Reduced Expectations and the California Budget

Tuesday, January 14, 2014

Page 6

IN MY OPINION (Column)

Reduced Expectations and the California Budget

By JON COUPAL

Shortly after Jerry Brown was first elected governor, nearly 40 years ago, he famously said, “This is an era of limits and we all had better get used to it.”

In keeping with this theme, it is now taxpayers who look at Governor Brown’s proposed 2014-15 budget with reduced expectations.

In fairness, there are aspects of the budget plan that taxpayers can endorse. The budget reflects at least some measure of fiscal restraint and austerity. Brown’s desire for no new taxes, continuing to pay down the ‘wall of debt’ and establishing a prudent reserve is commendable.

Nonetheless, there was much unsaid—some positive, some negative—in the budget plan. On the plus side, at least Brown did not launch a jihad against Proposition 13, which must have come as a serious disappointment to some of the more rabid Democratic members of the Legislature.

On the negative side, the failure to address major fiscal problems is a glaring omission. The teachers retirement fund—CalSTRS—has a huge unfunded liability that renders meaningless all the “happy talk” about surpluses. Add to that the massive shortfall in the unemployment insurance fund and the long term obligation to provide health care benefits to government employees and the good news turns out to be not so good. Without action, these liabilities will continue to expand and come back to haunt both taxpayers and the state economy in the future.

Sadder still is that the governor wants to throw good money after bad into the moribund high speed rail project which is a horrible misapplication of precious transportation dollars. Adding insult to injury, he announced a plan to use “cap and trade” revenue to pay for the high speed rail boondoggle which may exacerbate the major legal problems he is already facing.

Also, there is a lot more money for state employees. This criticism may sound mean spirited, but it is important to note that California already has the highest paid public employees in all 50 states and the additional pay is coming from the Proposition 30 tax increase. So while state workers will get more, average Californians will have less because they have to pay for the higher compensation.

Finally, with respect to a spending limit proposal, the governor said, “The devil is in the details,” which does not show that he has clear vision or sense of urgency on this important policy issue. (And do we really think the California Legislature will sign on to a plan that limits their spending power in a manner that is remotely effective?)

There is another quote from Jerry Brown’s first term that is worth noting. In response to criticism from liberal members of his party for failure to spend even more he said, “It’s not because I’m a conservative, it’s because I’m cheap.”

However, this year’s budget proposes increasing spending by nearly 9 percent and it is clear that counting on the governor’s parsimony is not sufficient protection for taxpayers. And this budget is just a first offering. The administration will issue a revised budget in May, based on more up-to-date revenue forecasts, and what lawmakers finally approve prior to the June 15 deadline may include a great deal of additional spending.

It is clear that California needs a spending limit with teeth that allows increases only for inflation and population growth. Perhaps one of those super wealthy individuals, who, in recent years, have put massive amounts of money behind their pet ballot measures, would like to put their shoulder behind an initiative measure that would actually do some good.