Contributor

Ray Haynes

Mr. Haynes is an Assembly member representing Riverside and Temecula. He serves on the Appropriations and Budget Committees. [go to Assembly Member Haynes website at California Assembly][go to Haynes index]

Finally Fixing The Budget
Capping the Bottle...
[Ray Haynes] 6/29/04

P.J. O’Rourke once wrote that “giving money and power to government is like giving whiskey and car keys to teenage boys.” We have seen this time and again with the reckless behavior of California state government. History should be a good teacher. We should learn from experience. Every child who touches a hot stove once learns not to touch the stove again. You would think that those in government could do the same, but clearly they won’t put down the whiskey bottle, and they definitely aren’t going to hand over the car keys voluntarily.

From 1995 to 2000 Republican and Democrat politicians alike, increased state budget spending from $47 billion to $79 billion (over my vocal objections, I’ll not-so-humbly point out). From the 1998-99 budget to the 2000-01 budget, spending increased from $57 billion to $79 billion, $22 billion in three short years. Every one of those budgets was balanced. In the 2001-02 budget, revenue dropped when the dot-com boom collapsed, causing the billions of dollars in one-time capital gains revenue the state received from the dot-com boom to disappear. The rapid increase in state spending from 1999 to 2001, when combined with the drop in revenue (which, by the way, was predicted by budget analysts long in advance of its occurrence), caused an $11 billion deficit in the 01-02 budget, a $4 billion deficit in the 02-03 budget, and a continuing structural deficit of approximately $8 billion.

Interestingly enough, if the state had increased spending proportionate to the increase in the state’s population and the rate of inflation between 1995 and 2000, total state spending in the 01-02 budget would have been $62 billion, and resulted in a $4 billion surplus in 01-02 (even with the drop in revenue), and budget surpluses for as far as anyone could predict.

With that knowledge, one would think that any rational person would say that (1) balanced budgets don’t always stay that way, because they often build in spending patterns that could become deficits if revenue dries up; and (2) the only way to make sure that the state has balanced budgets for extended periods of time is to control spending in the good times, so that spending is lower in the bad times.

Voters approved Proposition 58, the Balanced Budget Amendment, in March. A nice move, to say the least, but really only a fig leaf to cover the state’s budget problem created by the huge increases in spending in the late 1990’s. Unfortunately, elected officials act like a kid in a candy store when they get extra money from taxpayers. The money, once received starts to burn a hole in their pocket, and the politicians start looking for ways to spend it. Already, every dollar of new revenues discovered in the budget process right now is being directed not to reducing the structural deficit or paying down the bonds, but to restoring spending or even attempting to give pay raises to welfare recipients! Only voters can control this urge.

At least one idea is floating around to control this urge. At www.NoDeficits.com, Assemblyman John Campbell and Rescue California (the group that helped the recall of Gray Davis succeed) are putting out an idea that actually controls spending in good years by (1) limiting the growth in spending to population and inflation growth; (2) limiting state debt service to 6 percent of total state spending; (3) taking all the surpluses and applying them to a “rainy day” fund, paying down accumulated debt, tax cuts, and building freeways. It also controls spending by local governments and closes several loopholes in the existing Gann Spending Limit. If the limit being proposed by Assemblyman Campbell and Rescue California had been in place prior to Gray Davis being elected Governor in 1998, we would not have had any deficits over the past five years, and state spending would have been right about where it is in the existing budget. All in all, the initiative would go a long way toward making sure that the spending splurge of the late 1990’s will never occur again.

The five years of Gray Davis nearly killed this state. Those years certainly left its fiscal health in shambles. Merely balancing future budgets won’t stop this from occurring again. Real spending control is necessary. Hopefully, after rescuing California from Gray Davis, Rescue California will rescue the state from budget deficits. The idea is sure worth thinking about. At a minimum, maybe it will put the cap back on the legislature’s whiskey bottle… CRO

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