Monday, 23 January 2012

LAO on the Governor's budget

For all the frustrating aspects of California state government, one entity that I find to be very reliable is the Legislative Analyst Office (LAO).  As usual, they have done a good job of responding to the Governor’s budget proposal; particularly the proposed “trigger” cuts if voters do not approve a tax initiative that are targeted almost exclusively to education.

I liked this simple statement of fact from Mac Taylor in this Sac Bee post:

Sen. Mark Leno, D-San Francisco, wondered whether the governor’s scenario of cutting schools if the taxes fail is avoidable. Leno cited Brown’s insistence that he set up his tax plan as such because schools consume so much of the state budget.

Legislative Analyst Mac Taylor stopped him there. “They’re 40 percent of the budget, not 90 percent. You don’t have to do 90 percent schools. You can do a lesser amount. It’s just that obviously there are tradeoffs.”
In their formal response, the LAO gives the legislature some good advice on page 23:
Alternatively,given the potentially unintended consequences of the trigger as well as the major disruptions caused by midyear reductions, the Legislature could consider building a budget without midyear cuts. In this case, the Legislature could focus on a funding level it could afford despite the revenue uncertainties and then use any ballot-measure revenue as one-time investments in 2012-13 to pay down existing Proposition 98 obligations.
If you have heard me speaking in the past week, you know how much I really dislike the Governor’s trigger cut proposal.  It is completely different than the recent trigger cuts in this years budget.  This year’s trigger cuts were based on uncertain tax receipts in the short-run - something outside the control of voters or legislators - and were an understandable consequence of the deep cutting in this year’s budget.  The amount of the cut depended on the level of tax receipts, were of smaller magnitude, and distributed across programs.

This “trigger” cut is much different, and that is why I have not hesitated to use stronger language than normal when describing them (even politically-loaded terms like hostage or ransom).  Compared to the recent “trigger cuts”, this cut is more than double the size, is all or nothing (as opposed to a sliding scale based on tax receipts), falls almost completely on one piece of the budget, and depends on an tax increase election on a very complicated Fall ballot.  It is an ugly political threat, and would set a terrible precedent if successful.

I am pleased to see the LAO pointing out the problems with this approach, and hope the legislature rejects the proposal.  If it remains this way, I won’t be voting for the Governor’s tax initiative, and will take a serious look at Molly Munger’s proposal as an alternative (even though the tax increase is too large in my opinion and I generally don’t like dedicated revenue proposals.).

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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