My joy at being sworn in to the state Legislature last
December
– as a member of the Assembly representing a district that
includes Morgan Hill, San Martin, the Coyote Valley – ended within
hours, as a special legislative session was called to deal with a
record state budget deficit, now estimated at more than $35
billion.
My joy at being sworn in to the state Legislature last December – as a member of the Assembly representing a district that includes Morgan Hill, San Martin, the Coyote Valley – ended within hours, as a special legislative session was called to deal with a record state budget deficit, now estimated at more than $35 billion. The state’s general fund budget, absent this crisis, would be about $80 billion.
I am regularly asked, “Couldn’t anyone see this coming?” I think the state saw some of it coming, but no one expected this downturn to be second only to the Great Depression of the 1930s. With two-thirds of state general fund revenues tied to the income and sales taxes, which fluctuate with national economic trends, the health of the state budget is tied directly to the health of the economy.
It took time to get into this mess and it didn’t happen all at once. In the 1980s and early 1990s, we lengthened prison sentences and passed Three Strikes, all without tax increases to pay the higher costs for the increased number of incarcerated people. In the late 1990s, we used most of the tax revenue “bubble to increase funding for K-12 education in order to assure that our kids aren’t being left behind.
The state also reduced revenue through tax breaks, such as the reduction in the Vehicle License Fee and the Manufacturers Investment Credit. Then the bubble collapsed, and the state reserve was overwhelmed by a sea of red ink.
How bad is the deficit? We could lay off every state employee, but it wouldn’t be enough. We could close every prison and end all assistance to higher education, but it wouldn’t be enough. We could end medical assistance to low-income families and gut environmental protection, but it wouldn’t be enough.
In January, the governor proposed a budget with big cuts, new taxes, and a transfer of some programs to the local level. This was a gutsy, balanced, “pay-as-you-go” approach.
Legislative Republicans indicated their opposition to tax increases, which are not possible without some Republican votes. Republicans who voted for budgets in the last few years paid the ultimate political price for breaking ranks – two were defeated in primaries for higher office, one was removed from his legislative party caucus, and successful pressure was placed on two others not to seek re-election – a message not lost on the current crop of Republican legislators.
In February and April, the Legislature made unprecedented mid-year cuts – pegged at $12 billion over 18 months – not enough to solve the problem, but a good start.
Then, following the governor’s proposal and the mid-year legislative action, Republicans made a proposal. They recognized that the entire budget deficit cannot be resolved by cuts alone – and proposed that the state borrow billions to “spread the pain” over several years, but without tax increases to pay for the borrowing. This would be the equivalent of putting rent on a credit card – but in this case the amount to be charged into the future would be 15 percent of this year’s almost $80 billion state budget.
Last month, Gov. Davis presented a revised budget proposal, based on updated estimates of expenditures and revenues, designed to try to reach a bipartisan budget agreement. The new proposal includes fewer cuts, fewer tax increases, and almost $11 billion of borrowing to be repaid by an increase in the sales tax – an increase Republican legislators still say they won’t support.
California is in need of reform to ensure that we do not face future budget swings as the economy goes through downturns. For the past few months, I have been part of a bipartisan working group of Assemblymembers trying to talk across the aisle about budget solutions. While there is trust building, and these talks have been productive, they also highlight the difficulty of arriving at a solution.
The budget debate the next few weeks should be over what kind of California we want to live in – one that is guided by the values of educating children, providing medical care for the indigent, taking care of seniors who are poor, promoting the economy, and protecting the environment. Instead, it appears that the debate will focus on how we want to mortgage our future – whether massive borrowing should be paid from a new tax or just put on the credit card.
I believe in a balanced approach as the solution, as originally suggested by the governor – a mix of cuts and new taxes tied to education and health care and designed to sunset when the economy improves. And we should balance the budget now. This will not be politically easy or popular, but it is important to put the state on a “pay-as-you-go” basis. Our legacy to the next generation should be good schools, a clean environment, and a healthy economy – not mounds of debt and more deficits.
John Laird, a Democrat, represents the 27th Assembly district in Sacramento, which contains parts of Santa Cruz, Monterey, and Santa Clara counties. A more detailed budget background paper can be downloaded from his web page at http://democrats.assembly.ca.gov/members/a27/
