Friday’s revelation that California has developed an eight billion dollar deficit only three weeks after the legislature supposedly produced a balanced budget ought to be a wake-up call for every citizen of the Golden State. Our fiscal problems can’t be fixed at the margins. Our elected representatives are trying to treat a cancer patient by occasionally trimming his fingernails.
There is a solution, however, and the state’s current economic crisis may provide a once in a lifetime opportunity to enact it. We need to entirely eliminate the spending mandates that virtually ensure that California will never be able to put together a coherent budget.
If this seems like strong medicine, consider the following: the California Budget Project’s conservative estimate is that about 66 percent of the state budget is completely out of the hands of legislators and the governor. In his masterful book “The Future of Freedom”, Fareed Zakaria puts the figure as high as 85 percent.
For decades, well-intentioned Californians have been pulling the lever for ballot measures promising to improve the quality of important sectors like health care, education, and social welfare through mandatory spending requirements. All they’ve received in return is a bigger bill for bureaucracies that continue to fail and a budget process that is now literally unmanageable.
While the compassion that motivates support for these public services is admirable, the ballot box is the wrong place to implement it. Special interests know that good-hearted voters will have a hard time saying no to children’s hospitals or smaller class sizes. But they also know that they can bait the hook by putting these questions to the public in a vacuum that ignores fiscal realities.
That’s how we get the passage of initiatives like Proposition 98, which mandates that spending for California’s public education system take up at least about 40 percent of each year’s budget expenditures. But who on earth has any idea if that figure is appropriate? Imagine if we told every household in California that they had to spend 40 percent of their income on groceries, regardless of the size of their family, their wallet, or their appetites. The results would be chaos. Judging by California’s inglorious standing as one of the nation’s worst performers in public education, that principle applies equally in Sacramento.
The other problem with the formula model is that it rewards process instead of performance. In the private sector, the most successful businesses trump their competitors by providing higher quality at a lower cost. Is it conceivable that California could actually realize better educational outcomes while spending only 30 percent of the budget on the process? And if we could, what constituency in the state could be morally opposed to a system that simultaneously improved children’s lives and saved taxpayer dollars? Without a model that emphasizes results instead of expenditures, we’ll never know.
The state legislature can’t be expected to climb out of debt when they can only choose how to spend 15 cents out of every dollar in the state budget. So if Californians are serious about a return to fiscal responsibility, next year’s ballot should include an initiative that eliminates spending mandates and forces politicians to prioritize in times of both boom and bust. Without this essential step, the state will be doomed to endlessly repeat its current cycle of billion dollar rounding errors. All those who think the current system works, please raise your hand.