The conventionalhttps:> wisdom https:> in Sacramento is that the budget approved early Friday morning is held together by wishful thinking and accounting gimmicks, not to mention Rosy Projectionshttps:>.
Nobody can deny that the next Governor will be faced with an extraordinary challenge to balance his or her first budget. After all, the Legislative Analyst has said https:> that "well over two-thirds of the Legislature’s 2010-11 budget solutions are temporary or one-time in nature."
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But while a gimmicky, get-out-of-town budget may have been the best the Legislature could achieve, credit must go to Governor Schwarzenegger for holding out for much more. The Governor has pushed historic budget reform through the Legislature over the past two years. Now, to ensure the seeds he has planted bear fruit, it is up to the people to finish the job in one case, and future Legislatures to resist the temptation to roll them back.
Budget reform. The Legislature placed on the March, 2012, ballot a budget reform measure https:> very similar to that passed by the Legislature in 2009. That latter proposition fell victim to the voters’ anti-tax venom, since its passage would have triggered an additional two years of higher taxes. The budget reform proposal would lock in a requirement that the state accumulate a ten percent rainy-day reserve, use that reserve only when revenues fall precipitously, and ensure that one-time revenues not be used for ongoing programs. This reform must be validated by the voters, but will not need to overcome the baggage of a tax increase.
Pension reform. The Governor not only negotiated increased state employee retirement contributions in the collective bargaining agreements, but also achieved permanent changes in the retirement formulas https:> for state employees. For all new state employees, the measure reinstates the retirement ages and benefits that existed prior to the broad benefit increases granted in 1999. It also ends pension "spiking" by requiring the retirement formula be based on the final three years of compensation, rather than the highest single year of compensation. The compromise also requires https:> CalPERS to provide additional analysis and oversight of their actuarial assumptions when proposing new retirement benefits.
Automatic COLAs. As part of the budget agreement last year https:> , the Governor convinced the Legislature to repeal the automatic cost-of-living adjustments for all state programs except for public schools. This was a historic change, dating back to the (Governor) Reagan Administration, who first enacted automatic cost-of-living adjustments for welfare recipients.
The next Governor and Legislature should take inspiration to further extend these reforms – including real reductions in overall state spending, more opportunities for contracting out state services, and more controls on autopilot state spending like entitlements.