Spending Cap May Be a Good Fit for Both Sides

Sacramento

Give Gov. Gray Davis this: He fully understands and freely acknowledges the nature of a politician in possession of tax dollars. One way or another, those dollars will be spent.

Regardless of philosophy or party.

Asked by reporters if there’s anything he could have done differently to avoid this current budget mess, the governor evaded a direct answer, but noted: “If there is money available, there will be great pressure from both Democrats and Republicans to spend it.

“Republicans will insist on tax reductions. And Democrats are likely to insist on additional funding for education, health and welfare.”

Tax reductions such as the “car tax.”

Republican Gov. Pete Wilson slashed the vehicle license fee and GOP legislators, until now, have kept Democrats from restoring it. That’s blowing a $3.8-billion a year hole in the treasury. The tax cut is counted as an expenditure because the revenues ordinarily would go to local governments, and Sacramento is covering their losses with extra state aid. “Backfill,” it’s called, rather than spending.

Additional funding: not only for schoolkids and poor people, as Davis mentioned, but for items like parks and prisons. Especially of late for prison guards, among the governor’s most generous political benefactors.

So a fix is needed, a repair of the budgeting machine -- a shut-off valve for both tax-expenditure frenzies and ordinary spending binges.

Surpluses need to be squirreled in boon times to be available in times of bust.

Davis told reporters he hoped to propose reforms that “minimize this feast or famine budgeting that we experience in California ... deal with shaving off the peaks and the valleys of this oscillating economy.”

That was more than a month ago. He still hasn’t proposed anything specific, except restoration of the governor’s authority to cut spending without legislative approval when tax receipts tank. “Not in my lifetime,” vows liberal Senate leader John Burton (D-San Francisco).

Well, Republicans do have an idea and Davis is amenable, even if his own party is hesitant. The GOP wants a spending limit.

It’s a conservative idea, but not extremist.

Indeed, a spending limit may be just the way out of this quagmire -- the path to sensible budgeting in the long term and passage of a budget this summer.

A constitutional cap on spending may be the price Democrats are forced to pay to buy enough Republican votes for a budget -- and, most critically, the tax hikes to balance it.

“Let’s get rid of the waste and overspending. Then we’ll be willing to talk about taxes,” says veteran Assemblyman Tim Leslie (R-Tahoe City), a spending cap advocate. That’s hardly a commitment to trade, but it’s more flexible than “not in my lifetime.”

Burton doesn’t say “not in my lifetime” about a spending limit, but does declare: “I’m not going to be supportive of something that strangles state government and prevents it from delivering necessary services.”

Creativity and compromise clearly will be needed.

Davis’ new finance director, former Sen. Steve Peace, predicts that a spending limit and tax increase will be on the bargaining table when a budget agreement finally is reached.

For a spending limit to fly, the Legislature must approve a constitutional amendment, on a two-thirds vote, and place it on the state ballot. Public employee unions certainly would fight it.

Voters overwhelmingly approved a spending limit in 1979 at the height of the anti-tax rebellion. Called the Gann limit after its author, anti-tax crusader Paul Gann, the measure was obliterated in 1990 by a ballot proposition that doubled the state gasoline tax.

If the Gann limit had remained intact, the current budget would be balanced, according to Sen. Tom McClintock (R-Thousand Oaks), who’s pushing for a new spending cap. Instead, there’s a projected 17-month shortfall of between $26 billion and $35 billion.

Of course, there probably would not have been class-size reduction. Nor expanded health care for uninsured children.

“Pressures to spend have proven irresistible,” says McClintock, echoing Davis.

Assemblyman John Campbell (R-Irwin) has proposed a spending limit tied to inflation and population growth. Any surplus would be stashed in a rainy day fund. After the fund reached 10% of total state spending, the excess would be split between schools and tax rebates.

Details certainly are negotiable.

Democrats probably need some spending cap to get a budget passed.

Republicans need it to show they’re productive and relevant.

The governor needs it because politicians are innately incapable of saving money. Himself included.