12/09/2010 by Fred Silva

Governor-elect Brown begins long and winding road to fix state budget

Word from the state Legislative Analyst on Wednesday is that the budget is scarier than we thought. But Governor-elect Jerry Brown is determined to tame the budget beast.

Yesterday, Brown discussed the issues and his plans at a special meeting of legislators and local officials. It was clear that the once and future Governor grasps the enormity of the problem, as he outlined the most important themes:

  • The last three annual budgets were passed with dubious solutions that were predominately one-time in nature, often with borrowed resources.
  • More than 70 percent of the General Fund budget is managed by schools and counties. This isn’t a Sacramento problem; it is everyone’s problem.
  • Higher education and the prison system are the primary activities managed by the state.
  • The revenue system that supports state spending relies on the income tax, in particular on upper income people.
  • Recovery will take time. There are more threats ahead, and there are no magic elixirs.

So what course should the Governor and lawmakers take to get the state out of this mess?

It should be clear to the newly minted lawmakers – especially those who came from local government – that the problem cannot be solved with arithmetic alone. Now is the time to examine constitutional – and fundamental – responsibilities and make changes that allow public officials to focus on the highest priorities and get the most done with the available resources.

Forget the spin; voters in November gave clear direction to elected leaders: Focus on results and accountability – in schools, in criminal justice, in workforce development, and in the safety net.

Over the last two years, California Forward developed and advocated for a new budget system that would enable leaders to make those tough choices. Some progress is being made, mostly by individual lawmakers who realize that hope is not a revenue source. California Forward has also advocated for empowering community-level government to pursue state goals, and we have rolled up our sleeves to develop detailed proposals.

Now is the time to get real about the changes that will not only close the chronic budget gap but address the acute distrust that Californians have for their government.

As the Governor-to-be suggested Wednesday, it will take a multiyear workout plan. Not a put-off plan – we will all see through that – but a plan that stops the bleeding and makes government work again. The education and the economy will then improve, and tax revenue will recover because Californians are recovering.

So, if the new Governor and Legislature wanted to put together a multiyear workout plan – infused with California Forward’s principles for fixing the state—they would do the following:

1. Adopt a three year work plan, and set a goal for fiscal balance

The multi-year spending plan would balance revenues and expenditures by June 30, 2014. This time frame is enough to make meaningful changes in California’s approach toward education, health and human services, and criminal justice. The plan could include:

  • A one-time suspension of the constitutional requirement to balance the budget every June 30. Requiring balance is naturally a good fiscal practice, but lawmakers have dug such a deep hole that we have to be honest about how long it will take to climb out of it. A constitutional amendment already on the 2012 ballot, if enacted, would prevent overspending in the future (taking shovels away from lawmakers) and build up the reserves.
  • Over the three years, policymakers should systematically review every state-run program, benchmark costs and performance against peer states, and strive to be at 80 percent of peer proficiency by the end of the workout plan. This work should be disciplined by milestones for making changes and honestly scoring savings needed to reach balance by June 30, 2014.
  • The Governor, working with the Treasurer and Controller, should develop a cash-flow plan for the three-year period. These constitutional officers – working with lenders – should use their authority and standing to make sure the workout plan is fiscally sound and that the state is making adequate progress.

2. Restructure state and local program responsibilities in education, criminal justice, and health and human services

  • Over the next 24 months, the state should restructure the operation of state-funded, community-run programs. Begin with health, social services, and criminal justice programs.
  • The statewide interest should be expressed in terms of outcome goals, and the state should work with community governments to achieve those goals. Local governments should have discretion over how to use resources to best achieve outcomes, and in exchange will be held accountable for results.
  • Policymakers must fully engage the public in crafting and implementing these solutions – balancing the involvement and influence of capitol-based lobbyists.

3. Establish a budgeting process that prevents lawmakers from spending money the government does not have, and makes sure that available resources are spent as well as possible.

  • Enact SB 14 (Wolk) and SB 15 (DeSaulnier) that would put in place a process that focuses on results over the long-term.
  • Enact a PayGo system that would require lawmakers and initiative proponents to pay for their policy decisions. Lawmakers should represent the public will when spending more money or cutting taxes – but they should be required to pay for those choices when they make them.
  • Enact a means to capture spikes in revenue, and use those funds to build the reserve and pay off debt (as would be required by ACA 4, if approved by voters).

In short:

Step 1: Stop the bleeding.

Step 2: Make government work again.

Step 3: Recovery happens.

Other useful links on this topic:

Fred Silva is the senior fiscal policy advisor at California Forward.

Categories: Budget Reform, Fiscal Reform Plan, Governance Reform, Jerry Brown, State Budget

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