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]

They Are Wrong - Again
Liberal ideology drives the Legislature's analysts…
[Ray Haynes] 12/6/04

The Legislative Analyst's Office (LAO), whose staff is hired by the Democrat majority in both houses of the Legislature, puts out an estimate of the revenues and expenditures for the upcoming budget year each November. They did it again this year, projecting a $7.3 billion shortfall. The good news is that the LAO is wrong--again. The bad news is that some of my Democrat friends are going to try to use this report to raise your taxes. The fact is that revenues will be higher than the LAO projected, and much of the state's budget problems will disappear, if the Democrats can keep from spending your tax money faster than it comes, like they did from 1995 to 2000. Raising taxes will not be necessary--ever.

The LAO's previous November reports are available online so it is relatively easy these days to check just how good the LAO has been in projecting past budget revenues. They’re predictions have become quite predictable. LAO has been wrong projecting the size of the surpluses in times of growth, and wrong in projecting the size of the deficits when times were tough. For instance, in 1996-97, LAO estimated that the state would end the year with virtually no reserve. The total reserve was close to $3 billion. It also projected (in 1995) that the budget deficit by the year 1998-99 would be $1 billion. The budget surplus that year was $8 billion. The LAO recommended against tax cuts that year because they thought the state would run out of money. Republicans cut taxes anyway, and huge surpluses occurred. Keep in mind that in that year, total budget expenditures were only $46 billion.

In 1997-98, LAO projected a $769 million surplus. It was $5 billion. In 1998-99, LAO projected a $331 million surplus, and that by 1999-2000, the state would face a $1 billion deficit. The surplus in 1998-99 was $8 billion, and the surplus in the 1999-2000 budget was $12 billion. LAO blamed the car tax cut for their projected losses. Republican fought for, and won, the car tax cut anyway, and the surpluses emerged. To keep this in perspective again, the total revenues were $61 billion for 1998-99, and $77 billion for 1999-00. The state was then projected to end the 2000-01 budget year with a $6 billion surplus and a $10 billion surplus in 2001-02 in November 2000.

The LAO recommended no reductions in spending. In fact, LAO recommended a $4 billion increase in spending. Oops. Revenue in the 2001-02 year dropped from $77 billion to $66 billion. Spending did not decrease, at all. The state spent its reserves, borrowed short term money, and continued the spending spree that began in 1999, when total spending went from $57 billion to $79 billion in two short years. In none of its reports throughout this time did LAO recommend that the Legislature restrain spending. In fact, throughout this time, the only thing LAO did was recommend against tax cuts.

Now the LAO asks the Legislature to consider tax increases to address the "ongoing structural deficits." In fact, these deficits were caused by the splurge of the Legislative majorities, encouraged by then-Governor Gray Davis, and the LAO, in the 1999-2001 budgets. If the state has simply raised its spending by population and inflation growth, the state would be experiencing a $3 billion surplus right now, and the $15 billion deficit bond approved by the voters last year would not have been necessary.

I would be more forgiving of the LAO had they not been so adamantly opposed to tax cuts, and more receptive to spending curbs, during this time. They were not. In fact, they encouraged $4 billion in ongoing expenditure increases, and $6 billion in one-time expenditures in their November "fiscal outlook" reports. Now, for their mistakes, they are now telling us in the Legislature to "look" at revenue enhancement solutions to this "shortfall."

This fits the Democrats model, but it is not sufficiently critical of how we got into this mess. The fact is--the Democrats spent this state into this mess, and rescinding as much of that spending as is politically possible is the only way to get out of it. The state doesn't need to increase taxes, it just needs to decrease the bloat created 4 years ago. That is what the LAO should say. But--that wouldn’t satisfy its Democrat masters. CRO

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