A disciplined and focused fiscal system

One of California Forward's top priorities since 2008 has been reforming the state's budget-making process—currently a dysfunctional system that allows lawmakers to spend more money than we have and does not ensure that money is well spent.

California Forward has developed a comprehensive package of fiscal reforms that would require lawmakers to save money and pay down debt in good years, prevent legislators from making promises they can’t keep, require every program to be reviewed, and make sure dollars are spent in ways that improve the performance of critical programs, such as education and public safety.

Budget reform: California needs a state budget process that will prevent lawmakers from making promises they can’t keep and ensure public resources are well spent. The following elements of comprehensive budget reform are a top priority for CA Fwd in 2011 and 2012:

  1. Performance-based budgeting. The Governor and legislators should establish clear goals and performance measures for all programs. At least once every 10 years, lawmakers must review programs to determine if they should continue, or how they can be improved.
  2. Multi-year budget planning. The Governor and Legislature should prepare two-year budgets and three- and five-year fiscal forecasts, and publish updates on the state’s forecasted fiscal condition prior to the budget vote and early in the subsequent fiscal year. Quick action should be required when revenues decline and the budget falls out of balance.
  3. Pay-As-You-Go for new programs and tax reductions. Major new or expanded programs or tax reductions (created through the legislative or initiative process) should identify how they will be financed by additional revenue or compensating spending reductions.
  4. Manage volatile revenue and increase reserves. Spikes in revenue, after meeting minimum K-14 funding obligations, should be used to fill the rainy day fund and for other one-time uses, starting with paying down debt.

Revenue Reform: California needs to evolve the tax structure to reflect the evolving economy, and to support structural changes designed to improve community and regional services. Tax reform is a priority for CA Fwd, provided it is part of comprehensive fiscal management and performance improvements. From that perspective, two principles should guide those reforms:

  1. The tax structure should be aligned to the new economy. California is transitioning to a knowledge and service-based economy, which has ramifications for how tax structure influences investment decisions, as well as how much revenue is generated by certain taxes.
  2. The allocation of revenue should be aligned to structural changes designed to improve results and accountability. The level of government responsible for providing services must have adequate fiscal control to set priorities and adjust strategies so they can achieve objectives and be held accountable for results.

One element of this reform package—allowing the state budget to pass with a simple majority vote—was adopted with the passage of Prop. 25 in November 2010.

California Forward and the California Forward Action Fund continue to advocate for additional reforms that would give lawmakers the tools they need to balance the budget, create stability, and improve results.