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State budget is full of tricks, questions

Posted on June 27, 2017 by Sonoma Valley Sun

California voters are pretty good at figuring out what is going in the state capital when it hits them directly. For example, recent polling shows that citizen awareness of the $5.2 billion annual gas and car tax is very high and, incidentally, very negative.

But the same can’t be said when it comes to the more complicated and arcane actions of our state politicians such as the annual California state budget process. While Californians are painfully aware that taxes are very high (they’ve been watching their friends and neighbors moving out of state at record pace) they typically have little comprehension of where their tax dollars go. That’s not surprising since California ranks dead last in budget transparency according to a recent study by U.S. News & World Report.

Nonetheless, here are the main takeaways that every California taxpayer should know.

First, the budget is huge – over $125 billion in general fund spending – by far the largest budget in California history. Since the recovery began after the great recession, taxpayers have infused California’s General Fund with $41 billion and special funds by $28 billion. That translates into a 63 percent increase since 2010.  And property owners have done their part as well.  With real estate values fully recovered (and then some) property tax revenues are up 72 percent. This is where our schools get the lion’s share of their money.

Second, the budget is only balanced if you ignore debt. The majority party is practically breaking their arms trying to pat themselves on the back for a “balanced budget.” This is like a family celebrating the fact that they paid all their bills this month but ignoring the fact that they have a mortgage that is way beyond their means over the long term. California’s pension debt is, by some measurements, close to a trillion dollars.

Third, the budget is, as usual, full of tricks and questionable accounting. One of the more dubious ploys involves borrowing from special funds. This year, there’s a proposal to borrow $6 billion (with a “b”) from the state’s Surplus Money Investment Fund to reduce the unfunded liability of the state’s pension fund, PERS. While there is agreement that appropriating more money to PERS now helps to reduce unfunded liability in the future, that payment should come from current revenue, not a special account designed to cover ongoing operating expenses.  Let’s call this for what it is: Paying your Visa bill with your MasterCard.

The budget is being praised for adding a couple billion more to the state’s rainy day fund (technically called the Budget Stabilization Account) bringing it to over $8.4 billion. But recall during the last recession, the budget shortfall was many times that amount. Thus, while it seems like a lot of money, the state’s reserve funds remain woefully inadequate. You can’t save a penny a day for a couple of years and think it will be enough to fix the roof when it collapses.

Other trickery includes several dozen so-called “trailer bills.” These are supposed to be budget related bills – many are not – that can pass with a simple majority vote and are not subject to citizen referendum. Because they can be jammed through on short notice without citizen recourse, they are a favorite tool of the majority party to effectuate big policy changes. Two examples of this are the gutting of the California Board of Equalization – one of the few state tax agencies in America actually accountable to voters – and a blatantly political power grab by changing the law as it relates to recall elections designed solely to throw a lifeline to a tax-and-spend democrat who cast the deciding vote on the gas and car tax hike.

Bottom line? The majority party has adopted laws and policies which will unquestionably push state spending permanently higher by expanding programs, increasing welfare costs and giving their political funders – labor unions – higher compensation via costly collective bargaining agreements. Our elected leadership is driving California right off the cliff.  Thelma & Louise would be proud.



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