A 21st Century Budget Process

Times, and business, were bad. State spending was running far ahead of tax revenues. The state controller came up with a plan: Limit each year’s budget increase to 5% over the previous year’s outlay. If there was a need to spend more than that, it could be approved by a two-thirds vote of the Legislature.

That fresh-sounding scenario was California in 1933. The 5% plan was put to voters, who approved it. But in subsequent years, budgets in a fast-growing state routinely exceeded the 5% cap. The result was to require a two-thirds vote to pass every budget.

That Depression-era experience produced two lessons for California today. One is that flat spending controls don’t work. The other is that the two-thirds vote does not protect the state from overspending, but it does contributes to bitter legislative deadlock that crowds out rational debate.

The lessons are pertinent as the Legislature considers Gov. Arnold Schwarzenegger’s budget reforms. He proposes that if the governor and Legislature cannot agree on a joint compromise budget, the state controller be directed to impose flat, across-the-board budget cuts. The idea is to encourage a budget deal first. But it’s bound to fail, in large part because the budget needs a two-thirds vote to pass.

Democrats control both houses of the Legislature, but by less than two-thirds. Anti-spending, anti-tax Republicans in the Legislature can block any budget and have grown used to their anti-anything role. To them, across-the-board cuts would be preferable to any negotiation. On the other side of the aisle, Democrats grown used to battle could balk at passing a budget at all, hoping to embarrass the governor for his seemingly cruel and insensitive automatic reductions.

Formulating and passing the annual budget are the most important responsibilities of the governor and Legislature. The governor first lays out his priorities. The Legislature is then supposed to work out a compromise version. The governor, however, always has the last word, with his extraordinary veto power. With few limitations, he can reduce or eliminate any item in the budget.

To resort to automatic cuts is to abdicate responsibility to govern. Part of the solution remains a return to passing a budget by majority vote, as in Congress and most other states. Voters rejected a 55% proposal last year, but the initiative by the Legislature seemed political and deceptive.

Yes, a majority vote on the budget would give Democrats more power in the current Legislature, but in a less nasty atmosphere. If they didn’t have Republicans to blame for everything, they’d have to assume some honest responsibility. And in the end, the governor has full power to rein in the budget with his line-item veto.

California’s budget process has been broken for so long that few recall how it’s supposed to work. If Californians fear normalcy, their government will stay inoperative.