is Director of Government Affairs for the Reason
Foundation and coauthor of "Roadmap to Reform."
Day of Reckoning Is Here
is in need of a little friendly family budget advice
When an average family confronts car repairs, braces for the
kids or a broken dishwasher, credit cards can provide a useful
short-term bridge. But they do not work over the long haul to
deal with mismatches in spending and income. In fact, relying
on credit is a recipe for disaster.
Much in the
same way, borrowing may be a necessary tool for Gov. Schwarzenegger
and the Legislature as they confront California's
ever-growing budget crisis, but only if that borrowing is pursued
in conjunction with steps to tackle longer-term spending challenges.
faces an immediate cash crunch, much like the family that,
after paying to replace the transmission on the minivan,
realizes that it does not have enough cash to pay all the bills.
But we also face a structural deficit, much like the family
that routinely spends more than it earns and, in the process,
racks up a ton of debt.
It is painfully
shortsighted for a family facing both a short-term cash crunch
and a longer-term spending imbalance to focus solely
on getting to next month.
By the same
logic, it is foolish and shortsighted for Sacramento to focus
on just getting us through the deficit looming over
the new budget to be released in January, estimated at around
$14 billion. (That's over and above the $15 billion in past
debt the governor hopes to take care of through voter- approved
has been the path pursued by state government over the past
several years. Rather than attempting to tackle the
longer-term imbalance, elected leaders in Sacramento have found
ways to get to the next payday whether through borrowing, raiding
local governments, or instituting accounting gimmicks.
Gov. Schwarzenegger's Finance Director Donna Arduin described
California's budget woes in stark terms. Over the
past five years, the state has spent $23 billion more than
it has received in revenues. And this river of red ink continues.
spending is left on autopilot and revenues hold to their projections
of modest growth, California will have accumulated
$62 billion in deficit debt by 2006.
revenues are projected at $72.9 billion and spending at $77.2
according to Legislative Analyst Elizabeth Hill, spending will
increase to $85.7 billion, and it will continue to climb
to more than $96 billion by 2006. By then, revenues will only
be $85 billion, meaning an $11 billion gap between spending
needs to confront the reality that we are spending more than
we take in every year.
we do about it?
just like the family coming to grips with the painful realization
that its spending and income are out of whack,
we need to understand that this isn't just a bad month or year,
it is a lifestyle.
a number of constitutional spending-limit proposals that would
help curb the state's expensive lifestyle.
need to ask themselves what services it expects from state
government and then focus on providing them.
California state government owns over 194 million square feet
of space in more than 22,000 buildings on 2.5 million
acres of real estate, including San Francisco's own Cow Palace.
Being in the commercial convention centers and fair business
probably is not a core mission of state government.
It is easy
for leaders in Sacramento to stick their heads in the sand
about fundamental reform and focus solely on getting
to next month. Unfortunately, this family in the Capitol is
mired in debt and needs to confront the fact that its spending
and paychecks do not match.
originally appeared in the San Francisco Chronicle.