When you set out to fix something, it first pays to figure out what's broken and why. That's advice that state officials would do well to heed as they try to close a $14.5-billion budget shortfall. But unfortunately, the budget debate in Sacramento has served mostly to shroud the reasons for the problem in three myths.
Myth No. 1: The deficit comes from autopilot spending. In his State of the State address last month, Gov. Arnold Schwarzenegger said that "while revenues are flat, automatic formulas are increasing spending by 7.3%. Now, even a booming economy can't meet that kind of increase. So the system itself is the problem."
Like many other forms of conventional wisdom, this familiar complaint holds a kernel of truth.
It's true that when the governor and lawmakers write the budget, much of the spending is already set. Proposition 98, the biggest autopilot, sets a minimum funding guarantee for K-12 schools and community colleges. Federal law and patient caseloads largely drive Medi-Cal spending. Interest on bonded debt has to be paid. Voters have locked away such revenues as tobacco taxes for their ballot-dictated priorities.
So it's true that state officials don't have as much flexibility as they might like about where to spend money. But it's not true that the autopilots force California to spend more than it otherwise would or should, thereby creating deficits, which is what Schwarzenegger was driving at.
The theory doesn't fit the facts. Despite all the formulas and mandates, spending doesn't always grow. From 1990 to 1995 and from 2001 to 2005, governors and lawmakers held the state's general-fund spending nearly flat. Per-capita expenditures actually fell. What's more, policymakers can -- and sometimes do -- turn off the autopilots. (For instance, Proposition 98 was suspended in 2004.)
The best test of the theory is what has happened to school spending in the two decades since the passage of Proposition 98. The measure's set of complicated formulas ties school and community college funding to growth in enrollment, education costs and the economy. If autopilots drive spending to levels higher than prudent policymakers would otherwise choose, you would expect to find the amount California spends on its schools rising relative to states in which elected officials have more budgeting freedom. Instead, according to Education Week's annual survey, our schools rank 46th among all the states in per-pupil spending, adjusted for regional costs.
