Public Finance Made Easy

John Wildermuth
Journalist and Political Commentator

Government finance doesn’t have to be complicated, although you wouldn’t know it from watching the budget dance in Sacramento.

1. Collect money and put it in the state general fund.

2. Let the governor and the Legislature decide how to spend it.

3. Repeat annually.

Granted, making the decisions isn’t easy, but that’s why we have elections: to pick people we trust to make tough calls.

But increasingly, it’s the first part of the formula that’s causing problems. While seemingly every Democrat wants to collect more tax money, no one wants to let the state decide how it should be spent.

Take, for example, Assembly Speaker John Perez’ plan to eliminate corporate tax breaks that could bring in $1 billion in new revenue to the state.

You can make an argument that the tax breaks are good for business. On the other side, with the state looking at another massive budget shortfall, it’s obvious California needs the cash.

But Perez has no intention of putting that new money into the state general fund, where legislators and the governor would decide where to spend it. You know, the way the state Constitution says the budget process should work.

No, Perez wants to earmark all the money for scholarships for middle-income kids headed to the UC and state college systems.

Then there’s California’s cap-and-trade program for greenhouse gases, which experts estimate could bring the state more than $12 billion a year.

If that money actually came in, it would cover next year’s projected $9.3 billion deficit and leave some extra to either restore some of the governor’s planned cuts or flesh out a rainy day fund.

Not going to happen. While Gov. Jerry Brown wants to put some of the money into the general fund, he hopes to designate a larger chunk for renewable energy development and infrastructure, with future revenue headed into the high-speed rail project.

At least the state would see a bit of that money. Business groups want the cash used to compensate companies for the cost of meeting the state’s new emission requirements while the Air Resources Board wants the money to go back to consumers hit by higher energy costs.

The anticipated ballot measures aren’t any better. Brown’s proposed initiative earmarks most of the $5 billion to $7 billion it would raise for education, although he argues that would free up general fund money for other purposes.

Two other measures aimed at the November ballot would raise billions more, most for schools.

Sure, people would rather put money into schools than into repairs than upgrading computer systems or refurbishing DMV offices, but when popularity rather than need becomes what drives state spending, there’s trouble ahead for all of us.

Ballot box budgeting – even without the ballot box – isn’t a problem because the mandated spending isn’t needed, it’s trouble because it takes the decision about where California’s limited funds should go from the people elected, for better or worse, to make those choices.

Questions about whether the state needs to boost taxes, which ones and by how much are exactly the battles legislators – and, since Prop. 13, voters – should be fighting.

How that money should be spent, however, should be part of the budget negotiations, not ballot measures or partisan bills.

Brown and plenty of others talk about the need to make the budget process more transparent and accountable. But until voters and politicians alike decide to stop playing favorites, to pay for state programs out of a single pot without siphoning off money in advance to favored interests, that’s not going to happen.

John Wildermuth is a longtime writer on California politics.

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