Once again, California’s state government is in dire fiscal straits.
In an annual tradition, Californians are bombarded with apocalyptic scenarios of financial doom and gloom over impending budget cuts to popular government programs. In order to shore up this year’s fiscal mess, Gov. Jerry Brown proposes to cover a $16 billion shortfall in the state’s $142 billion budget by cutting $8 billion from the general fund, obfuscating $2.5 billion in several gimmicks and fee increases, and raising $6 billion in new taxes.
However, in 2010, Brown campaigned not to raise Californians’ taxes with one caveat: that the voters approve any such tax hike.
To entice residents to vote for higher taxes in Proposition 30, the governor is playing a clever game of carrot and stick while threatening menacing “trigger cuts.” If voters fail to raise taxes, they will face a further $6 billion in painful cuts to popular programs to offset the anticipated tax revenue. If they acquiesce to higher taxes, they will be rewarded with kudos from the political class for their self-sacrifice and fewer budget cuts.
The governor’s threatened slashing seems to hit all the right programs to elicit maximum public outcry: $5.3 billion from K-12 education, $250 million each from the UC and CSU systems, $50 million from adult developmental services, $20 million from local police forces, and so on. The CSU system has embraced the same carrot and stick tactic: reject tax increases and face an extra increase in tuition, accept tax increases and see a $498 per student rebate.
Unfortunately, if passed, Proposition 30 will likely only bridge the gap for a short time, since California’s budget problems are chronic and structural, not temporary. Total budget expenditures a decade ago were $100 billion, compared to today’s $142 billion. The four largest outlays in both the 2002-2003 and 2012-2013 budgets are (a) Health and Human Services, (b) K-12 Education, (c) Business, Transportation and Housing, and (d) Higher Education.
Over the last decade, Health and Human Services funding grew from $27.2 billion to $45.4 billion. K-12 Education went from from $31.8 billion to $38.8 billion. Business, Transportation and Housing funding grew a whopping 130.1 percent, from $7.3 billion to $16.8 billion. Sadly, neglected Higher Education funding actually shrank from $11.3 billion to $9.9 billion (but was compensated several times over with higher tuition).
Meanwhile California’s population grew from 33.8 million in 2000 to 37.2 million in 2010, a paltry 10 percent increase.
However altruistic, this explosive growth of spending is clearly unsustainable. The state will likely not abate in the near future, forcing higher education to fight for a shrinking part of the budgetary pie as other programs gobble up more revenue.
Furthermore, the combination of a weaker than national average economic situation and steeper progressive taxes could leave California in a deeper fiscal lurch as the affluent tax base flees to zero percent income tax states like Nevada and Texas, depriving Brown of his lucrative cash cows.
While Proposition 30 might raise some $6 billion in income and sales taxes and act as a temporary stopgap measure, it fails to enact badly needed reform for a bloated system and only enables another year of unsustainable budget busting dysfunction.