State deficit highlights need for reform
Proposed budget would reduce UC funding
By Jaymes P. Dunsmore
From the February 2008 Print Edition
Governor Arnold Schwarzenegger presented his 2008-9 budget proposal last month, calling for across-the-board-cuts to prevent a $14.5 billion dollar deficit, as well as a constitutional amendment, known as the Budget Stabilization Act, to reform the state budget process and avert future fiscal emergencies.
Without the governors proposed changes, automatic spending increases will force California to increase state spending by 7.3 percent in 2008-9, despite the fact that tax revenues are not keeping pace.
California must reform how it budgets and spends taxpayer dollars, the governor explains on his Web site. For a generation, the states budget has swung in and out of balance as a result of discrepancies between fluctuating tax revenues and auto-pilot spending. This system is not stable, responsible or in anyones best interest.
The governors proposed plan would establish a Revenue Stabilization Fund, a sort of rainy-day fund into which excess tax revenue would be deposited during years when tax revenue exceeds state expenditures for use in years when tax revenue fails to meet the needs of the state.
The Budget Stabilization Act would make it easier for the state to reduce spending when revenue is projected to fall short. Whereas currently spending cannot be reduced after the budget is signed without declaring a fiscal emergency, which requires the governor to call a special session of the Legislature, Schwarzeneggers proposal would mandate reductions in spending if the Department of Finance foresees a budget deficit.
If the Budget Stabilization Act had been in effect since 1998, the governor contends in a press release, the state would not have developed a structural budget deficit. In years where a deficit emerged, the Budget Stabilization Act would have triggered moderate cuts automatically to avoid draconian cuts later.
With a $14.5 billion deficit looming, Schwarzeneggers budget proposal includes across-the-board reductions, which his office explains are designed to prevent severe cuts to any one department. The governor has faced harsh criticism for many of his proposals, which include closing 48 state parks and releasing prisoners with less than 20 months remaining on their sentences, as well as a number of cuts to state social programs and education.
While the plan to close state parks has California nature lovers shocked, state parks spokesman Roy Stearns said its happened before; during the early 1990s California closed parks to help balance the budget.
Environmentalists and business leaders alike are concerned about the states latest plan to shut parks; Margaret Kennett, president of the Russian River Chamber of Commerce, told the Santa Rosa Press Democrat that closing Armstrong Woods State Park would be a major blow to the area. Many California businesses that rely on the tourism state parks generate would be hurt by their closure.
Other proposed budget cuts are drawing similar concern. The governors plan to reduce per-pupil spending on K-12 education from $8,558 this year to $8,458, has sparked outrage from parents and teachers alike. The Education Coalition, which represents approximately 1.7 million parents, teachers and other school employees called the proposal disastrous.
Funding for the University of California would also be affected by Schwarzeneggers proposed budget. According to a UC press release, The governors proposal would increase funding under his compact with the UC system but then apply a reduction of $332 million, or 10 percent the same percentage reduction proposed for most state General Fund programs. That would leave UC with a net state funding reduction of $109 million, or 3.4 percent, compared with the current year. If approved, the governors budget will likely mean higher fees for UC students; an increase of 7 to 10 percent is expected.
UC President Robert Dynes says he understands the problem facing the state, but disagrees with the governors solution. This budget proposal will have serious impacts on our ability to deliver on our mission for our students and for the people of California. State funding for the university is not an expenditure but an investment.
Despite calls for higher taxes from Democrats, the governor has maintained that tax increases are not a solution and are off the table. I have made it very clear that we cannot tax our way out of this problem, Schwarzenegger said in a press conference announcing his plan. I think the people of California are sending to Sacramento plenty of dollars. . . . If we cannot function with that money, there is something wrong with the system.
With Schwarzeneggers vow not to raise taxes, and Democratic opposition to cutting funding for state programs, California appears headed for another budget showdown. While Democrats hold a majority in the legislature, Republicans control enough seats to block any tax increase, making it clear a compromise will have to be reached.
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