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Gann Spending Limit Hits State Government Hard for First Time

November 02, 1987|DOUGLAS SHUIT | Times Staff Writer

SACRAMENTO — Some view it as a curse on government.

Others say it is just what the doctor ordered to curb the free-spending, program-happy appetite of the Legislature.

It is blamed when patients are turned away from hospitals. Its name is invoked when old and battered textbooks are distributed at public schools. Disapproving fingers are pointed at it when government is too slow to fill potholes in the streets.

The issue causing so much discussion is the spending limit that voters imposed on California state and local governments in 1979.

Called the "Gann limit" after anti-tax crusader Paul Gann, its author, the spending cap hit state government hard for the first time this year.

First, Gov. George Deukmejian and lawmakers struggled to fashion a budget that kept the state below the limit. Then they watched with frustration as an unexpected surge in tax revenues brought in more money than the state was allowed to spend.

Even though the fiscally conservative Deukmejian acknowledged that the state had unmet budget needs, his hands were tied.

The resulting surplus meant good news for many Californians, because under the Gann initiative, any money the state cannot legally spend must be returned to taxpayers. As a result, the state controller's office over the next three months will send out rebate checks totaling $1.1 billion.

But for many others, the limit presented some harsh new realities.

Judging from this year's results, the limit will have a far-reaching impact on government programs.

Despite what is expected to be a continued healthy inflow of tax revenues, many programs will shrink.

Education, health and welfare programs, already struggling to keep up with rising costs and increased demands for services, bore the brunt of the tight budgeting this year and likely will face the same fate in future years.

As a result of budget cuts, many school districts throughout the state had to put off the purchase of textbooks, eliminate non-teaching positions and scale back dropout prevention and other non-academic programs.

The purchasing power of county health programs was reduced, leading to predictions that indigent Californians face longer delays in getting treatment--or face the possibility of no treatment at all.

Some residential care facilities that provide homes for developmentally disabled may have to close their doors or turn away prospective residents because the state isn't providing enough to keep up with rising costs.

Assemblyman John Vasconcellos (D-San Jose), chairman of the Assembly Ways and Means Committee, in his criticism of Deukmejian's $592 million in budget cuts last July, said: "The cuts strike hardest at persons who live on the margins of our society: seniors, AIDS victims, minority children and poor Californians who depend on Medi-Cal (the state-funded medical services program)."

Because of the spending limit, state government this year basically was a zero-sum game--that is, in order for the budget to grow in one area, it had to be cut in another. The same pattern is expected to be repeated in future years.

Simply put, the limit, using 1979 as a base year, ties government spending to an inflation index and the growth of population. This year, the limit increased allowable state spending by 4.9%.

If all things were equal, the limit would allow state government spending to grow about as fast as the rate of inflation. But in government spending, all things are not equal.

Some of the fastest-growing portions of the state budget, such as costs of coping with a swelling prison population and the need to put more and more tax dollars into AIDS research and treatment, were not factors when voters approved the limit in 1979. And some costs, such as repairing or constructing state highways, cannot be measured against the U.S. Consumer Price Index, the inflation factor used to calculate the spending limit, because of the huge outlays of capital required to get such projects off the ground.

It is widely acknowledged that the limit is not elastic enough to anticipate and provide for growth in existing programs such as funding public schools and to meet new budget demands such as expanding the prison system.

While the initiative allows the governor and Legislature to raise the limit, such an action requires a two-thirds vote of the Legislature, a practical impossibility given the deep partisan divisions in the Assembly and Senate.

All of the program cuts cannot be laid entirely at the doorstep of the spending limit.

For one thing, there is the reality of a fiscally conservative Republican governor dealing with a Legislature controlled by Democrats and led by liberals. These powerful forces often are sharply split over spending priorities.

Many of the governor's budget cuts are philosophical and would have been made with or without the limit. Deukmejian, for example, began cutting the budget of the Medi-Cal program almost from the beginning of his first term in 1983, long before the spending limit was a factor.

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