What Happened to the Spending Limit?

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Gov. Gavin Newsom announced a record breaking $213.5 billion budget, $4.5 billion larger than he proposed in January. The state’s got $21.5 billion surplus money to spend and  $16.5 billion stashed away in the “rainy day” fund. California’s treasury is bursting with money. Does anyone remember that the state’s voters asked for budget discipline by overwhelming passing a spending limit?

You could say that was a different era in California politics. The spending limit was passed in a 1979 special election at a time when voters at the polls expressed concern over taxes and spending. But the idea of putting some restraint on profligate legislators seems to have gone out of style in the Golden State.

Of course, the governor’s budget team acknowledged the spending limit. It’s right there on Page 94, the last item in the section titled, Statewide Issues and Various Departments. The May budget revised the calculation that helps determine the limit. The May Revision estimates that Per Capita Personal Income growth will not be quite as robust as the January budget predicted; that the state’s population won’t grow as fast and that K-14 education will drop more than anticipated in January.

As Fred Silva, long time budget analyst and Budget Project Leader for the California Forward think tank reminded me, those creating the spending limit believed spending should not grow faster than the economy.

The formula created to achieve this budget discipline took into consideration personal income growth and population. There were calculations for specific appropriations subject to the limit.  The limit was exceeded during the mid-1980s during the Gov. George Deukmejian administration and about a billion dollars was returned to taxpayers.

That action riled up spending interests who campaigned for changes to loosen the limits.

Local governments were subject to spending limits as well. That created an avenue for the state to pass subventions to local governments that were below their local limits and help keep the state below its limit.

The big pressure relief on the limit came later when Proposition 2 passed expanding a rainy day fund to deal with budget emergencies. Gov. Brown and now Gov. Newsom have made sure that the rainy day fund is filled as much as possible for both have predicted that rainy day is coming.

So here the state stands with a spending limit on the books, eager spenders among special interests and in the legislature, and a spending limit that doesn’t seem to bring the discipline envisioned by its creators.

Should California even have a spending limit? And, if so, what kind? One that limits spending to some degree, one suspects. But that hasn’t been happening.

(Update: The budget page for the spending limit has been corrected. It initially read page 92; it is page 94.)

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