For almost 20 years, California’s state budget has been stuck on stupid: In bad times, governors divide the pain. When dollars are flowing again, they divide the spoils – often setting up future cuts.
It’s just politics, right?
Maybe not. In a remarkably refreshing proposal, Gov. Jerry Brown wants to use billions of dollars in unexpected revenue to make the budget not only bigger, but also better.
In California Forward’s “Boom, Bust, Repeat” series, we urged budget-makers to remember the state has been in this situation before – with the economy expanding and the state’s volatile revenue system overflowing – only to build budgets that crumbled in the face of the next recession.
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The governor’s budget heeds the lessons of history better than any budget we can remember. As budget season begins, we encourage the Legislature to do the same.
“People expect the chief executive to manage, and the only way to manage the roller coaster we have is to: 1) build up a rainy-day fund, and 2) avoid embarking on new programs,” the governor said on May 14.
The May revision does just that. It puts at least $3.5 billion into the budget reserve and includes a collection of prudent ideas for spending new revenues. The phrase “one-time” appears two dozen times – from “one-time” resources for K-12 schools and special education programs to “one-time” money to combat the drought.
This isn’t just lip service to fiscal sustainability. The fine print reveals case after case of innovative ideas. Three of the boldest examples:
Higher education: The governor’s deal with the University of California holds tuition flat in exchange for more funding, but UC will be required to spend nearly half of the new funds on one-time expenditures such as deferred maintenance and energy efficiency projects. The state reserve will be tapped to reduce UC’s unfunded pension liabilities. The deal ties funding to increased access, and it requires UC to pilot new technology to make administration more efficient.
Taking on poverty: Faced with lingering poverty in California, the governor has been pressured to put more money into safety-net programs. Instead, he proposes an earned-income tax credit and an amnesty program for court-ordered debt. The tax credit will provide at least $460 to families making less than $14,000 that can be used on everything from child care to transportation. The amnesty program offers 50 percent reductions in fees to 4.2 million Californians whose licenses are suspended because they can’t afford to pay fines.
K-12 education: While the constitution requires much of the windfall to go to schools, the proposal finds ways to balance local control with the likelihood that some of these funds will disappear in the next recession. After paying off most of the $11 billion in deferred education payments, schools would receive $6.1 billion in additional funding – only $2.7 billion of which is ongoing. The rest – $3.5 billion – will go into one-time implementation of new academic standards for English and math.
This should be only the beginning. As the state learns from this wave of innovative investment, the budget must be reoriented to prioritize programs that are working best – in health care, poverty reduction and corrections. Smart approaches will also be required to address the state’s long-term needs, such as unfunded pension and health care liabilities, and deferred infrastructure investment. And innovation will certainly be needed if the governor’s climate change goals are to be addressed without hurting job creation.
More will have to be done to build a fiscal foundation for lasting prosperity. The governor’s budget offers a helpful place to start.
Lenny Mendonca and Pete Weber are co-chairs of California Forward’s Leadership Council.