Limiting California’s Future

Republican lawmakers have called for the Legislature to place a “hard spending cap” on the ballot in return for Republican support of a tax increase to help close the state’s budget gap. First, it is important to note that California already has a hard cap in the state’s constitution. In fact, we’ve had one since 1979. Proponents of a harder cap would return the state’s spending limit to its pre-1990 version, a limit based on the annual change in population and inflation. In contrast, the current cap is based on the change in per capita personal income, which is designed to limit public spending as a share of the state’s economy.

 In order to assess what a hard cap would mean for the budget, the CBP modeled the impact of the cap described in ACA 19 (Villines) of 2008 if it had been enacted beginning with the 1995-96 budget.

Limiting California's Future

Our analyses found that such a cap would have limited total state spending in 2008-09 to $39.7 billion below budgeted levels. The General Fund’s share of the necessary reductions would be $31.2 billion. What would it take to cut $31.2 billion out of the General Fund budget? Eliminating all General Fund support for higher education; the judiciary; child support services; health care services; resources – including fire protection; and environmental protection. Maybe that’s why the campaign to modify California’s original cap was led by then-Governor George Deukmejian, then California Chamber of Commerce president Kirk West, and then-California Taxpayers Association president Larry McCarthy.

— Jean Ross

4 Responses to Limiting California’s Future

  1. Matt says:

    Interesting opinion your blog has on the Republican stance. Before reading this article, I was unaware there was a hard spending cap. After reading, my opinion is the hard cap isn’t working. I believe most Californians would agree with me. We tax far too much and have not enough to show for it (in terms of Universal Health care, better Education, etc.). While I’m not in favor of cutting $31b from the GF budget, I hope this is an opening for a round of negotiations where we can reach a point in which every temporary dollar in increased revenue doesn’t lead to a permanent increase in spending.

    Maybe you could offer more information as to what would remain if your proposed $31b cut were to be implemented? Would we be left with nothing but commissions, agency boards, and handout programs? Why not start there? Who came up with the $31b? The chart didn’t make much sense to me……

  2. Joseph Rosenblum says:

    Not a comment but a question. Your analysis going back to 1995 certainly shows the magnitude of cuts if enacted and effective starting then. But does the proposal require that the effective date be several years ago or is it effective for fiscal year 2010? If so, why isn’t a cap going forward, a reasonable political compromise for tax increases that set the current level of spending as the base?

  3. Laura Strand says:

    Spending caps presume that all costs are fixed costs and ignores the fact that goods and services costs increase over time. It also ignores the fact that our population continues to increase.
    It’s as simplistic – and stupid as a zero tolerance policies.

  4. cbporg says:

    Here’s our analysis of the measure that was approved by the Legislature as part of the February budget agreement and that will appear on the May ballot as Proposition 1A:

    –Jean Ross