Don't Blame Voters for California's Budget Woes
The following column appeared in
The Wall Street Journal on October 3, 2009:
Don't Blame Voters for California's Budget Woes
Big spending pols falsely claim citizen ballot initiatives
have tied their hands.
By SHIKHA DALMIA, ADRIAN MOORE AND ADAM B. SUMMERS
With the Golden State still struggling to balance its books,
politicians from both sides of the aisle have come up with a nifty
way to avoid responsibility for the mess: Blame the voters.
Gov. Arnold Schwarzenegger, a Republican, summed it up for his
fellow pols recently by telling a reporter: "All of those
propositions tell us how we must spend our money. . . . This is no
way, of course, to run a state." State Senate President Pro Tem
Darrell Steinberg, a Democrat, has made similar comments in
denouncing "ballot-box budgeting."
Their indictment is false. Voters aren't tying lawmakers' hands too
much, but too little. Here's the background:
For decades, state officials have habitually proposed deep cuts to
the most popular programs unless voters agree to higher taxes. Tired
of being manipulated, voters have used the ballot initiative to put
some programs off-limits.
Nevertheless, a 2003 analysis by John G. Matsusaka, president of the
Initiatives and Referendum Institute at the University of Southern
California, found that no more than a third of California's
appropriations that year were locked in by voter initiatives so
stringent that legislators couldn't override them. Most of the
appropriations -- about $30 billion in 2003 -- were for Proposition
98, which passed in 1988 and mandates funding for K-12 education.
Even this overstates the case against ballot-box budgeting. K-12
spending has remained remarkably stable at around 40% of the budget
pre- and post-Prop. 98. Today, California is 24th among the 50
states in terms of the percentage of its general funds it devotes to
K-12. This suggests that education spending is not grossly out of
line. Prop. 98 aside, Mr. Matsusaka found that only about 2% or 3%
of California's budget is frozen as a result of ballot initiatives.
Mr. Matsusaka's analysis was affirmed last month by the Legislative
Analyst's Office, a nonpartisan outfit that advises the legislature.
It looked at all the restrictions on the state's budget -- not just
those imposed by ballot initiatives -- and concluded that: "Despite
these restrictions, the legislature maintains considerable control
over the state budget -- particularly over the longer term."
So what happened this year that got the politicians and others so
upset with ballot-box budgeting? California faced a $42 billion
budget deficit. After a round of spending cuts and $12 billion in
new taxes, the governor and the legislature called for a special
election and placed a number of propositions on the ballot that
would have increased taxes an additional $16 billion and allowed for
billions more in borrowing and fund shifts. Voters shot those
measures down in May.
After much bickering, lawmakers nearly closed the deficit with
severe cuts, but left the governor with a $1 billion deficit to
close on his own. He did so by using his line-item veto to strike,
among other things, $500 million for in-home care, transportation
assistance and other social services.
Now the governor is being sued by a whole host of special-interest
groups, including a coalition of organizations representing the
disabled. Those organizations (along with Mr. Steinberg, who has
filed a separate suit), claim that the governor cannot
constitutionally cut spending beyond what the legislature has
already cut. The suits ignore that the governor is bound by a
constitutional requirement that the state's budget be balanced --
but in any case have nothing to do with spending that is mandated by
ballot initiatives.
In looking for the causes of the state's budget mess, a good place
to start is with the unionized public employees, who have filed
their own lawsuit against the budget. Public union ranks have grown
a whopping 37% since 1990 and consume about one-third of the $85
billion budget in wages and benefits. California also faces a total
unfunded future liability of about $110 billion for pensions and
health-care benefits. Still, the state's chapter of the Service
Employees International Union and other unions are suing the state
because their members are being asked to take a few days of furlough
to save the state about $1.5 billion. The unions say this is an
illegal pay cut. Regardless of whether it is, ballot initiatives are
not the issue.
True enough, some lawsuits are driven by ballot initiatives. The
California Redevelopment Association is attempting to stop the state
from raiding $2 billion in local redevelopment funds. Sixty years
ago voters passed a constitutional amendment to prevent such raids,
but the state government has found ways around that prohibition. But
restoring the will of the voters in this case is essential for sound
budgeting, because local development funds are used to pay for
bonded contracts for roads and other infrastructure projects. If the
state is allowed to grab these funds, the credit ratings of cities
and counties will plunge and their borrowing costs will rise.
Whatever the wisdom of ballot initiatives that protect some programs
from cuts, they are not the root cause of California's fiscal
disaster. That cause is the government's spending addiction. From
1990 to 2008, California's revenues increased 167%, but total
spending soared 181%.
This problem won't be tamed by letting lawmakers get their hands on
more tax dollars by scrapping Proposition 13, which limits property
taxes, as Mr. Steinberg and other lawmakers have suggested. Rather
the solution is to restore the Gann Spending Limit that restricted
state spending increases to population growth and inflation and
required that anything left over be returned to taxpayers.
Such restrictions kept the state from slipping into a cycle of
fiscal chaos in the 1980s by checking government expenditures and
forced lawmakers to rebate $1.1 billion in excess revenue in 1987.
But voters diluted Gann in 1990, when they passed Proposition 111,
exempting infrastructure projects, disaster spending and a number of
other state expenditures from the spending limit.
Prop. 111 freed politicians in Sacramento to use the revenues that
gushed in during the dot-com boom and housing bubble to grow the
state budget to unsustainable levels. If Gann hadn't been neutered,
a Reason Foundation study found in February, California would have
been rolling in a $15 billion surplus this year.
The Golden State's problem is not overly controlling voters -- but
out-of-control politicians.
Ms. Dalmia is a senior analyst, Mr. Summers a policy analyst, and
Mr. Moore a vice president at the Reason Foundation.
Read this article online at:
http://online.wsj.com/article/SB10001424052970204518504574417350428944122.html
The Wall Street Journal on October 3, 2009:
Don't Blame Voters for California's Budget Woes
Big spending pols falsely claim citizen ballot initiatives
have tied their hands.
By SHIKHA DALMIA, ADRIAN MOORE AND ADAM B. SUMMERS
With the Golden State still struggling to balance its books,
politicians from both sides of the aisle have come up with a nifty
way to avoid responsibility for the mess: Blame the voters.
Gov. Arnold Schwarzenegger, a Republican, summed it up for his
fellow pols recently by telling a reporter: "All of those
propositions tell us how we must spend our money. . . . This is no
way, of course, to run a state." State Senate President Pro Tem
Darrell Steinberg, a Democrat, has made similar comments in
denouncing "ballot-box budgeting."
Their indictment is false. Voters aren't tying lawmakers' hands too
much, but too little. Here's the background:
For decades, state officials have habitually proposed deep cuts to
the most popular programs unless voters agree to higher taxes. Tired
of being manipulated, voters have used the ballot initiative to put
some programs off-limits.
Nevertheless, a 2003 analysis by John G. Matsusaka, president of the
Initiatives and Referendum Institute at the University of Southern
California, found that no more than a third of California's
appropriations that year were locked in by voter initiatives so
stringent that legislators couldn't override them. Most of the
appropriations -- about $30 billion in 2003 -- were for Proposition
98, which passed in 1988 and mandates funding for K-12 education.
Even this overstates the case against ballot-box budgeting. K-12
spending has remained remarkably stable at around 40% of the budget
pre- and post-Prop. 98. Today, California is 24th among the 50
states in terms of the percentage of its general funds it devotes to
K-12. This suggests that education spending is not grossly out of
line. Prop. 98 aside, Mr. Matsusaka found that only about 2% or 3%
of California's budget is frozen as a result of ballot initiatives.
Mr. Matsusaka's analysis was affirmed last month by the Legislative
Analyst's Office, a nonpartisan outfit that advises the legislature.
It looked at all the restrictions on the state's budget -- not just
those imposed by ballot initiatives -- and concluded that: "Despite
these restrictions, the legislature maintains considerable control
over the state budget -- particularly over the longer term."
So what happened this year that got the politicians and others so
upset with ballot-box budgeting? California faced a $42 billion
budget deficit. After a round of spending cuts and $12 billion in
new taxes, the governor and the legislature called for a special
election and placed a number of propositions on the ballot that
would have increased taxes an additional $16 billion and allowed for
billions more in borrowing and fund shifts. Voters shot those
measures down in May.
After much bickering, lawmakers nearly closed the deficit with
severe cuts, but left the governor with a $1 billion deficit to
close on his own. He did so by using his line-item veto to strike,
among other things, $500 million for in-home care, transportation
assistance and other social services.
Now the governor is being sued by a whole host of special-interest
groups, including a coalition of organizations representing the
disabled. Those organizations (along with Mr. Steinberg, who has
filed a separate suit), claim that the governor cannot
constitutionally cut spending beyond what the legislature has
already cut. The suits ignore that the governor is bound by a
constitutional requirement that the state's budget be balanced --
but in any case have nothing to do with spending that is mandated by
ballot initiatives.
In looking for the causes of the state's budget mess, a good place
to start is with the unionized public employees, who have filed
their own lawsuit against the budget. Public union ranks have grown
a whopping 37% since 1990 and consume about one-third of the $85
billion budget in wages and benefits. California also faces a total
unfunded future liability of about $110 billion for pensions and
health-care benefits. Still, the state's chapter of the Service
Employees International Union and other unions are suing the state
because their members are being asked to take a few days of furlough
to save the state about $1.5 billion. The unions say this is an
illegal pay cut. Regardless of whether it is, ballot initiatives are
not the issue.
True enough, some lawsuits are driven by ballot initiatives. The
California Redevelopment Association is attempting to stop the state
from raiding $2 billion in local redevelopment funds. Sixty years
ago voters passed a constitutional amendment to prevent such raids,
but the state government has found ways around that prohibition. But
restoring the will of the voters in this case is essential for sound
budgeting, because local development funds are used to pay for
bonded contracts for roads and other infrastructure projects. If the
state is allowed to grab these funds, the credit ratings of cities
and counties will plunge and their borrowing costs will rise.
Whatever the wisdom of ballot initiatives that protect some programs
from cuts, they are not the root cause of California's fiscal
disaster. That cause is the government's spending addiction. From
1990 to 2008, California's revenues increased 167%, but total
spending soared 181%.
This problem won't be tamed by letting lawmakers get their hands on
more tax dollars by scrapping Proposition 13, which limits property
taxes, as Mr. Steinberg and other lawmakers have suggested. Rather
the solution is to restore the Gann Spending Limit that restricted
state spending increases to population growth and inflation and
required that anything left over be returned to taxpayers.
Such restrictions kept the state from slipping into a cycle of
fiscal chaos in the 1980s by checking government expenditures and
forced lawmakers to rebate $1.1 billion in excess revenue in 1987.
But voters diluted Gann in 1990, when they passed Proposition 111,
exempting infrastructure projects, disaster spending and a number of
other state expenditures from the spending limit.
Prop. 111 freed politicians in Sacramento to use the revenues that
gushed in during the dot-com boom and housing bubble to grow the
state budget to unsustainable levels. If Gann hadn't been neutered,
a Reason Foundation study found in February, California would have
been rolling in a $15 billion surplus this year.
The Golden State's problem is not overly controlling voters -- but
out-of-control politicians.
Ms. Dalmia is a senior analyst, Mr. Summers a policy analyst, and
Mr. Moore a vice president at the Reason Foundation.
Read this article online at:
http://online.wsj.com/article/SB10001424052970204518504574417350428944122.html
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