Last week, the California Department of Finance confirmed that the state’s fiscal year revenues through June will come in $2.2 billion short of expectations, prompting Gov. Jerry Brown to implement $1 billion in budget cuts. These cuts include a $258 million busing subsidy, $320 million from public universities, $200 million in programs for the elderly and disabled, and $79.6 million from public schools, equal to half a day of schooling.
Most will go into effect Jan. 1, except the cuts to schools, which take effect Feb. 1. The triggered reductions are the result of a last-minute June budget deal and may now serve as political cover while Brown begins his push for a round of income and sales tax increases.
This sorry state of affairs is indicative of business as usual in California and provides a basis from which to examine the state’s irresponsible budget practices as a whole.
California’s current budget process relies heavily on the use of budget gimmicks, especially number shifting and projection altering that can create the illusion of a balanced budget.
Experts on both sides of the aisle saw the revenue projections on which this budget was based as wildly optimistic.
In June, State Budget Solutions pointed out that the governor was assuming $4 billion more in his rosy economic forecast than the already projected $6.6 billion forecasted increase.
Observers were proven right when the estimates were $541 million off the mark by the end of the budget’s first month.
Gimmicks are employed in part because of their ability to transfer blame away from politicians and to supposedly unforeseen circumstances, like California’s mysteriously low year-end revenues.
Relying on this particularly optimistic revenue projection allowed Brown and his allies to avoid ownership of cuts to important state functions like K-12 education.
Now, as he prepares to have a general sales tax increase, along with higher income taxes on those earning more than $250,000, placed on the November 2012 ballot, Brown can point to the potential for a new round of highly visible cuts as the only alternative to his tax increases.
In a sign that little is set to change, Brown has already made clear that his 2012-2013 budget proposal’s revenue forecast will include $7 billion from these extra taxes, despite the fact that their fate will not be decided on until November.
Interestingly, the governor vetoed a bill just this year with the potential to reform the entire budget process. The legislature unanimously passed SB 14, which would have implemented “performance-based budgeting.”
Performance-based budgeting requires state agencies and departments to craft desired performance outcome measures for all spending programs.
Measurements are then used to continually assess a program’s effectiveness and efficiency in achieving the department’s goals.
When each allocation is viewed as one part of a revenue pie, prioritization can occur based on the successes or failures of individual programs.
The governor’s accompanying veto message complained of the bill’s “one size fits all approach,” and called it a “siren song” of reform. Requiring performance measure implementation at all levels of government, he argued, would have diverted resources away from policy implementation and toward assessing their merit.
This understanding is symptomatic of a skewed vision of the budget. Brown and others in the state refuse to acknowledge the reality that a state’s budget is one whole entity.
Effective allocation of one sum of money (the state’s total revenues) requires a big-picture view of the entire budget, along with an understanding of how each expenditure stacks up against the rest in terms of actual outcomes and alignment with state priorities.
Brown declined to implement a reasonable, rational and responsible budgeting approach. Piecemeal implementation of effective budgeting techniques and the continued use of gimmicks may look like reform and austere decision making, but are the real “siren song” in creating a positive outlook for California’s future.
Bob Williams is president of State Budget Solutions, a nonpartisan organization advocating for fundamental reform and real solutions to state budget crises.
