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Tom McClintock
Mr.
McClintock is an expert on matters of the State budget and fiscal
discipline. He is a Senator in the California State Legislature
and ran for Controller on the Republican ticket in 2002. His valuable
website is found at www.tommclintock.com
the
Shadow Governor
In Search of the Enron Accountants
by Tom McClintock 6/10/03
Gov. Gray
Davis’ May budget revision at least answers one
question: what ever happened to Enron’s accountants? By
every indication, they’re alive and well and hard at work
on California’s budget crisis.
How else
can Gov. Davis claim that he is cutting more from the state
budget than any Governor since 1945 while adding
$2.2 billion
in new spending to his January budget proposal?
It’s
easy, with the right accountants. Davis counts the
tripling of the car tax – bringing $4.2 billion into
state coffers at the expense of every family in California
-- as a “cut” in
government spending. Borrowing $1.8 billion to meet
the state’s
pension obligation is another “cut” in
government spending. So is ignoring $500 million the
state owes
to the State Teacher’s Retirement System. Pushing
$1.1 billion of state school obligations and another
$900 million of MediCal costs
into the next fiscal year is a “cut” in
government spending.
All told,
at least $8.5 billion in so-called “cuts” are
either tax increases or robbing from future budget
years.
An additional
$5.5 billion in “cuts” are
the result of the Governor adding new spending
into the budget
that is
not required by current law and then taking it
out again.
When the
Governor finishes “cutting” government
spending, he still has to borrow $10.7 billion to cover his
deficit for
the fiscal year ending June 30th – at an
added interest cost of $1.1 billion. According
to the Legislative Analyst’s
office, total borrowing in one form or another
accounts for $17 billion of the Governor’s
budget “solution.”
In 1966,
Ronald Reagan mercilessly pounded Governor Pat Brown
for spending $1 million a day more
than the state’s revenues – about
$5.5 million in today’s dollars. Davis,
by contrast, is spending $30 million a day
more than the state is taking
in.
To finance
the borrowing, he proposes to raise California’s
sales tax, which is already one of the highest
in the nation. This, he says, is his concession
to Assembly Republicans, who
had proposed borrowing into future years
to pay off the “Davis
Debt.” The only saving grace of the
Republican proposal was that it allowed for
a politically
acceptable solution without
tax increases. Davis’ response was
to accept the very worst part of the Assembly
Republican plan and finance
it
WITH tax
increases. And he still starts the next fiscal
year nearly $8 billion deeper in debt despite
more than $8 billion
in new taxes.
The saddest
thing about the May budget revision
is that it studiously ignores the operational
reforms that could
quickly
bring the
state’s finances back under control
without decimating state services and without
crushing the economy – simply
by changing the way money is spent in Sacramento.
For example,
the Performance Institute and the Reason Foundation – two
think-tanks specializing in public administration – released
a detailed study of California’s
bureaucracies just days before the May
budget revision.
Their conclusion:
if California adopted such commonsense reforms
as performance
based
budgeting, contracting
out state services,
selling surplus state assets, combining
or eliminating agencies with overlapping
jurisdictions,
pension
reform, the budget could
be easily balanced without sacrificing
vital services or raising taxes.
But
that would require crossing California’s well-entrenched
spending lobby and that’s something
the Governor and legislative Democrats
just won’t do. To prove the
point, Democratic majorities in both
houses
added nearly $2 billion more to the
governor’s budget proposal
before sending the mess on to a conference
committee.
The price
is steep: the biggest tax
increase in California history;
a pension system
that is out
of control;
steadily mounting debt.
And a future
as bright as Enron’s.
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