“The state Senate’s Budget chairman, Mark Leno (D-San Francisco), said it doesn’t make sense to plan the state’s budget around potential financial catastrophe. California could absorb mild downturns, he said, with such steps as reducing debt repayments,” the LA Times reported this week.
As the state budget deadline approaches, Senator Leno’s statement is short-sighted and clearly runs counter to our state’s recent history. Further, it belittles the significant struggles ordinary Californians faced when the state failed to plan for a severe downturn. For them, it is tough to forget the repeated cuts to California’s public services, higher taxes, growing long term debts, and overall instability.
The Great Recession did not cause the state’s fiscal distress. It just made painfully obvious the perils of boom-and-bust budgeting. Spending wildly during booms only to slash programs during busts is an entirely preventable behavior.
Einstein is well known for saying that the definition of insanity is “doing the same thing over and over again and expecting different results.” Leno’s approach would willfully have the state repeat the boom-and-bust cycle once again.
Accumulating significantly more debt during the recession did not prevent massive budget cuts during the same period. Indeed, a number of crucial budget areas still have not had their funding restored to pre-Recession levels. Earlier in this current budgeting process, we illustrated that transportation funding is still down 44% since 2007-08 and social services funding remains 17% lower. Funding for trial courts is down 6%, and funding for the University of California and California State Universities is down 4%.
On top of all that, the state’s long-term unfunded pension and retiree health care liabilities are 53% higher. The state’s total “Wall of Debt” exceeds $400 billion.
Furthermore, in addition to having higher debt and fewer services, Californians are paying more in taxes. Prop 30 raised income and sales tax rates. Personal income tax revenue now makes up over half of the state’s revenue. And that state’s overall tax structure means state revenues are wildlyunpredictable.
It should be clear that boom-and-bust budgeting offers the state no value proposition whatsoever. Its inevitable outcome is that residents pay more but receive less, and that proposition just makes no sense.