By Jon Coupal
“Government is like a baby,” Ronald Reagan was fond of saying. “An alimentary canal with a big appetite at one end and no sense of responsibility at the other.” If the former California governor were observing Sacramento today, he would probably add that our state government functions more like “triplets,” and has been doing so for more than ten years.
Back at the beginning of the millennium, the California treasury was overflowing due to capital gains tax receipts from what has become known as the “dot.com bubble.” Almost everyone in the state understood that these tax producing profits were the result of a short-term business cycle, and the excessive flow of tax revenue would not be a permanent condition. Unfortunately, there were a small group of Californians who did not understand these basic economic principles, including the majority in the state Legislature and Governor Gray Davis.
These officials responded to the increased revenue by spending it all and committing Californians to pay for expensive long-term programs, like radically increased pensions for government workers, that now have state and local governments facing nearly a half-trillion dollars in unfunded liabilities.
This profligate approach to governing was a contributing factor to the successful recall of Davis. However, governor Schwarzenegger, and the party-hearty lawmakers that continued to dominate the Legislature carried on like there was never a problem. When the state came up short, they used accounting gimmicks that allowed them to carry on spending as if there were no tomorrow.
Between 2003 and 2007, spending increased by one-third. Then the housing bubble burst, and these same suspects imposed the largest tax increase in the history of all 50 states. They had learned their lesson, they said, and pledged to taxpayers they would use the two years of massively higher taxes to buy time to reorganize and reform their spending ways. Two years later, and in spite of California families having paid about two-thousand dollars in extra taxes, the state is now facing a $26 billion shortfall. The “spendaholics” have fallen off the wagon, again.
All of this could have been avoided if the malefactors, who clearly lack self-control, had been compelled to work under a hard spending cap.
Because the politicians that control the Legislature and our current governor – the Department of Finance shows that Governor Brown’s budget will grow 31% by 2015 – are still in a state of denial regarding spending, there is an urgent need to take measures to restore a strict spending limit on state government.
This is why Senator Tony Strickland has introduced Senate Constitutional Amendment No. 10, sponsored by the Howard Jarvis Taxpayers Association, that would impose a firm spending cap on lawmakers. The expenditure limit includes General Fund and special funds, and contains no exemptions for education or local government funding. It creates a reserve of up to 10% of spending; this reserve can only be tapped to backfill revenue shortfalls in the current budget year and to fund non-fiscally related emergencies. Funds could only be used by a Declaration of the Governor and two-thirds vote of the Legislature. Half of the excess revenues beyond the 10% cap would be used to pay off existing debt.
Back when Bill Clinton was running for president, a big sign that read, “It’s the economy, stupid” was placed on his campaign office wall. In an ideal world every member of the Legislature would be required to post a sign on their office wall that said, “It’s the spending, stupid.” Sen. Strickland’s SCA 10 is the taxpayers’ way of sending this message.