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The 'crisis' is in leadership, not money

Our View: Budget deficit

Posted: January 24, 2009 10:00 p.m.
Updated: January 25, 2009 4:55 a.m.

"The budget process for California defies a simple, concise definition."

That's the introduction to the state Department of Finance's publication, "California's Budget Process," and that's no joke. Sacramento can't explain it because the politicians don't get it. They don't know how to budget.

Most businesses, and even most individuals in California, know how to budget. They look at their guaranteed revenues and spend within their means. If they're smart, they sock away any unexpected income for a rainy day so they'll be prepared if the sky falls in.

Jon Coupal of the Howard Jarvis Taxpayers Association doesn't buy the hype about California's budget "crisis." He thinks the Chicken Littles in Sacramento are merely setting us up for a tax hike.

He's right when he says the state won't "run out of money" in February. It still will be collecting tens of billions of dollars in taxes - and those tens of billions would be enough if the politicians had the brains to spend within their means.

"It's not a ‘crisis' if you are merely driving down the freeway," Coupal writes. "It is a crisis if you fail to slow down when you get to your exit. Reducing government expenditures when revenue decreases should be as natural as slowing down a car when approaching an off-ramp."


Sacramento doesn't have a revenue problem. It has a spending problem.

Its spending problem has ballooned into a $42 billion deficit - a figure that exceeds the entire annual budget of every other state except New York.

Now comes word that the Democrat-controlled House of Representatives is about to approve legislation to bail out our Democrat-controlled Legislature to the tune of $11 billion as part of President Obama's proposed $825 billion stimulus package.

That's not the answer. That's like handing a drunken sailor another bottle of rum, or reaching over from the passenger seat and stepping on the accelerator with the off-ramp approaching.

Somewhere along the way, they've forgotten that federal dollars are our tax money, too.

And this federal bailout would cover only 25 percent of California's so-called "shortfall."

Some observers have suggested suspending the politicians' paychecks until they balance the budget.

That's not good enough. Their paychecks should be canceled, not to be reissued as long as there is a deficit - and if the state actually does issue IOUs to businesses in February, legislators should be forced to forfeit their entire year's salary.

Hopefully the new voter-approved redistricting will force some of the bums out of office after the next Census. But that, too, is not enough.

We need to change the way this state is run. And in the spirit of "yes we can," there might be a glimmer of hope for change.

California Forward is a bipartisan think tank that's made up of a bunch of other prominent think tanks and funded by some heavy hitters including the Irvine Foundation.

Launched just shy of a year ago, it's headed by former Democratic Rep. Leon Panetta and Orange County Republican Thomas McKernan, CEO of the Automobile Club of Southern California.

Whether Panetta's move back to Washington as CIA chief will raise or lower the profile of California Forward remains to be seen, but the group's five-point plan for structural reform appears to be gaining traction.

Here's what it calls for:

n A two-year budget cycle and multiyear forecasting. Other states do it. Every year in California, the Legislature adopts its 12-month budget three or four months late, giving state agencies no time to figure out their revenue picture before they have to submit their next year's budget to the governor. Sure, the politicians would miss the deadline every two years - but that's only half as often. Every other year, state and local agencies would know what they're dealing with.

"As a former mayor, I know first-hand the challenges local governments and school district face when trying to set their budgets without knowing what the state will do," says Assemblyman Cameron Smyth, R-Santa Clarita, who thinks a two-year budget deserves "serious consideration."

n Focus on results, not spending levels. Today, state agencies base their annual budgets on how much they got the year before. If they aren't producing the desired results, don't keep funding them.

n Eliminate the two-thirds vote requirement to pass a budget. We don't happen to agree with this one. The fact that a few Republican votes are needed to pass a budget is all that's stopping the Democrats from closing the $42 billion deficit with new taxes. The voters imposed the two-thirds requirement in 1962 when Pat Brown was spending gobs of money on freeways and water projects. But if it's part of a bigger cost-containment package, we're willing to listen.

n Tie expenditures to revenues. This is as simple as it sounds. If you're going to launch a new program, identify the revenue source to pay for it.

n Create a rainy-day fund. When you're collecting windfall income taxes in the midst of a dot-com boom, or your property tax receipts exceed expectations during a real-estate boom, set the excess aside for when the booms go bust. They always do.

If the California Department of Finance is searching for a simple, concise definition, we've got one: "What goes up must come down."

You can - and should - bank on it.


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