Fiscal fitness for the Golden State

As the Legislature devises major reforms to California government, it’s increasingly clear that fixing our broken system — particularly our dangerously antiquated budget process — would not only help restore public trust but likely save taxpayers millions of dollars as well.

That’s because key features of the reform package advancing in the Assembly and Senate repair flaws in our budget process cited by rating firms. when they grade California’s bonds.

Recently these grades have been pretty crummy. Because there is a direct correlation between a bond’s grade and the interest rate taxpayers must pay to investors, by taking action we can help save Californians many tens of millions or more in interest.

State Treasurer Bill Lockyer previously issued a report that reflects rating firms’ concerns about California’s structural problems. The Legislature’s reform package, based on proposals from the nonpartisan good-government group California Forward, tackles those issues.

First, it would lower the vote threshold to pass a budget from two-thirds to a simple majority (and eliminate legislators’ pay every day that the budget is late). These provisions increase the likelihood that the budget will be enacted on time, which the treasurer told the Assembly Budget Committee last week is crucial to improving our bond ratings. They also allow the public to hold the majority accountable for budget actions and eliminate “hostage taking,” in which the minority party uses items unrelated to the budget as leverage for needed votes. California and only two other states — Arkansas and Rhode Island — require two-thirds of the Legislature to pass a budget. This regularly leads to gridlock.

The reforms also would require revenue and spending forecasts four times a year. Such forecasts currently are revised less frequently than in other states, creating an atmosphere of uncertainty about the state’s true fiscal condition.

One-time revenues would be devoted to one-time purposes. For too long, spending in boom times has not been managed effectively, with one-time revenue windfalls often applied to fund or expand ongoing state programs.

Initiatives with substantial costs would be required to identify the spending cuts or revenue increases needed to pay for them. Inflexible ballot initiatives tie up an ever-increasing share of the budget, hamstringing the Legislature and its ability to navigate changing economic conditions.

And the reforms would give a governor the power to cut spending midyear if the Legislature fails to address a fiscal emergency, such as a sudden economic downturn or loss in revenue.

These are not the only beneficial proposals in our package. Others include directing scarce tax dollars to programs with concrete results through performance-based budgeting; requiring rigorous oversight of existing programs to determine whether they are necessary and cost-effective; instilling longer-term thinking by requiring multiyear budget forecasts each time a budget is proposed; and mandating that new legislation costing $25 million or more sets forth its funding source.

These nonpartisan reforms would go a long way toward increasing rating agency confidence in our budget process. It’s time the Legislature display the leadership the state needs by passing these reforms, so that voters will have the chance to ratify them on the November ballot — and not a moment too soon.

A quick glance to our past underscores why. In 1994, during another serious recession, the Legislature convened a constitutional revision commission to address our structural problems — especially those with our budget process. After two years of solid work, the commission recommended common-sense, bipartisan solutions. But by the time the proposals emerged, the crisis had passed, as had the impetus to make sweeping changes to state government. A golden opportunity was wasted.

Here we are again — another crisis, and another solid package of bipartisan, common-sense solutions. This time we have the added motivation that by acting, undoubtedly we would save the state real money.

Mike Feuer (D-Los Angeles) represents California’s 42nd Assembly District. He is the Assembly’s majority policy leader, the chairman of its Committee to Improve State Government and an author of the pending reform measures.