California's Budget Is a Monument to One-Party Rule
With a few hours to spare before the June 15th midnight deadline, the California State Legislature passed its Fiscal Year 2014-2015 budget. At $156 billion in general and special fund spending, the budget represents a sharp spending increase buoyed by stronger than expected revenues thanks to two temporary and precarious sources: Proposition 30's $6 billion-a-year tax increase set to expire in Fiscal Year 2018-2019, and a resurgent stock market driving increased capital gains tax revenue.
As always, the spending runs the gamut, including politicians' pet projects like $264 million for former Senate President Pro Tem Darrell Steinberg's pre-school expansion, along with programs that actually enjoy broad public support. Here are some of the best and worst highlights.
The Good: California isn't necessarily known for its fiscal restraint, but at times, there are glimmers of hope (for instance, the passage and continued support of Proposition 13). The budget includes provisions related to the revised ACA 4, a "rainy-day" fund plan negotiated by state Republicans and Democrats that will go before voters in November. While this isn't the first attempt at a budget reserve, many are hopeful that this plan will be more successful.
However, "the good" also has "eh" components. The new rainy-day fund's calculations require metrics that currently do not exist, thus complicating the Department of Finance's implementation. In addition, the reserve does nothing to address the underlying causes of California's budget volatility - namely myopic overspending in good times with money from revenue sources that are overly sensitive to economic downturns. Moreover, a last minute trailer bill - policy items attached to the budget - amends the rainy-day fund to cap school district budget reserve levels; a give-away to the teachers' unions that will unnecessarily tie local school administrators' hands during budget and contract negotiations.
The Bad: Of all the pet projects funded in the budget, Gov. Brown's high-speed rail might be the most egregious. Under scrutiny by the courts and Congress, the project is facing serious funding problems, a myriad of legal and environmental challenges, and declining public support. Yet its many demerits didn't stop the legislature from earmarking $250 million of current cap-and-trade revenues, and 25% of future cap-and-trade funds to the project. While the funds allotted to the rail are substantial, they won't come close to covering its $67 to $100 billion price-tag. Worse, the appropriation is an affront to the intent of the cap-and-trade program, which aims to reduce California's carbon footprint by 2020. 2020 will predate the completion of the high-speed rail; that is if it manages to be built at all. This will likely lead to additional legal challenges.
The Ugly: The ugliest feature is not what is in the budget, but how the budget came to be. It was largely written, negotiated, and debated in back-rooms, without input from the budget conference committee's two Republicans, state Senator Jim Nielsen and state Assemblyman Jeff Gorell. At times, and in a budgeting process that was anything but transparent, Nielsen and Gorell only had a few hours to review provisions before the committee voted on the items. As the San Francisco Chronicle's Melody Gutierrez put it, "Democratic lawmakers crafted a budget for their Democratic governor to sign."
And even when it was rushed to a floor session on Sunday to meet the constitutional deadline for passage so that legislators could continue collecting their paychecks, neither individual legislators, nor the press or the public had an opportunity to delve into the budget details before voting (truly a "we have to pass it to figure out what is in it" moment). Notably, the lack of transparency didn't just extend to the budget details, but also to the important policy provisions included in the budget trailer bills.
At $156 billion, the highest level of inflation adjusted spending in California history, many will find at least one thing to smile about with the budget. Still, progress made in 2014 doesn't alter the certain reality that the Golden State has serious fiscal problems; problems addressed this time around either superficially, or not at all. This is what happens when one-party controls the entire process.