Is the budget in surplus? By how much? Does this mean we can put money away for a rainy day fund (that doesn’t save much for a rainy day)? Doesn’t this mean that California is back?
You can laugh – and safely ignore this budget conversation this budget season. No one knows what the 2014-15 budget will be now. Heck, no one may know for sure what the 2014-15 budget will be next year. Or in 2018.
This is California: where we don’t know whether previous budgets were balanced or not – many years after those budget years are over.
If you want a window into budget uncertainty in California, check out the Legislative Analyst Office’s work on “accruals.” This refers to what LAO calls “the state’s complex, obscure, revenue accrual practices, which take revenue collected in one fiscal year and move it back to prior fiscal years.”
Because of this practice and the complexity of it, the LAO and the Brown administration have, for years, been offering different projections of what the revenues were for prior budget years, most notably the first two budgets of Gov Brown’s tenure: 2011-12 and 2012-13. That’s right — the revenues and budgets for thoseyears are still being readjusted.
Here’s an example: because the LAO and the administration differ on which budget year to put the revenue from Proposition 30, there is a difference of $268 million in the General Fund for the 2011-12 year. The accruals may be finalized by next January. 2015. (And guess what—a change in accruals related to the 2012—13 budget – stemming from personal income taxes – produced an $849 million decline in general fund revenues).
Why does any of this matter? Because it reminds us just how broken the budget system is, and just how ridiculous it is, for anyone – a governor, a legislature, a member of the media – to say they have a handle on this.
The accruals also matter because the budget is a big crazy algorithm made up of formulas. And when the revenue numbers that go into the formulas change, the formulas can change – and the budget can change by billions of dollars.
A budget system like this may produce the illusion of balance in good times, but it can never be fixed. And it cannot be outsmarted, not for long. There is only one real solution. It involves taking a sledgehammer to the whole machine – and building something much simpler, and flexible, in its place.