Michael New - Contributor
J. New received his Ph.D. in Political Science from Stanford
University and is currenty a post-doctoral fellow at
the Harvard-MIT Data Center. Michael's research interests
include tax limitations, campaign finance reform, and
welfare reform. Michael's writings have appeared in a
number of publications including Investor's Business
Daily, National Review Online, and
Country Register. He
is a board member of The Stanford Review and an Adjunct
Scholar at the Cato Institute. [go
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Spending — same as it ever was.
[Michael J. New] 12/24/03
Governor Arnold Schwarzenegger abandoned a core campaign promise
when he signed a fiscal-reform package that
did not include a constitutional spending limit. The plan includes
a bond to cover the state's current budget deficit, but replaces
the spending limit with a provision that merely strengthens California's
existing balanced budget amendment. The governor's package cleared
both chambers of the state legislature by wide margins and will
be placed on the ballot for a March referendum.
package — assuming it's approved by
the voters — will do little to help California avoid future
budgetary shortfalls. The state's fiscal problems stem directly
from the massive increase in spending during Gray Davis's administration.
Between 1998 and 2001, on Davis's watch, spending increased by
a whopping 48 percent. Because the state was running surpluses
for most of this time, a more stringent balanced-budget amendment
would have done little to limit spending or solve California's
current fiscal woes.
Conversely, a well-designed spending limit would have halted
this expansion of government and prevented the current fiscal
crisis. If spending had grown by the inflation rate plus population
growth since 1998, the 2003 budget would have been $14 billion
less and the accumulated surpluses would have totaled over $50
billion. This would easily pay down the state debt and leave
a tidy sum for tax relief.
Now, some would argue that the stricter balanced-budget amendment
up for a vote in March would still be a victory of sorts. Coupled
with California's two-thirds supermajority requirement for tax
increases, it would theoretically prevent the legislature from
issuing debt and force lawmakers to make serious spending cuts
during fiscal shortfalls. However, this upbeat view may be misguided
for a few reasons. First, unions have placed an initiative on
the March ballot that would lower California's supermajority
threshold to 55 percent.
Secondly, California's fiscal constitution contains a number
of spending guarantees for education and other public services.
When fiscal limits conflict with spending mandates, judges almost
invariably rule in favor of the mandate. Because California courts
have often issued rulings hostile to the tax limits included
in Proposition 13, the supermajority provision provides Californians
with a false sense of security. This makes the case for a constitutional
spending limit even stronger.
This weekend's signing ceremony capped an intense, highly unusual
period of negotiations between Gov. Schwarzenegger and key legislators.
During the recall campaign, Schwarzenegger, Tom McClintock, and
other Republican candidates all vowed to strengthen California's
existing spending limit. Two weeks ago, Schwarzenegger made good
on that promise. He introduced just such a proposal and began
negotiations with state legislators.
The negotiations began
inauspiciously, however. The governor's original proposal established
a limit that was identical in size
to California's current spending limit — the same limit
that failed to stop the sharp increases in spending that occurred
during the Davis administration.
However, subsequent statements by Donna Arduin, director of
California's department of finance, indicated that the governor
wanted a lower limit, one that would restrict spending increases
to the inflation rate plus population growth. This is identical
to the rate of growth established by California's original spending
limit, known as the Gann Limit, which was in effect between 1979
and 1988. Furthermore, it is also the same limit set by budgetary
caps in Colorado and Washington, which enjoyed success limiting
spending during the 1990s.
Not surprisingly, however, most Democrats in the California
legislature were unwilling to support a strict spending limit.
Most legislators tend to be reflexively hostile to any efforts
that limit their autonomy, and California legislators proved
to be no exception. The December 5 deadline passed and Gov. Schwarzenegger
announced plans to launch an initiative campaign to place a reform
plan on the November ballot.
There would have been a number of advantages to this approach.
Schwarzenegger could have insured that his proposal enjoyed broad
support among conservatives, Republicans, and the business community.
Furthermore, because his spending limit would have been placed
directly on the ballot, there would have been no risk of it being
corrupted through legislative compromises. That is what makes
his decision to essentially surrender and agree to a fiscal package
without a spending limit very puzzling.
All is not lost, though. In the aftermath of this weekend's
vote, several assembly Republicans, dissatisfied with the compromise,
promised to continue to promote a constitutional spending limit.
Hopefully, one of California's taxpayer groups can collect the
necessary signatures to get a proposal on the November ballot.
It still remains a worthy cause, even if the current administration
has lost interest.
This opinion piece first appeared at National Review Online
is a board member of The Stanford Review and an Adjunct Scholar
at the Cato Institute.
2003 Michael New