THE CALIFORNIA BUDGET CRISIS
League of Women Voters of California Decries Budget Deal
September 23, 2008
The Legislature and Governor have enacted a budget deal that is dishonest and irresponsible. It not only fails to set priorities and address serious problems at a time when we face economic uncertainties, but also sets the stage for further and deeper budget problems in coming years.
This is a dishonest budget. It relies on an assortment of gimmicks—including accounting tricks, early collection of tax revenue, and speculative borrowing—to obscure the fact that the money to support the budget really isn’t there. As one example, although the claim is made that the plan does not rely on borrowing, in fact it counts on borrowing, through the future issuance of bonds to be repaid from lottery revenue. This speculative scheme depends on voter approval of changes to the lottery system, the hope of increased lottery sales, and the cooperation of skeptical financial markets in tough economic times.
The budget is also irresponsible. By including the Governor’s plan to build up the reserve, it reduces flexibility and makes it far more difficult for future legislatures and governors to adjust priorities within limited resources. Moreover, including this provision requires a constitutional amendment that must be approved by the voters. Passage of a future ballot measure should never be the premise on which a budget is based.
The budget deal calls for reducing the reserve fund for this year to less than a billion dollars, shifting this year’s shortfall into next year through a variety of accounting changes, and opening major new loopholes in the corporate tax that businesses will pay in future years. Meanwhile, it does nothing to address the continuing structural deficit caused by previous tax reductions and spending decisions.
The budget also includes a proposal giving the Governor new authority to make unilateral midyear budget cuts. Mid-budget adjustments should only be made through joint action of the executive and legislative branches so that our system of checks and balances—an essential component of responsible government—is maintained.
Still, despite these serious defects and the painful impact of the severe cuts it makes to essential services, a budget had to be passed. Without a budget, many important programs were jeopardized because they were not receiving the funding they depend on. The budget impasse deprived schools, medical providers, nursing homes, and child care providers of the money they need to continue to provide vital services.
The state also faced cash flow problems that could mean borrowing at a time when money is less available than usual, and likely to be more expensive. The state could not wait any longer for a budget, especially when the minority in the legislature had made it clear that they would not budge from their pledge not to raise any taxes. That pledge has once again enabled a minority to hold the entire budget process hostage to their wishes. This is not responsible representative government.
While there is plenty of blame to go around, there is a silver lining to the mess in Sacramento. The voters will be able to pass judgment on at least two components of the budget deal in a special election. More important, many people are now saying that it’s time to look at real budget reform, particularly at eliminating the two-thirds vote requirement to pass a budget. Now that the people of our state have been treated to a stark example of the utter dysfunction in the budget process, we hope they will join us in fixing this broken system and replacing it with a process that really works. The people of California deserve no less.
See also our Press Release.
Read about the Budget.