A Modest Proposal

Special-interest ballot initiatives have put California government in a fiscal straitjacket with no regard for vital state needs. Consider the recent reports that state income tax receipts are running as much as $700 million above official budget estimates.

Not so long ago, such news would have been greeted with cheers, opening the way to solving all sorts of state budget problems. Today, $700 million will make barely a dent in the budget struggle between Republican Gov. George Deukmejian and Democratic legislative leaders. Most of the projected bonus will be allocated automatically by factors beyond their control.

Education would get 40% of unexpected revenues up to a certain point as a result of Proposition 98 passed last year. Anything over that point, $128 million in the coming budget year, would exceed the state spending limit established by the Gann initiative approved by voters 10 years ago. Under another provision of Proposition 98, any surplus over the Gann limit also would go to schools.

Thus only about $77 million would reach the state’s general fund for allocation by the governor and Legislature. The two sides differ by about $1.6 billion over state needs for the budget year starting July 1. They are not arguing over frills, but long-established programs vital to the poor, the aged and the disabled, among others.

The increased tax receipts might have provided the negotiating room the governor and Legislature needed for reaching a reasonable budget compromise, were the funds not arbitrarily allocated by the initiative measures.

The solution is to eliminate the Gann limit, but repeal is not considered politically possible at the moment. The best alternative is a modest, but important, revision of the Gann limits sponsored by Sen. John Garamendi (D-Walnut Grove) with substantial support from the California business community.

The Garamendi plan would make the strict Gann inflation limit more realistic by using a California economic growth factor rather than the national cost-of-living index. Also, part of the allowable increase in state spending would be based on school enrollment rather than the general state population increase, more accurately reflecting the demands on state government. Any additional transportation funding, such as a gasoline-tax increase, would be considered a user fee and not counted under Gann. Nor would long-range state capital investments.

The result would not take any more money from state taxpayers than they pay now. The Garamendi proposal would restore to the governor and Legislature some flexibility in deciding how state resources should be allocated on the basis of rapidly changing needs. That, after all, is what budgeting is all about.