We’ve always thought it a bit odd how every January, when the Governor releases the proposed state budget for the following fiscal year, there is barely a drop of ink used by the main stream media about the impact to citizen taxpayers. Sure, as a spending document, the interests that receive government largesse — welfare, education, prisons — are going to have something to say. But what about the poor folks who actually pay for all this government? So we thought it might be useful to discuss for a moment what the state budget means for California taxpayers and homeowners.
If one were to believe Governor Brown’s representations about how “austere” his proposed budget is, a taxpayer would assume that government spending is much lower than during California’s boom times before the recession. That assumption would be wrong.
First, the 2013-14 proposed budget would spend more than any other budget in California history. This is true even as it relates to the general fund portion of the budget which doesn’t include special funds or federal revenues. In fact, the General Fund budget at $97.7 billion is actually $104 billion if previous realignment dollars are included. (The “realignment funds” are simply general fund dollars sent to local governments for the purpose of paying for programs – like corrections – that were previously the responsibility of the state). The General Fund budget is once again above 2007-2008 levels – the highest ever in state history.
Second, the higher spending is not due to additional revenue coming in because of economic growth. To the contrary, the extra dollars are reaching state coffers due solely to the $50 billion tax increase approved by the voters in November. Succumbing to the threats of closed schools and tuition hikes, voters approved Proposition 30 by a wide margin.
But Proposition 30’s passage is coming at a huge cost now that California has the highest income tax rates and highest sales tax in America. Specifically, that damage is inflicted on our potential for economic growth. Indeed, it now appears that the exodus already underway by skilled workers, higher income earners and educated students out of California is accelerating.
Although no direct threats to Proposition 13 appear in the proposed budget, that doesn’t mean they aren’t there. The biggest threat is that California’s overspending continues to put political pressure on the California Legislature to propose the weakening or repeal of Proposition 13. In fact, on the first day of the new legislative session a number of such bills were introduced including those that would reduce the two-thirds vote requirement for so-called “parcel taxes,” a particularly virulent form of property tax hitting those on fixed incomes the hardest.
When Governor Brown presented his budget, he was specifically asked by a reporter about the efforts to lower the vote threshold to impose additional local taxes. Such efforts are usually advanced under the guise of giving cities and counties more “local control;” but this is nothing more than code for “make it easier to raise taxes.” Brown gave his typical non-answer answer: Paraphrasing, he said “This is just January. I’m not talking about this in January.”
When California’s elected governor won’t give a straight answer to a direct question concerning the preservation of Proposition 13, it is time to man the battlements.