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Contributors -
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 Governor in the 2003 recall election. His valuable website is found at [McClintock index]

A Gray Davis Kind of Budget
Democrats act as if spending $5 billion more than you take in is responsible
[Tom McClintock] 6/27/05

When a state gets itself into a fiscal pickle the size of California's, a helpful bit of advice is the First Law of Holes: "When you're in one, stop digging."

Unfortunately, that little wisp of wisdom is entirely wasted on the majority of California's legislators. Not only are they still digging, they're digging even faster.

Witness the budget that was voted on with great fanfare on June 15, the constitutional deadline (last met in 1986) for the Legislature to send its budget to the governor for approval.

As a result of last year's general fund budget, California will spend $82 billion while taking in just $80 billion - ending the fiscal year on June 30 about $2 billion in the red, according to the nonpartisan Legislative Analyst's Office.

But next year, if the budget offered by the Democrats is adopted, California will spend $89 billion while taking in just $84 billion - a $5 billion deficit. We're not even heading in the right direction.

To understand what's wrong with California's finances - and the latest addition to its woes if the Democrats' budget is adopted - three numbers become very important: 5, 6 and 9.

Five percent is the combined rate that population and inflation will grow next year.

Six percent is how fast state revenues will grow. Revenues substantially exceed inflation and population growth, proving once again that this has never been a revenue problem.

The problem is the 9 percent figure. That's how fast general fund spending would grow under the budget now pending. During the spendthrift days of Gray Davis, annual spending growth averaged 6 percent.

We are told the budget is balanced because of billions of dollars of borrowed money either carried over from last year or new borrowing contemplated for the coming year. But borrowing is not revenue. Borrowing is what happens when you're spending more than your revenue.

This budgetary nonsense has already racked up $26 billion of general fund-supported debt to finance the state's chronic deficit spending. That's $2,860 that the average California family is obligated to repay through its taxes just as surely as the balance on their last credit card statement.

The Legislature was once fully capable of working through these problems and delivering relatively balanced and relatively punctual state budgets. But those were days when the state Constitution was faithfully followed. The budget was painstakingly pieced together through extensive discussions and negotiations and give-and-take agreements throughout the many months of deliberations. Each house took up its budget independently and entertained amendments from any member.

The new process is to present a conference report to both houses for a take-it-or-leave-it vote at the last possible moment with no opportunity for even the slightest modification. This doesn't leave much room for bipartisan compromise that was once the hallmark of California's Legislature.

So where do we go from here? It should be obvious to everyone that the same legislators who got us into this mess aren't going to get us back out. Months of legislative inactivity have produced a last-minute spending plan measurably worse than the Davis budgets that have already placed California on the brink of bankruptcy.

Perhaps the most important action immediately available is Gov. Schwarzenegger's "Live Within Our Means Act," scheduled for the statewide election Nov. 8. The heart of the measure restores the authority that the governor of California had from 1939 until 1983, to make midyear spending reductions whenever spending exceeded revenue, without having to return to the Legislature.

Ironically, in his last budget, Gray Davis begged the Legislature to restore this traditional authority to his office. As long as the governor held this power, legislators were compelled to adopt balanced budgets based upon honest numbers. Failure to do so gave the governor his choice of what programs to reduce - and they knew it.

As a result, it was a power that rarely needed to be used and California rarely ran a deficit.

The ultimate solution rests in a maxim that is both a blessing and a curse for democracies: We get the government we vote for. We're now living with and paying for the curse. The blessing is that we can change it. CRO





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