We have reached the high holy days of California’s budget season, as our governor and Legislature decide which programs will gain life, and which will be sacrificed. And so, per tradition, our state’s ministers have begun their ritual sermons on the dangers of overspending.
They are preaching nonsense. California’s real problem is underspending.
Go ahead and dismiss this as blasphemy. After so many years of budget crises and big deficits, Californians have adopted a budget religion grounded in self-flagellation, even though our recent budgets contain small surpluses. You can probably recite the catechism yourself: We’re still sinners who spend too much on state services! Far more than we take in! So save us, Non-Denominational Higher Power, from our profligate selves with budget cuts or spending limits!
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I am here to tell you our spending theology urgently needs reformation.
And that requires genuine revelation. Our state’s tendency to produce big deficits is not caused by big spending. We have had big deficits because our state budget is based on volatile formulas and taxation that expand deficits in unpredictable ways. In fact, California has long been on par with other states in expenditures per capita and in spending as a percentage of state GDP. Nevertheless, we cling to our religious fear of overspending and take the cheaper path – which often costs the state more money in the long run.
The problems of underspending are most obvious when it comes to pension obligations. California governments and employees have long spent too little money on contributions to pension funds. So, to catch up to our pension obligations, California taxpayers are having to make much bigger contributions now, which reduces spending on critical services like schools and health care.
The costliness of underspending is also the story behind rising public higher education costs in California. Over generations, the state has cut back its relative contributions to the University of California and California State University systems. This underspending has been made up for in part with ever-higher tuition fees for students.
While overspending may be the state enemy, underspending gets you in more trouble. The UC president’s office is under siege now for underspending – a state audit showed more than $100 million in secret reserves. The state parks department had a similar scandal around unspent money in 2012.
Underspending also explains problems with our basic services. Studies have found that the state spends tens of billions less on schools than would be necessary to provide all Californians with an adequate education. And that underspending has real costs: California is not producing enough college graduates and skilled workers.
That the state has failed for generations to spend enough to build and maintain infrastructure is obvious in the degrading of roads, bridges and waterways. The state’s long-term failure to adequately fortify Oroville Dam spillways is now forcing hundreds of millions of dollars in repairs.
In recent budgets, Gov. Jerry Brown and the Legislature have sought to counter the state’s tendency to underspend now and pay later. They’ve made a great show of efforts to pay down debt. And Brown’s current budget proposal suggests making a large advance contribution to pensions now, in order to reduce liabilities later. But that payment, unfortunately, is achieved by borrowing billions from a state special fund.
Brown has grown popular as a proselytizer of the credo that California can be managed on the cheap. That’s appealing dogma for a state whose people struggle with a very high cost of living.
But the realities of our state remind us that successfully running California on the cheap is a fantasy. And a very expensive one at that.