California’s finances have mostly moved beyond the fund shifts, deferrals, borrowing and other budgeting maneuvers that became common during past fiscal downturns, according to a new study of budget transparency by an organization led by former Fed Chairman Paul Volcker, which warns that the “state’s fiscal culture” could revert if revenue falls.
Monday’s “Truth and Integrity in State Budgeting” study from The Volcker Alliance examined budget practices in California, Virginia and New Jersey. The findings could be summed up as: Virginia sets the standard, New Jersey is a mess, and California’s budget transparency has gotten better since the approval of majority-vote budgets, temporary tax increases, and a stronger rainy-day reserve.
California lawmakers, though, pay too little attention to $195 billion in unfunded pension and healthcare obligations and an estimated $64.6 billion backlog of infrastructure maintenance projects, the report said. And when the state’s volatile revenue stream surges, as it is now, lawmakers have a “tendency to overspend during boom years.”
Moreover, the study added, the state “has obscured its budget problems further” by using an accounting approach that counts expenses when they are paid as opposed to be when they are incurred, according to the study’s authors.
“It remains too early to tell if the state’s fiscal culture has changed permanently or if California will revert to its previous tactics in the next economic or stock market downturn,” the report reads.
California lawmakers face a deadline next Monday to pass a spending plan for the fiscal year beginning July 1. Monday, Assembly Speaker Toni Atkins, D-San Diego, and Senate President Pro Tem Kevin de León, D-Los Angeles, spent about 30 minutes in Gov. Jerry Brown’s office.
“We’ve got until the 15th,” Atkins said as she left. “We’re working hard.”