Reports of a recent bump in state revenues have led some -- including the Times in a May 21 editorial -- to say short-term fixes are enough to solve the state's remaining budget gap. This approach is shortsighted in more ways than one, not the least of which is squandering the opportunity to finally make structural changes needed to put California on firm financial footing.
The Times, and others, argue that future revenue growth obviates the need for a balanced, multiyear revenue plan. Concerns with this approach include the fact that: Even under the rosier forecasts emerging from recent tax collections, California faces a $10 billion per year "structural" shortfall for as far as the eye can see. This gap is largely attributable to tax cuts enacted over the past decade -- such as corporate tax breaks adopted in 2008 and 2009 -- with no plan to pay for them. While the revenue drop created by the Great Recession will be filled as the economy improves, the portion of the gap attributed to recent tax breaks won't be restored without legislative action. Only ongoing revenues can fill an ongoing gap. Moreover, while California and other states have seen improved tax collections, we are far from out of the woods. Unemployment remains high, housing markets unsettled and federal budget-balancing efforts are likely to reduce funds that flow from Washington to California.
Prominent economists still raise concerns that the global economy could easily slide back down, erasing recent revenue gains. Prior budgets balanced with wishful thinking and short-term "fixes" that left the state deeper in debt just months after enactment have contributed to the depth and duration of the state's fiscal woes. More than 75 cents of each dollar of recent budget "solutions" have been short-term in nature or failed to materialize. The Times' focus on the short term represents more of the same failed approach that has left California careening from one crisis to another and left schools, colleges and universities, hospitals, counties, and countless families, whose incomes and budgets depend on state dollars, unable to plan responsibly. The Times' editorial ignores that half of the governor's tax package would support local public safety and related programs that would be transferred from the state to county governments. This so-called "realignment" has the broad support of law enforcement, county supervisors and policy experts. It also takes on new urgency and importance in light of Monday's U.S. Supreme Court ruling requiring the state to reduce prison populations by the tens of thousands. Transferring responsibility for lower-level offenders to the local level offers the most efficient and expeditious route to complying with the court's decision. Counties, however, with their recession-battered budgets can't take on this new responsibility without the certainty that only a multiyear revenue package can provide.
The last thing California needs right now is more of the short-term thinking that gives schools and public safety agencies no room to plan for challenges ahead and diminishes officials' credibility with voters. Lawmakers have already cut the state's critical public institutions -- from colleges and universities to welfare-to-work programs and child care. Even with the more than $10 billion in cuts already made to critical public structures like schools and health care for seniors earlier this year, California continues to face a $10 billion gap. A multiyear, balanced approach remains the only credible and responsible way to bring stability to California's finances. To quote the Times' own words from January, "It is no longer acceptable to just say no."
Jean Ross is executive director of the California Budget Project, a Sacramento-based nonpartisan fiscal and policy research group.