Tag Archives: California Budget Project

Those stubborn facts about the budget

(Excellent stuff from the Democratic candidate for AD-70 – promoted by Robert Cruickshank)

PhotobucketI was recently asked by the Orange County Register to give answers about how to fix the California budget in 75 words.

That is not possible, because it’s a complicated issue.

Of course, I could have pretended it was simple, like my opponent will do, by blaming California’s budget problems solely on government spending.

But that is not the case.

California has the second lowest ratio of state employees to population among all the states, with 103 full-time equivalent state employees per 10,000 residents. The national average is 143 state employees per 10,000 residents.

It isn’t excessive spending that is the real culprit causing our budget woes – it’s the reckless borrowing we’ve done to pay for unfair tax cuts to the rich and giant corporations.

The three main causes of California’s budget crisis are (1) the national recession, (2) the billions of dollars in tax cuts given to the wealthy and giant corporations, and (3) the billions of dollars in interest that California must pay for the money borrowed to cover these unfair tax cuts to special interests.

If you want to see why people get confused about the causes of our budget problems, break down this whopper from the website of Jerry Amante, one of the Republicans campaigning in the 70th Assembly District, where I’m running:

Over the last 20 years, the California Consumer Price Index has risen 44% and population has increased by 20%.  During the same period, state spending as (sic) increased by 262%, from about $40 billion to $145 billion.  This huge expansion in the size of state government is the root cause of our budget problems.  The solution is not to raise taxes so the government can keep growing – it is to rein in spending and limit government growth. I support a constitutional amendment to limit spending increases.

I don’t know where Amante gets his numbers.

The California Consumer Price Index has risen 72.1% from December 1989 to December 2009, not 44% as Amante claims.

Population has increased by 28% from 1990 to 2009, not by 20%.

(It’s pretty easy to Google this stuff.)

Factor those two numbers together (population and inflation), and you see that if spending had remained level per person, state spending adjusted for inflation would have had a natural increase of 220%.

Jerry Amante was either just plain wrong or intentionally dishonest in his numbers about population and prices, leading to a gross distortion of the growth of the California budget relative to population and cost of living.

How did he do on his spending numbers?

He got one number right: state general fund spending for 1989-1990 was $39.5 billion, very close to Amante’s $40 billion number.  But state general fund spending in 2009-2010 was $86.1 billion, not the $145 billion that Amante claims.

Maybe Amante meant total state spending, including special funds and bond funds, but then he should have used $48.8 billion as his number from twenty years ago and a current number of $124.7 billion.

But whatever numbers Amante uses, the fact remains that real general fund spending has increased less than half of one per cent per year over the last twenty years.

Total spending has increased by more, driven by reckless borrowing under GOP Governor Schwarzenegger, so that bond payments have increased more than 400% from what they averaged twenty years ago.

Much of that irresponsible borrowing has been to pay for tax cuts.  While general fund spending has been relatively level, the cost per year of the tax cuts enacted since 1993 has risen to $11.7 billion a year.  Just the 2008 and 2009 tax cuts for giant corporations will cost the state nearly $8 billion over the next eight years.

If you are asking, “What tax cuts?,” you’re not alone. You probably haven’t seen these tax cuts, since the constant shift has been from taxing corporations and the richest Californians to taxing the middle class, primarily in the form of increased sales and income taxes, but also through higher fees, much higher tuition and service cuts.

California also lost $1.2 billion dollars a year when Republicans irresponsibly took away the provision that allowed for a California estate tax that was fully deductible against federal estate taxes.

So does California primarily have a spending problem, or do we have an acute tax fairness problem and a reckless borrowing problem?

We do have a huge revenue problem as the recession has seriously cut into the state’s income and sales tax revenue.  California’s problem is worse than other states because we came into the recession already crippled by Arnold’s ill-considered tax cuts and the reckless borrowing needed to pay for them.

Most Californians agree that we need to restore the cuts made to education, continue to provide vital and cost-effective health services for our seniors so they can live with dignity in their own homes.

To protect our schools and our seniors, we need to stop the borrowing, roll back some of those corporate tax cuts and let the banks, oil companies, and giant corporations pay their fair share.

The California Budget Project has done some great work in analyzing the state budget issues, and bringing to light some of the myths that are constantly thrown around.  If you want to compare myths and facts, take a few minutes to read their great analysis.

Don’t believe the myths.

To fix the budget, we need the facts.

Melissa Fox

PS Remember that I’m hosting coffee at the CDP convention. See my over-caffeinated blogad on the right side of the page.

We want our cake, and kinda want eat a small slice over in the corner

Robert mentioned the drastic cuts facing higher education earlier this morning, but this PPIC poll on Californians and Higher Ed is worthy of its own post.  Basically, the California dichotomy, which I suppose isn’t all really unique to California, of wanting everything but not wanting to pay for it is still with us.

First, the good news: Californians want a quality education system from top to bottom:

Nearly all Californians across regional, political, and demographic groups say that higher education is very or somewhat important to the state’s future economic vitality and quality of life. Latinos (80%) and blacks (74%) are the most likely to say it is very important. (PPIC

And they think we have a pretty good one now:

Californians give high grades to all three branches of the higher education system: community college (51% good, 15% excellent), California State University (52% good, 10% excellent), University of California (50% good, 15% excellent).(PPIC

Unsurprisingly, cost is labeled as the top concern, with a huge majority (84%) saying it’s a problem. And large majorities favor specific programs to make education cheaper, such as a sliding scale and work-study programs. Furthermore, it seems that there is a lack of education about financial aid opportunities, especially in where it’s needed most, families with low household incomes.

The bad news: While there is clearly a lot of work to be done, but apparently higher education is a bit lower down the line, behind K-12 education and human services, anyway.  It’s true that K-12 needs a lot of attention, we must not grow complacent about higher ed. The more concerning part is something more global: the budget and taxes.  Namely, we’re still a little unsure about the whole raising. It’s classic, “And a Pony” thinking.

Today, most Californians (83%) are concerned that the budget crisis will lead to significant cuts in funding for higher education, and more than half (54%) say spending for public colleges and universities should be a high or very high priority. Yet more than half (52%) are unwilling to pay higher taxes or to increase student fees (62%) in order to avoid such cuts. However, about half (53%) favor spending more state government money to avoid increasing tuition and fees – even if it means less money for other state programs.

Part of the discrepancy has to be in the way you ask these questions.  Because you can’t really, over the phone, lay out the entirety of the budget system and ask people where the money should go. So instead we get a series of questions that goes something like this: Do you want to spend more money for a strong higher ed system? Yes. Do you want to spend more money on better K-12 education? Yes. Do you want to pay taxes for them? No.

Well, I simplify somewhat, but nonetheless this is tough to poll. So, I think the “And A Pony” thinking is somewhat overblown, but not entirely mythical.  It certainly exists, but other recent polling shows that Californians are now willing to pay increased taxes. Back in September, Field reported (PDF) that over 60% of Californians favored some sort of tax increases to help balance the budget.

There is a will, we just need to make sure that everybody up and down the line understands that.  As Jean Ross & the Budget Project point out in a new report (PDF), now is exactly the right time to invest in the future. We shouldn’t be cutting back, but investing so that California will be the first to recover.

Conservatives Slash Where it Hurts Most

We all know that the conservative Republicans have been attempting to slash services to the state’s neediest, but the California Budget Project released a report today highlighted these facts.  So, to the Republicans who keep fighting to slash more, know this. You are fighting to cut aid for children, and quite literally taking the food of a child’s mouth. You are fighting to reduce help for the disabled and elderly, and literally putting these people on the streets. You are taking money from Child and Adult Protective Services, and literally allowing children, the elderly, and disabled adults be beaten and abused.

Purposefully allowing injury to those who can’t defend themselves makes us no better than the ancient Spartans, who left weak babies to die. And, if we keep cutting, funds to Child Protective services will suffer. Josh Richman gives us a nice little summary:

A slow squeeze on state funding for county-provided social services over recent years has left California’s children, families and seniors with a badly tattered safety net, the California Budget Project concludes in a new report.

The survey of 13 counties – representing two-thirds of the state’s population, and including Alameda, Contra Costa and Santa Clara – gauged the effect of funding cuts on adoption programs, Adult Protective Services, California Work Opportunity and Responsibility to Kids (CalWORKs), Child Welfare Services, the food stamp program, foster care, In-Home Supportive Services (IHSS) and Medi-Cal.

“Asking counties to do more with less has undermined human services programs that help some of California’s most vulnerable residents including children at risk of abuse and neglect, and seniors who want to live safely in their own homes,” said California Budget Project senior policy analyst Scott Graves, the report’s co-author.(SJ Merc 8/8/08)

Unfortunately, it takes a crisis for Republicans to demand action. One can only hope that it doesn’t take such a crisis in the form of an injured child to spur legislators into action.  You can only cut so far before you begin to cut into what makes our society work and what makes our society special.  Taxes are the wages of a functioning government that protects those who need protection. You can’t scream about prisons and locking everybody up and then ignore the everyday living situation of our children.  Or, at least you can’t do so and go to sleep with a clear conscience.  

Increased State Spending Will Spur Economic Growth In California

The California Budget Project released a report on Friday entitled “Budget Cuts or Tax Increases: Which Are Preferable During an Economic Downturn?” Their findings? Well, let’s just say their findings have proven the Republican minority wrong once again. “Carefully chosen tax increases are preferable to cutting public spending when the economy is weak.”

The economies of states that substantially increased taxes in recent years performed as well as or better than those of states that did not. States that enacted large tax increases between 2002 and 2004 – increasing state revenues by at least 5 percent – subsequently experienced stronger average growth in personal income than states that did not increase taxes at all. Additionally, average job and wage growth was essentially the same for states that increased taxes the most during this period as it was for states that did not increase taxes. Moreover, states that raised taxes substantially are considerably less likely to face budget shortfalls this year than are states that did not.


But is the opposite true?  Well, pretty much yes.

The economies of states that enacted large tax cuts in the late 1990s and early 2000s performed worse than those of other states. States that enacted large tax cuts between 1994 and 2001 – reducing revenue by at least 7 percent – subsequently experienced weaker growth in jobs and personal income and larger increases in the unemployment rate, on average, than other states. Furthermore, the states that enacted large tax cuts faced larger budget shortfalls when their economies weakened.

In the meantime, Assembly Budget Chair John Laird (D-Santa Cruz) released the Assembly Budget Committee’s Conference Report on the 2008-2009 State Budget earlier today. The Conference Report calls for some budget cuts but proposes $8.2 billion in increased tax revenue to balance California’s budget without drastically cutting public spending on vital services. The CBP report gives ample justification for the approach that Laird and the Assembly Democrats are recommending.  

According to Nobel Prizewinning economist Joseph Stiglitz, when the economy is weak, “economic theory and evidence gives a clear and unambiguous answer: It is economically preferable to raise taxes on those with high incomes than to cut state expenditures.”

State spending reductions could further exacerbate the weak economy. Consumers buy less and businesses produce less when the economy is weak. Therefore, the key to promoting the state’s economic growth in the short run is to encourage spending on goods and services. Stiglitz writes: “In a recession, you want to raise (or not decrease) the level of total spending – by households, businesses and government – in the economy. That keeps people employed and buying things, and makes it more likely that businesses will want to invest to serve that consumer demand.” However, state spending reductions have the opposite effect: Each dollar less that the state spends generally reduces consumption by the same amount.


Online Organizing Director

California Democratic Party