Once again, Legislative Analyst Mac Taylor is playing the role of Toto in the Wizard of Oz. He pulled the curtain back and revealed for citizens of the state that little secret about the state budget that the great Wizards (Governor and Legislature) would not admit: The budget they adopted in October is likely already $6 billion in the red and does nothing to solve the long-term problem of fiscal solvency. It also set up another budget gap for the 2011-12 fiscal year of $19 billion, for a staggering two-year problem of $25 billion.
The late-adopted budget did little for the fiscal stability of the state, in either the short or long-term. In fact, it actually made things worse. There are large gaps between future revenues and expenditures, as far as the eye can see…at least through the next 5 budgets. However, not all of the current problem should be laid at the feet of the Governor and Legislature. Voters have a hand in this, as well, passing measures that complicate our ability to achieve fiscal balance.
This is why most of the solutions to the 2010-11 budget problem were one-time fixes, that do not help the long term. Add to that the actions of the voters, and little has changed. Sadly, there was almost no effort on the part of Republicans or Democrats to accomplish what should have been a primary objective: Creating a path to fiscal solvency.
Is there a path to solvency? California Forward and like-minded groups have made a variety of suggestions on setting out such a path. These include multiyear budgeting, budgets based on improving program outcomes, strengthening the rainy day fund, and requiring a method for financing new programs.
The legislative analyst has suggested specific actions to lead the state out of this mess, making three suggestions that Governor-Elect Brown should embrace:
1) Fiscal solvency matters. For the long term, fiscal solvency should be the first priority. For the next several years, major permanent program reductions must be made, along with an assessment of the revenue base that supports state spending. Sadly, there are few groups who care about this issue. There are no “Friends of the General Fund” to advocate for reaching fiscal balance. There are only advocates for specific – albeit important – programs, such as education and health & human services.
2) It is time to approach state budgeting on the basis of what citizens are asking for: value for their money. The focus of our budgeting process should be how to improve the performance of existing resources and how this improves outcomes for the people served by the state.
3) Revenues must be part of the discussion, because many state tax preferences need to produce “value for money,” just like expenditures.
The Analyst’s Office has given the new Governor and Legislature a road map to fiscal solvency: think long term, get value for money, and work toward solvency of the general fund.
Fred Silva is the senior fiscal policy advisor at California Forward.