Floor Speech: McClintock v. Budget
by Tom McClintock [politician]
http://www.californiarepublic.org/archives/Columns/McClintock/20070822McClintockvBudget.html
The budget package that comes before us today is at least slightly improved over what was put before the Senate the night it walked off the job and went on summer holiday on August 1st.
At least an effort has been made to balance the budget on paper. And that’s something, since we just closed the last budget year with what appears to be the biggest budget deficit in California’s history, a deficit that has reduced the $10 ½ billion budget reserve that we began the last year with to around $4 billion.
My concern is that the reality – particularly given the state’s now brittle economy – is much more troubling than these figures imply.
We can start with the fact that nearly half of the amount the governor has promised to veto doesn’t reduce spending by a single penny – it is a bookkeeping adjustment reducing the Medi-Cal reserve.
But since so much of the budget is based on Enron accounting, let’s just go with the flow and pretend the governor’s line item vetoes are real and will at least take the budget reserve to $4 billion on paper.
That’s not what we’re getting. For example, this budget simply pretends that we took in $700 million more in May, June and July than we actually did. That money doesn’t exist – it never has – but the budget pretends that it does. Property tax and tribal gaming revenues are still inflated by nearly $400 million according to the LAO and the budget still ignores the fact that the governor has already agreed to more than $300 million in salary increases for prison guards this year.
So the actual budget reserve – even pretending the line item vetoes are real — is just $2.7 billion. And that is a paper thin margin to cover the governor’s other risky assumptions, starting with the cheery assurance that California’s economy will produce twice the rate of revenue growth this year as it did last year.
It’s possible – I suppose. We were spared a serious budget deficit in 2005 by a sudden surge of revenues. But I think that is highly unlikely to happen this year, given the draconian regulations that have been imposed on our economy over the past year.
As a result of those regulations, we’re watching unemployment increase rapidly, our foreclosure activity is growing FOUR times faster than the nation, job creation which had ground to a halt last month is now negative –we’re actually losing jobs month over month. And yet we’re expecting revenues to grow twice as fast as they did last year.
If the economy simply doesn’t get any worse and we have the same rate of revenue growth as we had last year, the result will be a $3.3 billion shortfall – enough to completely overwhelm the remaining reserve.
And that’s just the beginning of the risky assumptions:
The Legislative Analyst warns that we have not adequately budgeted to meet our health care obligations to retired state employees – plan on a big overrun there.
Financial experts are warning that the sale of the Ed Fund could fall as much as $800 million short of the billion dollars than is budgeted – if the feds approve it at all.
The federal courts are not likely to turn a blind eye to continuing the practice of looting safe deposit boxes and retirement and college funds to the tune of $700 million a year that this budget depends on.
We’ll be very lucky if this paper thin safety net of $2.7 billion can cover all these contingencies – and many more like them.
But because this budget also robs future budgets of revenue, while sticking them with added costs, it sets in motion a budget deficit of at least $5 ½ billion that we will be confronting just five months from now when the next budget is submitted in January.
Corrections made now could avert more difficult decisions next year — and here’s the fine point of it: If we can’t even genuinely reduce spending by even $700 million after three weeks of impasse – how do we expect to confront the $5 ½ billion budget deficit looming just over the horizon?
That’s an important question, because today we set in motion events that will require far more difficult and painful decisions starting just five months from now in what is likely to be a much worse economy.
I am afraid that with this vote, for the second time in a decade, this state is being driven to another Gray Davis-sized fiscal crisis that this vote makes inevitable for exactly the same reasons: Lack of restraint in good times combined with a lack of discipline in bad times.
Villaraigosa insists his "sanctuary city" of L.A. is OK, yet we all know the damage it has brought to this area. Do you think we'll ever have another Prop 187 that could stand up to a judge? One lone judge threw out our votes, calling Prop 187 "unconstitutional", yet California taxpayers/homeowners are drowning, and illegal immigration is one of the culprits. Everyone knows it, but most of the politicians remain mute when illegals are mentioned, including our U.S. Senators and most of the Reps.
Illegals are the protected class in California. Who will protect the taxpayers of this state?
Proud to have supported Tom McClintock.