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California's problem is spending? That's a myth

May 28, 2009|MICHAEL HILTZIK

A reader writes:

"California's problem is mainly on the spending side. If we stuck to a budget increase of inflation plus population growth over the last 10 years, we would probably be in fairly decent shape."

For The Record
Los Angeles Times Saturday, May 30, 2009 Home Edition Main News Part A Page 4 National Desk 2 inches; 79 words Type of Material: Correction
Hiltzik column: A column by Michael Hiltzik in Thursday's Section A on the California budget said the state's population grew about 30% from 1998 through 2009. The correct figure, based on population estimates from the state Department of Finance, is about 15%. However, the finding by the Legislative Analyst's Office that the state budget remained in line with population growth and inflation during that period, on which the column was based, relied on the correct multiplier of population growth.

Sounds right, doesn't it? The same perfectly reasonable supposition was expressed in scores of e-mails I received following last week's budget ballot debacle.

Indeed, the idea that California's budget has been out of control as measured against inflation and population growth is a deeply cherished talking point in the debate over the state's fiscal deficit.

Unfortunately, it turns out to be yet another infectious myth. The truth is that over the last 10 years, California's spending has tracked population growth and price increases almost to the penny.

This finding comes from the nonpartisan legislative analyst's office, which subjects the state budget to more careful scrutiny than almost anyone else in Sacramento.

Analyzing the 2008-09 budget bill last year, the legislative analyst determined that since 1998-99, spending in the general fund and state special funds -- the latter comes from special levies like gasoline and tobacco taxes -- had risen to $128.8 billion from $72.6 billion, or 77%.

During this time frame, which embraced two booms (dot-com and housing) and two busts (ditto), the state's population grew about 30% to about 38 million, and inflation charged ahead by 50%. The budget's growth, the legislative analyst found, exceeded these factors by only an average of 0.2% a year.

My calculations show that the combined growth factors would have allowed the budget to grow even more. But for the purpose of argument, let's use the legislative analyst's more conservative number. That punctures the notion that the state has been on a drunken spending spree out of proportion to these common multipliers.

A couple of caveats are in order. These budget figures don't include federally backed spending. Gov. Schwarzenegger's '08-09 budget included $56 billion in federal funds, mostly for health and social services programs such as Medi-Cal.

Nor do they include spending of bond proceeds or the various borrowing scams the governor and Legislature implemented, such as dipping into local government coffers.

The inflation factor, further, isn't the consumer price index, which rose about 35% over the period, but a separate federal index of state and local purchases. This makes sense because the state buys relatively less of what's measured by the CPI, like bread and hamburger meat, and relatively more of what's measured by the government index, like healthcare, heavy equipment and educated workers.

That said, it's worth examining where the state does spend money, and why.

To dispense with a common bugaboo, yes, the state spends plenty on illegal immigrants. How much is impossible to specify because no one knows how many live in the state or what services they use.

My colleague George Skelton recently estimated this cost, net of the federal government's skinflint contribution, at some $5 billion a year. As he observed, undocumented workers contribute plenty in taxes, too.

I would further add that we employ these people to tend our farms and gardens, build our homes and help raise our children.

In any event, far more blame for the deficit belongs to California voters. Year in, year out, they enact spending mandates at the polls, often without endowing a revenue source.

"Budget management really is in the hands of the voters," says Assembly Budget Committee Chairwoman Noreen Evans (D-Santa Rosa), who recently posted a video online cogently outlining the dysfunctional budget process.

Some of these programs have hidden costs -- well, not so deeply hidden. The three-strikes law saddled the state with hundreds of millions in costs to prosecute and jail thousands of innocuous defendants. After Proposition 63 expanded mental health services in 2004, the Mental Health Department's budget expanded from $370 million to $1.5 billion.

From 1998 to the present, by my count, voters passed 27 separate bond issues to pay for school buildings, libraries, hospitals, highways, a high-speed rail system, stem cell research, veterans facilities, clean water and air, and more. These may be mostly worthy amenities, but that doesn't mean they pay for themselves.

Since 2000, the legislative analyst's office reports, $85 billion in such borrowing has been authorized at the ballot box -- half of it in 2006 alone. Annual payments on these bonds have climbed from $2.5 billion in 1998 to more than $5 billion this year.

Then there's budgetary borrowing, those little subterfuges so favored by our political leaders, which include the $15-billion deficit bond issue of 2004, the governor's version of a credit card max-out binge.

Debt service on those borrowings rings in at more than $4.2 billion this year and next.

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