Thursday, 5 January 2012

First Take on Brown's Budget Proposal: Are School Trigger Cuts Ransom?

Interesting afternoon and press conference surrounding the Governor’s new budget proposal.  The headline on the budget is nearly $5 billion in mid-year “trigger” cuts to education if the Governor’s proposed tax initiative doesn’t pass in November.  In response to questions about tying his tax proposal to large education cuts, called “ransom” by Dan Schnur, the education cuts were defended by Brown because “that is where the money is.”

Looks more like ransom to me and I don’t like the tactic.  If that is where the money is, because that is where he put the funding increases in his budget.  In the base budget that assumes the tax increases pass, K-12 education is most of the increased funding, nearly $5 billion, almost the same amount cut mid-year if the tax initiative were not to pass.  Education may be the biggest budget item, about 40%, but it is 90% of the trigger cuts tied to the tax vote.  I would rather see the budget keep education funding flat and not assume the tax increase.

My amateur political science guess is that part of the reason for this structure is to convince proponents of some of the other tax initiative proposals to pull their competing initiatives off the ballot; in addition to the fact that the ransom strategy might be effective in getting people to vote.  It will work on my wife and probably will work on me too since my kids will be lobbying me to.  And this tax proposal is marginally better and smaller than the tax extensions he was pushing last year that I opposed.
I have to wonder about the seriousness of ransom threat.  As a practical matter, I don’t really see how a mid-year budget cut of this magnitude could be implemented, and really don’t envy school administrators that have to budget and plan for this.  This mid-year cut (or perhaps better described as taking back the increase) of $5 billion is orders of magnitude larger than the worst case scenario envisioned this year, and is almost 10% of education spending.  If I were writing a school budget, I would base it on pretty flat spending with a large reserve rather than count on a 10% increase, but that could be difficult to do if it is in the budget and there are a lot of pressing needs.
The economic and revenue forecasts underlying the budget seem pretty reasonable so I wouldn’t count on budget help there, although there are probably more forecasters who will view it as overly pessimistic than too optimistic.

Friday Update:  It didn’t take long for Chris Thornburg to call the revenue forecast “bizarrely low” today consistent with the paragraph above predicting that some economists will see the forecast as too conservative.  I don’t see it that way, but Chris makes a good argument for stronger growth.

About the Author

Ethan Jacob

Author & Editor

I am Ethan Jacob Executive Director of the Center for Business and Policy Research at the University of the Pacific, where I have a joint faculty appointment in the Eberhardt School of Business and the Public Policy Program in the McGeorge School of Law..

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