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Making California solvent

Let's stop lurching from budget crisis to budget crisis and completely restructure the state.

June 22, 2010|Darrell Steinberg

An interesting thing happened on June 8: Some 75% of the local measures on ballots around California passed. Throughout the state, voters said loudly and clearly that they are willing to pay for quality public investments in such things as education, healthcare and transportation — as long as they know how the money will be spent and who is accountable.

What does that tell us as we struggle to balance our state budget? Plenty.

I am now involved in my 10th state budget — my fifth as a principal negotiator — and the core issues have been the same each year. Democrats have fought to maintain investments in education, health, public safety and infrastructure — investments I believe are necessary to provide essential services, create jobs and expand the state's economy. Republicans (most of whom also care about public investments) reflexively exclaim, "No new taxes, no new revenue." They prefer cuts to schools, infrastructure and services for children, the sick and the elderly. Since it takes a two-thirds supermajority vote to pass new taxes and fees, we historically have had to address budget gaps as high as $42 billion with triaged cuts, more borrowing and creative accounting.

Those approaches should be abandoned. The present structure of state government is not sustainable. As the old saying goes, if you're already in a hole, the first thing you must do is stop digging.

Our challenge now is to find a way to save essential investments in education, health and public safety, while beginning to deliver services at a level of government closer to the people.

There is no question that the magnitude of this year's budget challenge stems from the worldwide recession that began in 2008. That year, California's budget for general fund expenditures was $102 billion. It now stands at $86 billion. State revenue dropped nearly 20% during this same period. Over the last two years, we have cut $35 billion from the budget, affecting every major area of state government. School districts have had to issue thousands of pink slips; class sizes have increased; 300,000 women no longer receive preventative breast exams — the litany of effects is long and painful. Even if the Legislature passed the governor's proposed budget this year — which would, among other things, eliminate CalWORKS, an essential piece of the safety net for children in our state — next year's deficit would start at $6 billion.

We need to invest in the state in order to avoid unacceptable cuts to education and vital infrastructure and to help address the unacceptable 12.6% unemployment rate in our state. But investment to prop things up for just this year is not a formula for political or policy success.

To maintain the services Californians expect and want will require raising some fees, delaying some tax cuts and perhaps even raising some taxes. But it will also require that the state find more efficient ways to deliver those services. California needs a three- to five-year restructuring plan that begins to transfer $4 billion to $5 billion of health, human services and public safety investments from the state to the counties. This transfer of responsibility needs to be accompanied by a transfer of funds to administer the programs effectively. The state must also begin working with school districts, community college districts and the education community to consider the same kind of transfer of funds and responsibility for public education.

Why go to all this trouble to restructure? Since the passage of Proposition 13, state government has largely become a pass-through entity. The state raises the money and gives it to school districts and counties, which in turn deliver the services. This convolution requires multiple levels of administration for the same programs. It obscures who is responsible for what, which means citizens don't always know whom to hold accountable for essential services. The multiple layers of responsibility also stifle innovation, requiring 58 very different counties to operate under uniform state mandates.

To be sure, the state has a responsibility to see that its citizens receive services to which they are legally entitled. But under restructuring, the state's role would become one of ensuring equality and making certain that communities with smaller tax bases don't get inferior services.

So how do we begin this restructuring? Here are some initial ideas.

For 50 years — from 1948 to 1998 — the vehicle license fee was 2%. It was raised temporarily last year from 0.65% to 1.15%, still well below the 1998 level. A percentage of that increase already goes to local law enforcement. I'd propose keeping the fee at 1.15% permanently and use $1.5 billion of the funds generated every year to fund current state law enforcement functions at the local level.

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