Old Spending Habits Could Set State Straight

State officials are spending a great deal of time, money and political capital to convince Californians that borrowing $15 billion -- plus an additional $6.4 billion of interest -- would solve the state’s budget problems. But if this is a spending problem, isn’t the solution to reduce spending rather than borrowing more to spend more?

A 13.4% reduction in the current rate of spending would cure the budget deficit by the end of the 2004 fiscal year without tax increases, expensive borrowing or raids on local governments. It would allow the state to begin 2005 debt free and with incoming revenue that would allow for nearly $12 billion of spending increases and tax reductions.

Opposition to this approach falls into two schools. One argues that such cuts would be “draconian” and lead to a “fiscal Armageddon.” The other concedes that a 13.4% reduction is hardly unreasonable after a 35% increase in general-fund spending during the Gray Davis years, but that it is unrealistic because the Legislature would never vote to make those cuts. Fortunately, it doesn’t have to.

With just two ballot measures, California could permanently set its fiscal house back in order without legislative approval. And they would not even be new laws; they would simply restore two provisions that were on the books for many years and that served the state well.

The first measure would restore the authority that the governor held from 1939 until 1983 to reduce spending without legislative approval whenever spending crept ahead of revenues.

The second measure would restore the Gann spending limit that was in place from 1979 until 1990, limiting the growth of state and local spending under a formula that considered the combined increase of inflation and population. If the Gann spending limit had been left alone, the state general fund budget would be around $67 billion today -- precisely the level necessary to cure the deficit. And far from draconian, the budget would still be slightly greater -- even after adjusting for inflation and population growth -- than California spent as recently as 1997.

If the same effort that is now being expended for the biggest state bond issue in U.S. history were used instead to restore these two time-tested laws, California’s budget problems could be put behind us in a matter of months. The alternative is to drag our financial problems for years into the future as taxpayers struggle to pay off more than $21 billion of principal and interest from the past while trying to cope with their own generation’s needs.