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GUEST EDITORIAL : Budget must be balanced, capped

CA Senator (Rep.) 36th District

Vice Chair, Senate Budget Committee

Since Gov. Arnold Schwarzenegger’s arrival in Sacramento, the beginning of the calendar year has typically been a time of announcing major new policy initiatives, legislative proposals and of generally hopeful days ahead for California. Yet in 2008, all has been focused on the solemn news that California is in grave danger of fiscal insolvency.

More specifically, California faces a budget deficit over the next 18 months of more than $14.5 billion. Our state government has willingly put itself into the position of racking up bills over and above what we can pay, meaning we must either cut spending immediately or be unable to pay our debts.

California ranks between Italy and Canada as the seventh-largest economy in the world. Our revenues attest to our world rank as an industrious, dynamic economy. Just a decade ago, the state’s annual budget was around $70 billion. This year, taxpayers will send to Sacramento nearly $130 billion hard-earned dollars. That is nearly doubling the size of government in just 10 years, far outpacing the cost of inflation and population growth combined.

Even with a booming economy, California’s current spending increases would be considered excessive. Our population is growing at a rate of about 1.1 percent per year with an inflation rate of 2.7 percent. Our spending, on the other hand, tells a very different story. In the past five years, spending on the Resources Agency has risen 74 percent; health and human resources is up 29 percent; and higher education has grown by 33 percent. These percentages are alarmingly disproportionate to all other areas of growth in California. If overall government spending had simply grown at the rate of combined inflation and population growth, it would have only grown a little more than 20 percent over the last five years, but instead it has grown at almost twice that pace, nearly 40 percent. Not surprisingly, our chronic deficit never went away and now has come back with a vengeance to threaten California’s fiscal health with disastrous consequences.

For years, Sacramento’s Democratic legislators have postponed tackling our financial problems, leaving the tough decisions about how to pay for new programs to future legislators and future generations of Californians. In many ways, the people running Sacramento have simply looked at taxpayers as an unlimited supply of money.

With a strong economy, that may work on a temporary basis. However, as market strength worldwide and statewide has begun to slump, the Legislature must be realistic in looking at what resources are available and how they can best be used to preserve our economy.

The state is in dire need of a spending ceiling. Since Sacramento’s leaders haven’t been able to temper overspending, the voters themselves must impose fiscal discipline from outside Sacramento through a constitutionally imposed spending cap. The restriction called for by the governor would temper the ability of the Legislature, or a governor, to overspend when times are good, leading to massive deficits when the economy cools off.

Right now, though, we have to spend no more than what we have. The spending reductions necessary at this point to bring spending in line with revenues will no doubt be described as “Draconian.” However, the most Draconian act would be to continue spending our state straight into insolvency.

Undoubtedly, some in Sacramento will call for raising taxes. But making every hard-working Californian pay for years of the politicians’ spending largess isn’t just wrong morally, it’s exactly the wrong thing to do for the economic health of the state. Tax increases would likely push the economy closer to the brink of recession, and would actually result in less revenues coming into the state treasury.

In recent years, robust economic times and their resulting revenues offered a prime opportunity to create a prudent rainy day fund. Unfortunately, Sacramento’s majority leadership did not permit us to save during the good times. Now it is critical that we first bring spending in line with our revenues.

Next, we must create a formal process through which we establish a prudent reserve when the next wave of fiscal prosperity comes. Finally, we must examine spending mandates that require program funding even when sufficient finances aren’t there.

California’s finances can be set in order without continuing to punish taxpayers for the Legislature’s spending problem. Taxes do not need to be raised. Legislative discretion does.

 

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