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Do Budget Chains Bind State, or Is It Politics?

Rigid spending obligations leave little room to cut, officials say. But critics say political commitments may be the real problem.

January 10, 2003|Jenifer Warren and Dan Morain | Times Staff Writers

SACRAMENTO — As they struggle to cope with California's fiscal problems, budget planners say they are hobbled by a harsh reality: A sizable chunk of the state's income is off limits -- tethered to a panoply of rigid spending obligations.

Take, for example, money the state must spend to repay bonds that finance everything from new schools to parkland purchases. Failure to make such payments, which will total $2.9 billion in the coming fiscal year, is not an option.

Funds dedicated to employee contracts -- state firefighters, prison guards, mental health counselors and the like -- are also sacrosanct, unless employee unions agree to reopen them. Violate those agreements and lawsuits appear.

The use of billions of other state dollars is dictated by voter-approved ballot initiatives -- most notably, Proposition 98, which governs much of the state's school spending -- court decisions and the federal government, said Davis administration officials. Left over, they estimated, is about 10% of the budget they consider purely discretionary -- or easily shifted in a crisis like today's.

"It's true that a lot of state spending is really locked in," said Jean Ross, executive director of the nonprofit California Budget Project, which studies the impacts of the budget on the poor. "That's why we believe any solution to this problem has to involve revenue increases."

But are the walls of this budgeting box truly solid, or are the impediments more a question of politics?

Republicans and many Democrats believe that the constraints are overstated. State Sen. Tom McClintock (R-Thousand Oaks) speaks for many in his party when he says that the state does have wiggle room -- and could close the budget gap merely by rolling back spending by less than 10% for the next 18 months.

"You have to abide by the first rule of holes," McClintock said. "When you're in one, stop digging."

For years, he said, "policymakers have floated the excuse that so much of the budget is outside of their control." That, he argued, is "one of the great myths of the budget process."

The conservative senator is right. Virtually every constitutional and statutory spending mandate imposed on the state could be suspended by a two-thirds vote of the Legislature -- the same margin required to pass the budget.

The state could close its parks and sell the land. It could shutter the University of California and shift responsibility for higher education to the private sector.

California also could follow the lead of other deficit-stressed states -- including several led by Republican governors -- and relax sentencing laws or free certain nonviolent prisoners early, saving millions on incarceration costs.

Gov. Gray Davis could even scrap his own Department of Finance, which does the bulk of the work on state budgets.

But do Californians want to sacrifice their prestigious university system, lose parks or risk an increase in crime that might result if convicts get an early pass to the streets? And could a governor who pitched such solutions get votes for them in the Legislature?

Lobbyist Craig Brown, finance director under former Gov. Pete Wilson, said the issue largely boils down to which state functions and services "you define as mandatory."

In essence, state spending can be viewed as spreading across a spectrum. On one end are certain irrefutable requirements the state cannot neglect, such as debt payments. At the other are items politicians can choose not to fund, or fund at lower levels, if they want to risk the consequences -- such as arts programs.

Numbers defining those categories of spending are hard to come by. The California Budget Project is one of the few groups that has tried to quantify them.

Last summer, a report by the organization calculated that about 66% of the general fund -- the state's main pot of money -- is committed to annual spending the group defined as mandatory. The report's definition included school funding and child-welfare payments as mandatory, but not the Department of Corrections, state forest and fire protection, the state public defender or workers' compensation benefits.

Whatever the number, all parties agreed that California's most inflexible funding obligations include constitutional requirements, mandates by the federal government -- for Medi-Cal health insurance for the poor, for example -- and areas where courts have created hard and fast funding duties, such as an order that prisoners receive a certain standard of health care. Spokeswoman Anita Gore of the Finance Department said that in all, those obligations make up about 26% of the budget, according to a breakout from 2001, the most recent available.

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