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 www.tommclintock.com [McClintock index]

Another Failed Budget
Compromise didn't deliver - again...
[Tom McClintock] 7/8/05

From the Senate Floor - Thursday

I am sorry to interrupt the chorus of self-congratulations, but I feel compelled to state an obvious fact – that this budget is $6 billion out of balance; that the state’s chronic deficit spending is getting worse, not better; and that the growth of general fund spending is growing and not shrinking.

Nor can I join applauding the “painstaking negotiations” that have produced this document. The fact is, in May the Governor proposed spending $88 billion (General Fund), the Democrats countered at $89 billion, and they have now compromised at $90 billion. I suppose it is a blessing that the negotiations didn’t go on any longer.

Let me run through the vital statistics of this spending plan. According to the Legislative Analyst’s Office in June, inflation and population will grow 5 percent and revenue will grow 6 percent. But according to the budget staff analysis, spending will grow by 10 percent. That makes it measurably worse than the plan the Senate rejected on June 15th.

On June 15th, we rejected a $5 billion operating deficit. This budget spends $90 and takes in only $84 -- for a SIX BILLION DOLLAR shortfall – THIS YEAR.

On June 15th, we rejected a 9 percent increase in state spending. This budget is a 10 percent increase – averaging 7 1⁄2 percent over the last two years. Spending increases under the Davis administration averaged 7 percent.

Let me repeat: This budget spends $6 billion more than we take in. Last year we spent $2 billion more than we took in. That means that this year’s operating deficit is THREE TIMES bigger than last year’s.

Now, I’m sorry to throw cold water on the celebration, but that is not progress. That is the opposite of progress.

And yet, once again, we’re told that the budget is balanced. But the blunt truth is that it is only balanced with borrowed funds carried over from last year.

We’re told that there is additional debt repayment in this budget. But listen carefully: you’re using borrowed money from last year to repay borrowed money. That gets you precisely nowhere.

And by next year, according to the staff analysis, we will have completely maxed out on our Prop 57 credit card and we’ll still be about a billion dollars short. And our cumulative budget deficit will have grown to nearly $30 billion. That’s more than $3,000 in taxes that an average family will be obligated to repay just as surely as the balance on their credit card statement.

IF this budget is adopted today, I believe that it can be safely said that “Never in the field of California finance has so much been owed by so many … because of so few.”

And this is only if everything goes perfectly. And that requires us to ignore the urgent warnings of the Anderson Forecast – and others – that difficult economic times lie directly ahead.

If there is so much as a hiccup in the economy, this state will be plunged into a financial crisis that will make 2003 look like the good old days.

There is, however, one good thing that this budget accomplishes. It makes it absolutely imperative that we restore to the governor the authority that he held from 1939 until 1983 to make mid-year spending reductions without having to return to the legislature.

This authority served this state extremely well until it was bargained away – over my objections, I might add – back in 1983.

Restoring the authority of the governor to halt this state’s chronic deficit spending is at the heart of the “Live Within Our Means Act,” and with the adoption of this budget, it is now about the only thing that stands between our state and financial insolvency. We would be well advised to adopt that measure right here as an adjunct to this budget.

This is my 19th state budget vote. It might surprise many of you to know that I voted to support five budgets in the 1980’s – budgets that were actually balanced and that had prudent reserves. The concept seems almost quaint today. Those were days when we had a Triple-A credit rating and our debt service was 1.3 percent of the budget.

And then in the late ‘80’s we saw the budget process gradually shifted from the legislature to the so-called Big Five. And we began passing budgets that were brazenly unbalanced or that included massive tax increases that brought even bigger deficits as they crushed the economy.

And we are now dragging along the cumulative result of this folly. Some $25 billion of deficit-related general fund debt – growing to nearly $30 billion by next year. Our credit rating is the lowest in the nation and our debt service costs have quintupled as a percentage of general fund spending.

I don’t know how much farther we can go down this road before the state’s credit will be completely exhausted. At that point, we will not only have failed to provide the sound management of our generation’s affairs – but we will also have stripped our children of their ability to meet their generation’s needs as they struggle to repay the mountain of debt with which we have crippled them.

I’m sorry to rain on this parade but those are the facts, and as John Adams said, “Facts are stubborn things.” CRO

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