The 2011-12
budget plan introduced by Governor Brown on Monday includes major pieces of the
fiscal puzzle that at long last will hopefully bring fiscal balance back to California.
Unlike prior
budget plans purporting to close the state’s widening deficits, this one
actually proposes long-term structural changes to bring California out of its
fiscal hole. One big difference is the budget proposed by Governor Brown does
not rely on one-time spending reductions or gimmicks. It seeks to permanently
change the makeup and extent of state spending to balance revenues and
expenditures. It is important to recognize that the plan anticipates extending
temporary revenue increases to get important state services – such as education
and health and human services – through an economic condition that is
improving, but not quickly enough.
Here is the
difference between prior attempts to bring fiscal balance and the one proposed
by Governor Brown:
-
Most
of the spending and program reductions, many coupled with program realignment,
are permanent and will bring spending in line with revenues. -
A
long-term realignment of social service and criminal justice programs – which can
be more effectively administered at the county level – will for the first time focus
on improving outcomes for those who receive assistance. -
A
five-year extension of the temporary taxes will be used to help finance the
last two budgets, and a portion will help finance the realignment of state
services.
The big unstated gamble is whether the
state can get to fiscal balance within a 12-month fiscal year. To make this
budget work, a long list of program changes must be ready for implementation on
July 1, 2011. This also assumes that voters in June 2011 will approve the
necessary tax extensions that are the glue that holds this plan together.
The prior governor tried to get to fiscal
balance using onetime reductions, and it did not work, in part because it is difficult
to implement major program changes within the year the savings are counted. The major difference now is that spending
reductions are long-term and need to be matched with a restructuring that
assigns selected state programs to county government. The central problem remains
whether all of these changes can be implemented in a single fiscal year. That is the missing piece of the puzzle. It may take a two-year plan that includes the
2012-13 budget and that would bring fiscal balance by June 30, 2013 rather than
2012. Knowing our past experience it is worth raising the caution flag.
In addition to the challenge of bringing
the budget into balance in one fiscal year, policymakers should enact the
budget process reforms that they have contemplated for more than a year.
California needs a process that will prevent lawmakers and governors from
making promises they can’t keep and ensure public resources are well spent.
Here are some specific ideas that California Forward has advanced over the last
year:
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Performance-based management and budgeting
with better oversight. Require the Governor and legislators to
establish clear goals and performance measures for all programs. At least once every 10 years, lawmakers must
review programs to determine if they should continue or how they can be
improved.
- Pay-As-You-Go for new programs and tax reductions. Require that major new or expanded
programs or tax reductions (created through the legislative or initiative
process) have an identified way to be financed, either by additional
revenue or spending reductions.
-
Multi-year budget planning.
Require the Governor and Legislature to prepare two-year budgets and
three and five year fiscal forecasts, publish more frequent updates on the
state’s fiscal condition and strengthen requirements for quick action when the
budget is out of balance. -
Manage volatile revenue and strengthen
reserves. Capture
one-time spikes in revenue, fill the rainy day fund and, after meeting minimum
K-14 education funding obligations, limit one-time revenue to one-time uses,
starting with paying down budget related debt. A constitutional amendment will
be on the February 2012 ballot that will accomplish this task. The governor and
legislature should consider moving it to the June 2011 special election, along
with our other proposed reforms.
Asking voters
to consider continuing temporary tax increases must be accompanied with structural
reforms that will maintain fiscal balance and create a budgeting process that
provides Californians with value for their money.