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Budget Stalemate

by Tom McClintock [politician] 8/3/07

In an absolutely stunning development, senate Democrats recessed the senate indefinitely without a state budget:

• On a straight party-line vote, they defeated a Republican motion to resume the senate session yesterday;
• On a straight party-line vote, they defeated a Republican motion to approve emergency funding to allow bills to be paid until the budget is adopted;
• On a straight party-line vote, they refused even to consider $800 million of budget savings that Republicans have proposed.

Senate Democratic President Don Perata refuses even to discuss the budget with the senate Republican leader. So much for the deliberative process.

Budgets have been late before, but negotiations, discussions, debates and votes kept going on.

This is the first time, I believe, in the history of the state that both houses of the legislature have gone on summer vacation without adopting a state budget. It seems somewhat analogous to the Iraqi Parliament adjourning for summer vacation while urgent matters require its attention.

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 http://www.carepublic.com/blog.html[McClintock index]

McClintock's floor speech during final budget debate...

I’d like to begin with a brief review of the numbers in this budget and the very real risk it runs.

Let’s begin with the $3 ½ billion reserve. This is actually what is left out of the $10 ½ billion reserve that we began the last fiscal year with. That should be a warning right there: we started with $10 ½ billion in the bank at the beginning of last year. We’re now down to $3 ½ billion.

Still, you’d think that’s more than enough to cover the $700 million deficit in the budget now before us.

But as I pointed out last week, it’s not a $700 million deficit. It’s two billion dollars short of hard cash, and pushes an additional billion dollars into future years.

And the actual budget reserve of about $1 ½ billion is a paper thin safety net when you consider the many highly questionable assumptions – starting with the expectation that revenues will grow twice as fast this year as they did last year.

The collapse of just a few of those assumptions could quickly blow through that remaining reserve and leave the state insolvent – even before we confront the mammoth budget deficit already looming on the horizon.

True, we still have a few billion dollars we could borrow from Prop 57. We could sell off the state lottery for the next 40 years for a quick up-front payment to paper over the deficit. We could even fudge a few billion dollars by raiding special funds or issuing short-term debt instruments.

But every one of those actions will make the next generation’s troubles even greater.

So I repeat – by adopting this budget you are running a very serious risk of running out of money before the end of the year. And you are not addressing the fundamental issues that promise an even bigger budget deficit next year.

My criteria on budget votes has always been that the budget be honestly balanced, that it have a prudent reserve and that it live within our means.

Last week I shared with you the letter that I sent to Senator Ackerman outlining the reductions necessary to reach that definition – about $3 billion. And if that sounds Draconian, consider this: AFTER making the reductions, we will still be spending $8 billion more than we spent just the year before last – and $22 billion more than we spent in Gray Davis’s last budget just four years ago.

Ladies and gentlemen – we’re on the verge of another Gray Davis-sized crisis – and for exactly the same reasons. We increased spending much too fast, the economy is now cooling, and we have to take decisive action now to avert far more damaging choices in the immediate future.

This vote again postpones that decisive action, and sets in motion events that are quite likely to overtake us within the next year – certainly within the next two.

And with that in mind, I would like to close with two more thoughts.

First, we Republicans have proposed billions of dollars of immediate spending reductions that could have been made in this year’s budget – but the real savings are in changing the way we spend money.

That requires considerable administrative, statutory and constitutional change and cannot be accomplished overnight. It is absolutely imperative that a special legislative session be conducted this fall to lay the groundwork for those changes before the fiscal crisis set in motion by this budget breaks upon us.

Second, we must return to the constitutional process of budget-writing that produced reasonably punctual and reasonably balanced budgets for 150 years.

Term limits have all but wiped out the institutional memory of how the budget is supposed to be adopted, but I assure you that we have a parliamentary process that has evolved over centuries of practical experience that brings diverse groups of people together to reach a common conclusion. I saw it work.

It requires each house to independently review the budget, to forge consensus beginning at the sub-committee level and to achieve a 2/3 concordance within each house BEFORE the budget moves to a conference committee. And the conference committee only resolves differences between the two houses.

That process engages every member. It encourages dialogue and discussion and mutual understanding and recognition of competing values and visions.

And it works.

When this budget passes – whether tonight or in the next few weeks – I would beg the Senate to resolve two things:

FIRST: To begin making the structural changes NOW that are necessary to bring the state’s finances back into balance and to restore the promise that this state once exemplified; and

SECOND: To restore the constitutional process of deliberation necessary to redeem the respect that this Senate once enjoyed. CRO





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