasing prisoners as an answer to our budget problems. Our budget crisis is a real problem, but we must look to serious, consistent fiscal discipline to solve the states problem, not one-time gimmicks to reduce the current budget. Given the dramatic prior increases in state spending, other solutions can easily be found.I remain committed to working with my colleagues in the Legislature to enact real structural budget reforms. That is why I am carrying my bill for the fourth year in a row to create a two-year budget process to better facilitate long-term planning and so that we can give the budget proper amount of time and review it deserves. It will also insist that we carefully review current state programs and spending levels and give serious attention to any inefficiencies before beginning the budgeting process. I sincerely hope that the Legislature will give my bill serious consideration this year.However, until the public demands real commitment from the majority party to seriously address the problems of formulaic spending requirements, revenue structural volatility, and the lack of spending review and control, we will only continue the cycle of short-sighted measures and giving shallow attention to these issues that are so critical to the fiscal health of California.Rick Keene represents the 3rd Assembly district in Northern California, which includes Truckee and eastern Nevada County.
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