The state budget has now been passed. It is far from perfect. (Indeed, I’m still not sure where about 11 billion of borrowing comes from; and I’m skeptical about assuming any particular value for enhanced earnings from the California Lottery.) But that has not been the focus of the intense criticism of those Republican legislators, and our Republican Governor, who supported it. Rather, they are being criticized because the budget deal includes about 15 billion of higher taxes. That’s matched by about 14 billion of cuts in spending.
Back in December, public works stopped in our state, because of this budget crisis. In the midst of a recession, we stopped building freeways, water storage, schools, airport improvements, port facilities. That was suicidal to California’s recovery. These are good projects, that will make California more competitive for years to come; and in the short run, they will give Californians jobs. We needed them to continue, months ago.
So, I wrote an article for the San Francisco Chronicle, in December, and posted it on my web site, suggesting that an immediate budget deal be forged with 50% cuts in spending matched by 50% increase in gas taxes. A 50:50 deal was, to my lights, the only way to get a budget done, and start public works again. With gasoline falling from its high of above $4 a gallon last summer, I thought it was the least damaging tax to raise.
The final budget deal is, practically, a 50:50 compromise, as I had proposed. The taxes come from income and sales as well as gasoline; I think that’s not as good, but the fundamental point is the same. There was no realistic possibility of a budget deal coming entirely from cuts in spending within one year.
When someone hoping to serve in public office says something like that, however, he leaves himself open to opportunistic criticism. It’s already started. So let me remind my critics of my history on balancing budgets. I authored the version of Prop. 76 that went to the Legislature in 2005, and then became the Chairman of the Prop. 76 initiative. Prop. 76 was rejected by the voters; but, had it been approved, we could have avoided this entire crisis. Across-the-board cuts would have taken place the first quarter that revenues started to drop. I wish it had passed.
When I was Finance Director of California, we balanced the state budget, without increases in taxes, in borrowing, or any phony accounting. In Congress, I received National Taxpayers Union, Citizens Against Government Waste, and Concord Coalition awards for holding the line of spending. Indeed, in terms of the cost of bills introduced, I was cited by the National Taxpayers Union Foundation as the single most frugal Member of the 102nd Congress.
So, I’ve done more than most, if not all, candidates on both sides of the race for Governor to keep government spending in line.
The emergency in our state’s budget, however, is not due to over-spending. Rather, it is due to the collapse of the stock market. Our state relies on the personal income tax for more than half of the general fund. Through no fault of any California policy, the stock market tanked, and with it, the capital gains revenue on which the expansion of spending had taken place. We should never have expanded spending based on assumptions that the good revenue days would stay forever. That does not change the truth, however, that the present crisis in our state budget was because expected revenues unexpectedly plummeted.
So, I do not criticize the State Senators and Assemblymembers, Democratic and Republican, who put together the current state budget fix. I predict we’ll have to revisit it; perhaps soon. For now, however, it was the right thing to do.
One last thing—to fellow Republicans. No party is in healthy condition when it directs all its energy to attacking its own members. Republicans can be the party of low taxes, but we must be the party of fiscal responsibility first.