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New Budget Plan
Takes Three Steps Back, None Forward By Carl DeMaio Gov. Gray Davis' new budget plan, and the Republican plan that came before it, serve as the ultimate confirmation that there is only one way out of the state's budget mess: The governor and just about every lawmaker in the Capitol Building need to check into a rehab clinic. They are spending addicts. Despite the dire budget crisis, state agencies still overspent their budgets by $2.6 billion in the last four months. Instead of closely monitoring these programs and identifying ways to improve their efficiency, the state just keeps on spending. Now, the political parties will try to come together on a plan that, in its essence, pays off one credit card with another, asks taxpayers to bail them out with a bevy of tax and fee increases, and slips in a few cuts so they can claim to be making the "tough" decisions. Gov. Davis' original budget plan was actually better than his just-released revised budget. Initially, Davis made tough choices, targeted specific spending reductions and recommended fundamental budget reform. The revised budget backs away from many of the spending reductions and offers no concrete details on how to reform a number of woefully inefficient state programs. The plan would cost families hundreds of dollars each year in new sales taxes and car fees, and also suggests using billions of dollars in bonds to shift the debt to future years Ironically, Gov. Davis got the magic debt-shifting idea from the so-called fiscally prudent Republican Assembly Caucus, which recently released its plan to "balance" the budget through a historic $10 billion debt bond. If you or I did it, we'd be basically be using one credit card to pay off another credit card. Bond financing represents a failure by our elected leaders to confront the state's budget problem head-on with real reforms and lasting solutions. The governor's plan also seems to have an eye on his political future. If he's ever going to run for national office (or survive the potential recall vote), he needs to regain the confidence of his political base - and it looks like he's trying. Thanks to pressure from teachers' unions and the infamous corrections union, proposed cuts to education and law enforcement have been dramatically scaled back. Legislators claim borrowing billions and tax increases are needed to balance the budget because they mistakenly allege the state has a revenue problem. State revenues actually grew at a very healthy clip - 26 percent from fiscal 1998-99 to 2002-03. If politicians had simply been able to limit themselves to spending increases equal to the growth in population and inflation, we wouldn't be facing this grave budget situation. So how do we get out of this mess without huge tax increases or cuts to education and social programs? First, we need to stimulate the economy without further burdening taxpayers or driving more businesses out of state. In a 2002 Development Counsellors International survey of 287 U.S. business executives, 57 percent of the executives selected California as the state with the least favorable business climate in the country. Increasing the sales tax won't help. Gov. Davis can encourage individual entrepreneurs to open small businesses by reforming workers' compensation laws. Workers' compensation premiums have skyrocketed more than 50 percent since 1999 and legislation signed last year is expected to increase compensation insurance costs for California businesses by more than $3 billion per year. Second, every state program should be subjected to performance measures. Using proven and tested benchmarks from similar federal agencies, and other states, all programs should be forced to demonstrate they are providing a valuable and needed service to taxpayers - and doing it with the appropriate level of funding and staffing. Low-priority and poor-performing programs should be suspended until the budget crisis is over. Reforming state programs and reeling in state spending is the real long-term solution to this crisis. Gov. Davis should have stuck with his original plan for fundamental reforms. Lawmakers have already acted on all of the easy budget options, agreeing to some program cuts and $2.2 billion in bonds. With the easy options off the table, it is time for tough choices. Instead of tax increases that cost the average citizen hundreds of dollars each year, let's send lawmakers to spending rehab. Maybe we can get a group rate. Carl DeMaio is senior fellow at Reason Foundation and president of the Performance Institute, a think tank in San Diego. |
