Gov. Arnold Schwarzenegger says he wants more than a balanced budget this year. He wants budget reform too.
For a state that has already laced itself into straitjackets of spending mandates and formulas, Schwarzenegger proposes new constitutional chains: a combined rainy-day fund and spending limit, to be added on top of the rainy-day fund and spending limit that voters have already approved separately. His implicit message: The Legislature and I have chosen badly, so please restrict our ability to choose again.
As any parent knows, you can't instill individual responsibility in children by depriving them of the opportunity to choose. The same goes for fiscal responsibility in government. Real budget reform in California shouldn't require more spending straitjackets and, except in one case, shouldn't require a constitutional change. It's simpler than that. Here's what we need to do:
* Adopt transparent and honest accounting. The first step in fixing the budget mess is to understand the size of the problem. That's not easy for Californians. The way the administration and the Legislature talk about the state's finances defies common sense and the rules of accounting.
Most people understand that their household budget is balanced when they spend no more than they earn each year. If they must dip into savings to pay rent, or run up a credit card balance to buy groceries, they know the budget is out of whack and they're headed for trouble.
Not so in California. Budget documents routinely fail to provide the number most useful in making budget choices -- the discrepancy between annual general fund spending and tax revenue. Instead, budget officials and politicians speak of what they call a "shortfall" -- the state's cash reserve at the beginning of the current year, plus the deficit or surplus in the current year, plus the projected deficit or surplus in the next year for which the budget is being written, plus the desired reserve at the end of that budget year. For instance, when Schwarzenegger announced in January that California faced a $14.5-billion shortfall, what he actually meant was that the state was running a deficit of about $7 billion for the current 2007-08 fiscal year and would have a deficit of about $8 billion next fiscal year unless corrective action was taken.
