California legislators bent budget laws, now Californians will pay
All but four states in the country have budget shortfalls. The smallest of these shortfalls is Vermont, and that comes in at $28 million. Yes, this is the smallest gap.
While we’re getting all-too accustomed to government debt and spending numbers in the billions it’s important to remember that millions still mean something. But speaking of billions, California’s got them covered. The budget shortfall in the state is $41.6 billion. That’s $41,600,000,000, the largest shortfall in the country.
When looking at the state’s budget laws, it would seem strange that things could get so out of hand. California provides several guiding boundaries to prevent out of control budgets and to contain any egregious fund appropriation before funds exist. From State Budget Solutions:
California is required to pass a “balanced budget.” California Code Section 13337.5 of state law prohibits the annual budget act from authorizing expenditures in excess of revenues. In 2004 the Constitution was amended to include language to specifically prevent the presentation of a budget bill that would appropriate from the General Fund more than that Fund would receive in revenues. California law forbids the carrying over of a deficit from one year to the next. The State only budgets for expenditures, not revenues.
The California Constitution limits appropriations to the appropriations limit from the previous year, adjusted for inflation and the change in population. This is commonly called “budgeting for fiscal discipline,” and is a way to keep the growth of appropriations from outpacing the growth in revenues from year to year.
So what happened? How could a state with such clear laws on responsible budgeting get out of hand? Well, the law is flexible if you know how to bend it:
Unfortunately, the most recently passed budget relies heavily on accounting maneuvers, including moving tax receipts from one year to a next and borrowing $5 billion against future lottery earnings. The lottery borrowing requires the approval of voters in a ballot measure in a special election the Spring of 2009. If the lottery plan is defeated, midyear cuts and other measures to rein in spending are likely. [from the Institute for Truth in Accounting]
The situation would be a lot less painful if legislators had followed the budget law instead of worrying about shortfalls now that the state is in crisis. At this point, any solution will hurt. For example, Governor Arnold Schwarzenegger has been fighting the state comptroller, trying to give paycuts to the state’s public employees. The governor’s administration went to court to try and force the comptroller to do this, but the judge sided with the comptroller. These cuts could translate to $455 a week, making the judge note that cuts would cause “undue harm” to the workers. But hasn’t the undue harm already been committed?
It’s time to rip off the bandaid. Thinking of spending cuts that won’t hurt people is inconceivable; legislators could have prevented this crisis by thinking about the consequences of their thoughtless use of public money. Now citizens will have to suffer for the lack of responsibility in their elects, those hired to look out California’s best interests.
One glaring fact of governmental finance is that there is no comprehensive and understandable summary of all that goes on. Granted, it’d be a huge effort. But, the consequence of not budgeting appropriately for revenues in light of expenditures is this fiscal emergency.
Currently, there does not appear to be a significant effort to budget sustainably. Revenues, namely property taxes, can fluctuate heavily from year-to-year, yet public agencies use those funds for many types of general expenditures. As specific revenues increased, so did the size of public agencies, irrespective to the nature of the revenues. Yet, as revenues dry up, what remains is are bloated, overgrown organizations.
An example of this in action is for education in California. School are funded primarily by the state, but subsidized by property taxes in each county. For the last 3 years, education payments are deferred, causing public schools, especially charter schools to manage difficult cashflow issues. My point here is to question specifically how property taxes relate to funding education. As the market fluctuates, should the quality and breadth of our educational offerings fluctuate accordingly? This seems to be the code set in law, or at least what is practiced.
As it stands, the budgetary process is very reactive. Reactive to special interests, political interests, and now to the fiscal ‘emergency’ that is upon the state. As stated in the article, “it’s time to rip off the band aid”. I interpret that statement as it is time to endure a bit of hardship for long-term gain. I agree with this in theory. Yet, practically, it is tough for citizens to trust in long-term gains when the political environment and rhetoric remains woefully shortsighted.
I’ve been trying to wrap my head around this budget situation for sometime, and always return to conclude that citizens can and should “act locally” with cities and counties. Citizens should come to expect effective and efficient governance, rather than settle for such mismanagement.