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]

One More Year
Creeping out of the State's budget mess…
[Ray Haynes] 4/26/05

With last week’s tax deadline passed, the tax geeks in the state government are busy tallying the state’s total revenue for the year. To do the tally, and reach an early estimate, they use a fascinating method. California has one address for tax payments, and another for tax refunds. To estimate tax receipts, the bureaucrats in California count the number of trucks delivering mail to the refund address, and subtract that number from the trucks delivering mail to the payment address, to come up with a total number of trucks. Since history has taught them how much money (on average) each truck will carry, they can estimate how much money the state will receive based on how many trucks go to each address.

Methodology aside, the numbers are beginning to trickle in, and based on early reports, it looks like state revenues will increase $7 to 9 billion over last year. California is pulling out of its budget woes.

Now I am not usually one to say “I told you so”—but I told you so. On December 3, 2004, in my memorandum titled “They are wrong—Again” I called the Legislative Analyst to task for projecting a $7.5 billion deficit, and calling for tax increases. I pointed out how the LAO had been wrong on predictions in the past, understating surpluses to stave off tax cuts and overstating deficits to call for tax increases (and, by the way, never the opposite). The Legislative Analyst was not very happy about the article, and called me about it. It turns out that my December predictions were a lot closer than hers. We are almost out of our deficit situation, just like I said it would be, and we didn’t need to raise taxes to solve the problem, just like I said. It obviously would have been easier to resolve the issue by cutting spending last year to bring us into balance, but with a Democrat majority there wasn’t much chance of that.

The fact that we have overcome a projected deficit is no call for a party. The Democrats are already talking about spending any extra money on their pet projects. They are nearly salivating at the prospect of increasing the size of government again, just like they did during the Davis’ years. They just can’t wait to indulge their spending addiction again.

The fact is the state needs at least one more year of spending restraint to truly recover, and stabilize the budget. The state will have either a slight deficit of less than $500 million or a surplus of about the same amount by the time all the dollars are counted and spent, as long as the Governor holds fast on spending. We have about $20 billion in debt to pay back before anyone should even think about increasing program spending. The state owes everybody a lot of money. Either we pay that back now, or we will be in serious trouble if the economy slows down in the slightest. For example, the state has taken over $6 billion in transportation funds to balance the budget over the last 3 years. $3.3 billion of that is considered a loan which has to be repaid. Why not repay it now with this increased revenue, rather than over the next 15 years as has been suggested?

Revenue has caught up to spending, and waiting one more year before considering any spending increases will allow the state to build a reserve to avoid future deficits should the economy slow down, especially since some of this new money may be one-time-only proceeds from a tax amnesty program. Of course, down-sizing government and government programs, and thus reducing our expenditures would be a better option.

That is the challenge of the budget battle this year. Already the interest groups who make money off the taxpayers are lining up at the trough. They are running commercials, they are attacking the Governor, they are thinking they will get him to meet their budget demands, and go back to the status quo pre-recall. Recent polls make them think that their strategy is working. Polls, however, are temporary. Economic principles survive. If this state (and this Governor) does not hold the line on spending, the budget will continue to careen out of control and create a situation from which we may not recover. One more year is needed. One more year, and we avoid a lot of pain. It sounds simple, but it is a huge challenge, given the present make up of the California Legislature. CRO

Mr. Haynes is a California Assembleyman representing Riverside and Temecula and frequent contributor to CaliforniaRepublic.org.

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