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A plan for getting California's fiscal house in order

Weaning California leaders of wishful thinking and fiscal fantasy is a priority as another lean year awaits.

December 27, 2009|Michael Hiltzik
  • Most of the leading candidates to replace Arnold Schwarzenegger as California's governor thus far have shown they are clueless on fiscal and economic policies.
Most of the leading candidates to replace Arnold Schwarzenegger as California's… (Justin Sullivan / Getty…)

Charles Dickens would have been flummoxed by the Golden State in 2009. It was the worst of times, pure and simple, with no "best" to balance out the ledger.

At the start of the last calendar year, the state of California was staring down the barrel of a $42-billion budget deficit looming for 2009-10. By midyear, when negotiations between Gov. Arnold Schwarzenegger and the Legislature got serious, the gap had widened to $60 billion.

Sacramento closed that chasm with its usual patented formula of draconian budget cuts, imaginary savings and outright thievery from city and county fiscal larders. But this did nothing to solve the state's structural budget imbalance. A forecast last month from the nonpartisan Legislative Analyst's Office pegged the budget deficit facing the state now at $20.7 billion, including a $6.3-billion hangover from the current year and a $14.4-billion shortfall for 2010-11. Last week the governor called for more deep cuts in state programs and said he would appeal for federal aid to help close the gap.

In the future, the LAO said, the state will face a continuing budget deficit of $20 billion a year. That's equal to the combined salary of all 306,000 elementary and high school teachers in the state. Even with an "unexpectedly strong economic recovery," the analyst's office added, there is "no way the state can avoid reprioritizing its finances" -- both through significant reductions in major state programs and new revenues.

That pretty much defines the mandate for the state of California in 2010. The time for wishful thinking and fiscal fantasy has passed.

Luckily, we will have an opportunity to air all the possible solutions to our fiscal mess this year through the mechanism of a gubernatorial election.

Unluckily, most of the leading candidates for the job have shown thus far that on fiscal and economic policies, they are clueless.

Let's start our examination of the coming year in California by listing in broad strokes what needs to be done.

First and foremost is a sweeping change in governance rules. No progress can be made in setting the state on solid fiscal ground as long as the Legislature remains a permanent novitiate. Spending and revenues can't be managed without deferring to a tiny minority with an outsized veto, and any special interest with a few million dollars to spend on signature-gathering and television ads can perform an end run around the Legislature at the ballot box.

In practice, this means a loosening of legislative term limits, a change in the rules requiring two-thirds votes in both houses to pass a budget or raise taxes, and a clampdown on ballot initiatives -- especially those mandating new spending programs.

As I've written before, the stringent rules on passing a budget haven't made our budgets better but immeasurably worse. The rules give a powerful veto to a small cadre of Republican legislators adhering to a no-new-taxes pledge. That makes it impossible for the state to match revenues and spending without budgetary legerdemain that invariably pushes costs off to future years, like time bombs.

Fans of the supermajority rule often argue that it's the only thing keeping the Democratsin the Legislature from impoverishing all taxpaying Californians (at least that's the theme of many e-mails I get from readers). The truth is that the real drivers of spending are the voters, who blithely sign off on program after program at the ballot box, year after year.

Preschool programs, after-school programs, a stem-cell program, new prisons, new bond issues, borrowing to balance the budget -- these were all enacted by voter initiative, often on the same ballot at which they enacted a special-interest tax break. Arguably they're all worthy programs, but ballot initiatives are no way to "reprioritize" spending.

California can't get its fiscal house in order without restricting initiatives, whether by requiring that every spending measure identify a new source of revenue, by funneling major initiatives to major elections that can't be easily swung by single-issue voters, or both.

This needs to be paired with measures that increase the professionalism of the Legislature so that lawmakers have the skills and experience to handle important decisions on spending priorities, and that means loosening or eliminating term limits. There have been nine speakers of the state Assembly since mid-1995 (we're soon to get a 10th). Over the previous 20 years, there were two, including Willie Brown, the chief target of the term-limit movement. If there's any evidence that the change has improved state government, I'd like to see it.

Most of these reforms would require voter approval. It may already be too late to get them on a 2010 ballot but not too late to get the ball rolling, regardless of whether the wiser course would be to address them one by one or through a constitutional convention.

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