Jerry Brown Plays the 'Frugal Adult' While Quietly Spending
It’s budget time again in Sacramento. And as is his wont, Governor Jerry Brown has attempted to signal a tone of frugality. While announcing the May Revise last week, Governor Brown confidently stated that "Cuts are coming over the next few years, and they’ll be big.” Why the warning? Because despite Brown’s much-touted “California Comeback,” his budget still has a $3.3 billion shortfall – smaller than previous deficits, but still notable given the state’s overall good economic health.
Importantly, this tone of frugality is more perception than reality. More political posturing and spin than math. Governor Brown and his team have convinced Sacramento that he is the “adult in the room” holding the line against out-of-control spending. But the numbers suggest otherwise.
The Explosion of Special Fund Expenditures: Since Fiscal Year 1984-1985, real special fund expenditures have ballooned a whopping 447 percent or about 6 percent, on average, per year. In Governor Brown’s budgeting era, more and more of the budget is locked into these special funds. The May Revise pegs total special fund expenditures at $56 billion for Fiscal Year 2017-2018, about 50 percent higher than Arnold Schwarzenegger’s last budget and more than double Gray Davis’ last budget. Moreover, we’ve seen a rise in the share of special fund spending to overall expenditures. The May Revise has special fund spending accounting for almost one-third of overall expenditures. This is not an anomaly for Governor Brown. On average, real special fund expenditures have been 28 percent of overall spending during his last two terms – the highest of recent Governors. This meteoric rise in special fund spending can cause major complications to fiscal responsibility and budgeting in California. As I wrote in a May 2014 Hoover Institution Eureka piece, “…the restricted nature of special funds adds further complexity to California’s already overly complex budget. This eliminates flexibility. Some might see this as a virtue, but budgeting is all about priorities—and when aspects of a budget are locked in, it makes it harder to appropriately prioritize.”
Transportation - Newsworthy Policy, but Not a Budget Priority: Transportation has been the major topic of discussion in Sacramento for the last few years as lawmakers have clamored to find ways to fill a major pothole in transportation infrastructure maintenance and modernization funding. Ultimately, Governor Brown and legislative Democrats rammed through new gas and vehicles taxes and fees to pay for the funding gap. The level of angst, however, shown in the public discourse on transportation infrastructure funding hasn’t translated to the budget. Since Governor Brown’s first budget, special and general fund transportation expenditures have increased, on average, 6.3 percent per year in real terms. While tied for the third largest average annual increase (with health and human services), general government tops the list at 7.1 percent. Transportation only outstrips the overall average annual spending increase by a half point. Meanwhile, under Governor Schwarzenegger, environmental protection – the most newsworthy policy of his Administration’s tenure – saw a real average annual increase of 24 percent. And even with stronger than average annual increases, transportation spending still ranks as only the 5th highest spending category.
California’s Spender-in-Chief: The claim that Governor Brown has been the adult in the room rests on comparing spending increases during his tenure to his predecessors. Regardless of whether you examine real general fund spending only, real special fund expenditures only, or combined real spending, Brown stands apart from his recent colleagues in the Horseshoe. Under Governor Brown, general fund spending has increased 35 percent – or 5 percent on average per year. The only previous Governor coming close is George Deukmejian at 27 percent (4 percent on average per year). Looking at special fund expenditures, under Governor Brown spending has increased 55 percent since his first budget (8 percent per year, on average). Deukmejian comes closest at 49 percent and Schwarzenegger next at 31 percent, but again Brown is in a league of his own. And when combined, Brown has presided over an increase of 40 percent (almost 6 percent, on average, per year), ten point higher than Deukmejian and over 30 points higher than the average the three Governors between Deukmejian and Brown.
Of course, the Governor is just one part of three in the budget setting process – the other two being the State Assembly and the State Senate. And according to recent political science research, there is evidence that California’s State Legislature has taken a significant progressive tilt, which typically leads to higher spending. Nonetheless, Brown has wide veto powers, especially when it comes to the budget. It would appear that the Governor plays the frugal adult in the room in front of the media, while advancing his progressive spending goals at the backroom negotiating table.