Author: Fred Silva

The good old days of secret budgeting are back and the primary victim is a transparent government. There was a time, over forty years ago

Once again the Legislative Analyst has pulled back the curtain on California’s budgeting practices, announcing last week that the state is likely to have a

It is now up to members of the
California Assembly to decide whether two of California Forward’s important fiscal
reforms will move forward.

Yesterday, the Assembly
Budget Committee approved SB 14
(performance-based budgeting) and SB 15 (multi-year
fiscal forecasting), which will bring a new budgeting system to California that
increases stability, focuses on program results and looks to the future.

In an era when more and more Californians are demanding accountability and transparency in government, our budgeting process has slid back into the cloaked era of the past.

Fifty years ago, the California budget was put together in a back room. Those in attendance included the Department of Finance representing the Governor; the budget committee chairs and vices chairs representing the legislative leadership; and the legislative analyst. The budget they created was then handed the legislature for approval and finally sent to the governor. These budgets usually garnered 2/3 of the legislative vote, and nobody knew what deals went into the process until after the governor signed the budget in question.

In the early 1970’s, a group of lawmakers revolted and pushed for a more open process. This led to more transparent and later televised legislative discussions that included the administration and legislative analyst.

When California Controller John Chiang decided on Tuesday that
legislators would not be paid, he did so by connecting two provisions in the
Constitution – one approved in 2004 (Proposition 58) that required budgets
to be balanced –  and the other approved
last year (Proposition 25) that prohibited legislative pay if the budget
is not passed by June 15.

Many lawmakers have taken issue with the controller’s decision,
and some have threatened to sue to get their pay reinstated. 

The dispute over what constitutes "fiscal balance" has been with
us for a long time, even before Prop 58. California’s state budgeting
process has always been based on an agreement between the legislature
and the governor about what fiscal balance means in a given year, with the Legislative Analyst’s Office (LAO) providing commentary.

That LAO commentary often deals with identifying
"threats" to fiscal health – sometimes through the courts – and the
ability of the administration to achieve savings in the adopted budget.

The 2011-12
budget plan introduced by Governor Brown on Monday includes major pieces of the
fiscal puzzle that at long last will hopefully bring fiscal balance back to California.

Unlike prior
budget plans purporting to close the state’s widening deficits, this one
actually proposes long-term structural changes to bring California out of its
fiscal hole. One big difference is the budget proposed by Governor Brown does
not rely on one-time spending reductions or gimmicks. It seeks to permanently
change the makeup and extent of state spending to balance revenues and
expenditures. It is important to recognize that the plan anticipates extending
temporary revenue increases to get important state services – such as education
and health and human services – through an economic condition that is
improving, but not quickly enough.

Word from the state Legislative Analyst on Wednesday is that the budget
is scarier than we thought.  But Governor-elect
Jerry Brown is determined to tame the budget beast.

Brown discussed the issues and his plans at a special meeting of
legislators and local officials.  It was
clear that the once and future Governor grasps the enormity of the problem, as
he outlined the most important themes:

• The last three annual budgets were passed with
  dubious solutions that were predominately one-time in nature, often
  with borrowed resources.
• More than 70 percent of the General Fund budget
  is managed by schools and counties. 
  This isn’t a Sacramento problem; it is everyone’s problem.
• Higher education and the prison system are the
  primary activities managed by the state.
• The revenue system that supports state spending relies
  on the income tax, in particular on upper income people.
• Recovery will take time.  There are more threats ahead, and there
  are no magic elixirs.

So what
course should the Governor and lawmakers take to get the state out of this mess?

The failure of our lawmakers to reach a reasonable compromise on the state budget dangerously erodes the confidence Californians now have in their government.

That palpable public mistrust was an overarching concern when California Forward fashioned a five-part reform package for a new budget system that, if adopted, would result in smarter fiscal decisions at the state Capitol over the long-term.

The reform proposals – titled It’s about Trust: A State Budget Process that Restores Public Confidence and just released – is based on the best management practices from state and local governments around the nation and on conversations with thousands of Californians.

Budget reforms cannot fill the estimated two-year $42 billion budget gap — that requires the difficult arithmetic of cutting programs, raising taxes and borrowing money. But the reforms are a way for Democrats and Republicans to send a clear message to their constitutiencies: revise the budget-making process so that the next fiscal crisis is managable. Because right now, if we’ve learned anything, it’s that our current budget-making process is part of the problem.

Joel Fox wrote an interesting piece yesterday about returning to the budget approval process that was in place from 1933-1962. Oh, if life and budget making were so simple…

The so called current services budget format simply tells us what the Governor thinks it will cost Californians to pay for our collective statutory and constitutional spending requirements. In the post-WWII period, life was neat and simple and so was the current services format. The state’s obligations were small with a significant portion of the general fund expenditures going to infrastructure.

Today, current services budgeting has a whole new meaning. It is filled with entitlements, caseloads, judicial requirements and pesty lobbyists. If we could find a way to measure the value of a dollar spent rather than the simple measurement of the growth in spending, some progress toward budget reform could be made.