Although the state budget is finally balanced after years of deficits, polls tell us that most Californians are still concerned about the state’s fiscal stability.
Their concern is well-placed.
A temporary tax increase, mostly on the wealthy, and a recovering economy have provided the wherewithal to cover the state’s current obligations.
Gov. Jerry Brown, who championed the tax hike, has also restrained the ambitions of his fellow Democrats to spend more money and persuaded voters to create a rainy-day fund as a partial hedge against future downturns.
Nevertheless, the budget is “precariously balanced,” Brown reminds us, and is dangerously dependent on how wealthy taxpayers’ investments are faring – a peril echoed in a new Standard & Poor’s report on California last week.
While Californians’ budget concerns are justified, the same polls also reveal that very few voters know very much about its income and outgo or the causes of its endemic instability.
Jeff Cummins viewed the annual process of writing a state budget from the inside as a staffer in the legislative budget analyst’s office and the state auditor’s office. And when he was creating a course in public budgeting at Fresno State University, he found a dearth of material dealing with the state budget.
Cummins has filled the vacuum himself with a newly published book, “Boom and Bust: The Politics of the California Budget.” And while intended as a textbook, it would be valuable to anyone, especially voters who worry about the budget’s instability but don’t know much about it.
Cummins examines the history of the state budget and its underlying tax system back to the 19th century, explains why the budget was not a problem during the post-Depression decades, and how it began developing chronic deficits three-plus decades ago during Brown’s first stint as governor.
Proposition 13, the iconic property tax limit that voters passed in 1978, plays a prominent role in Cummins’ timeline, as it should. It sharply reduced revenue for schools and local governments and led to a state assumption of the burden, especially for schools, just as the state’s own revenue was becoming more volatile because of its increasing reliance on income taxes on the wealthy.
But Cummins misses a crucial piece of that matrix.
Brown was running for a second term in 1978 and declared himself a “born-again tax cutter” after Proposition 13, which he had opposed, passed.
He and legislators cut state taxes just as they were assuming new burdens, throwing the budget into an immediate operational deficit that set a decades-long boom-and-bust pattern.
That omission aside, the book is a valuable primer on the budget and its politics and makes the case that reform of the tax system to reduce its volatility would be the best way to bring fiscal stability to California.
Call The Bee’s Dan Walters, (916) 321-1195. Back columns, sacbee.com/dan-walters. Follow him on Twitter @WaltersBee.