A Budget That Can’t Be Touched

First, a disclaimer. The state budget can be complicated, baffling even to the lawmakers and bureaucrats who deal daily with it. Also, I’ll never be mistaken for A. Alan Post or any other fiscal wizard. All I know about my own checking account is what the ATM tells me. All that aside, let me explore one facet of the budget process I find curious.

By now, everybody knows about the state’s fiscal crisis. IOUs and an $11-billion shortfall have made California a laughingstock. So far, efforts to balance the budget have been confined to finding cuts from the $44-billion general fund--programs such as health and welfare, prisons, schools. Who can argue that lopping $11 billion from $44 billion is not rough duty?

The general fund, however, is not the whole story. All told, $112 billion will be spent through the state next year. All told, only 128,000 of California’s 274,000 state workers will be employed through the general fund. This leaves a big pile of money and an army of workers outside the budget debate, exempt from the ax.

Now, not being an expert in government finance, this strikes me as strange.

What has evolved in California government is a two-budget system. There’s the budget everyone squabbles over, the general fund. And there is what Sacramento Assemblyman Phil Isenberg calls “the obscure budget.” No one debates it, because for a variety of reasons its funds essentially are all spoken for in advance, untouchable.

Nonetheless, this obscure budget accounts for a wide range of government business--from toll bridge districts to freeway construction, from anti-smoking research to toxic cleanup. It includes federal money for mandated programs, bond funds, pension programs, trusts and so-called special funds, an assortment of spending programs financed through specific taxes or fees.

There are many ways to land on the untouchable side--legislation, court mandate and ballot initiatives. Many entries simply reflect accounting procedures. Others are the product of special interest politics. For instance, anti-smoking advocates will sell voters on a cigarette tax to raise money for cancer research; gas taxes are set aside for Caltrans and freeway construction.

The advantages of this predesignated funding method are obvious. Certainly a case can be made for protecting specific activities from budget politics and the whims of legislators and governors. It also creates job security; during this current crisis, many government lifers have transferred to Caltrans or other departments that operate outside the general fund.

Only when times are tough and cuts are demanded does this two-track system expose its deficiencies. Legislators and the governor can debate whether to hold back kindergartners or evict dying patients from hospices. What they cannot debate in this lean year is whether to suspend freeway construction; fed by money slotted outside the general budget, the bulldozers roll on.

“To get a special fund created,” said Richie Ross, a Democratic political consultant, “you have got to have some juice, a well-organized constituency--like the highway lobby. These are the groups that are in the skyboxes, and one by one they have taken themselves out of the picture. And who are the people left behind in the general fund, the people in the bleachers? They are the people who are ill, retarded, poor or below 18. So the whole budget debate is a charade. They debate the price of beer in the bleachers, but no one talks about the skyboxes.”

There have been attempts to tap into the obscure budget. Jerry Brown made a run on it and so did George Deukmejian, who complained that, between mandated programs and expansions, 90% of the state money was locked up before the budget debate could begin. This year, there are proposals to retrieve some money from special funds, but how much can be legally snatched is not clear.

A few people here want to throw the full $112 billion on the table, to spread the pain of the deficit across more than just $44 billion of state programs. They wonder what sort of fat exists in those remote boards that are never examined, what potential revenues are lost to mismanagement. “No one knows,” said Isenberg, “because we never ask.” Such a sweeping change, they recognize, probably would require a rewrite of the California Constitution, and certainly would ignite a hellacious fight with powerful lobbies.

In other words, don’t hold your breath. Meanwhile, most everyone else engaged in the budget process believes it is simply naive to worry about money outside the general fund--a waste of time, an irrelevant pursuit. And, of course, they are the experts.