The State Budget Is Done — Time to Start Thinking About … the State Budget

July 10, 2014

In the wake of another on-time state budget, and with the Legislature on a month-long summer break, it would be natural to conclude that Californians won’t hear about — and don’t need to think about — the state budget again until sometime in 2015.

On the contrary: Like the Big Apple, California’s budget process never sleeps, a point highlighted in Dollars and Democracy, our newly updated guide to the rules and practices that shape the development of each year’s state budget package. The always-in-motion character of the state budget process can be seen in the following examples:

  • First, the seeds of each year’s state budget are planted well before January 10 — the constitutional deadline for the Governor to propose a spending plan for the upcoming fiscal year (which begins on July 1). Starting each summer and continuing through the fall, the Governor’s proposed budget is developed within the various agencies and departments of the executive branch through a process coordinated by the Department of Finance. While there is no official opportunity for public input at this stage, resourceful Californians can find ways to get their priorities heard — and maybe even adopted — by the Administration as the proposed spending plan is being assembled.
  • Second, far from being set in stone, the “final” budget that is crafted by lawmakers and the Governor following months of hearings and negotiations is likely to change over the course of a fiscal year. This occurs as state policymakers revise spending up or down and add new “trailer” bills to the budget package. For example, in each of the past two years the Legislature has passed a new budget bill — known as “Budget Bill, Jr.” — just a couple of months after the original budget bill was signed into law. The odds are that the budget package signed by Governor Brown a couple of weeks ago will be revised at least once, if not multiple times, in the coming months.

In short, there’s no “off season” as far as the state budget goes. While the January-to-June period gets the most attention, the process of crafting the budget is an ongoing enterprise, giving Californians ample reason to stay engaged and involved year-round.

— Scott Graves

On the Docket: Budget Changes and the May Revise

May 7, 2010

Next week is going to be a big week in budget and policy land. On Monday, some of California Forward’s proposals to modify the budget process will be heard in the Assembly Budget Committee. The hearing is scheduled for 1:30 in Room 4202 in the State Capitol.

On Friday, May 14, the Governor is expected to release his much-anticipated May Revise, an updated budget proposal based on the latest revenue estimates and policy proposals. The CBP will release an analysis of the May Revise on Friday, so stay tuned and check our website. All signs point to another tough budget year for the Golden State. In a Sacramento Bee op-ed this week, CBP Executive Director Jean Ross offered her take on this year’s budget challenges. She writes that “while the solutions won’t come easy, priorities should. As policymakers tackle another shortfall in a still-sputtering economy, they should support the public structures that have long been the backbone of our economic prosperity – our world-class universities, community colleges, and schools – and help those Californians hardest hit by the economic downturn. To do that, they must choose a balanced approach over ideological rigidity.” You can read the op-ed here.

— Lisa Gardiner

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Pay It Forward?

April 28, 2010

As noted in several of our On the Docket posts, the Budget Committees in both the Senate and the Assembly have convened a series of hearings to review proposals for modifying the budget process recommended by the organization California Forward. Monday’s Assembly Budget Committee hearing focused on California Forward’s proposal to impose a “pay-as-you-go” requirement to some new spending and/or tax cuts.

As a self-proclaimed budget wonk, I have a certain amount of sympathy for the concept of pay-as-you-go. It also is resonant with the CBP’s belief that budgets are about values, choices, and priorities and that there is no such thing as a free lunch. However, in this instance, as in virtually everything having to do with the budget process, the devil is in the details. And, in the case of the California Forward proposal, the details show that there is a lot less to the proposal than meets the eye. Perhaps the best way to explain what the California Forward proposal would do is to look at what it would not do. As proposed in ACA 4 (Feuer) and AB 2591 (Feuer), the proposed rules would not have applied to:

  • The “dark of night” tax cuts enacted in the September 2008 and February 2009 budget agreements;
  • The establishment of a “3 percent at 50” safety retirement formula;
  • The rising cost of General Obligation bond debt service, which nearly doubled from 1999-00 to 2009-10; or
  • Prison spending, including spending ordered by the federal receiver overseeing medical services, which is the fastest growing area of the budget.

How so? The proposal would not require spending increases or tax cuts to be paid for if they are the result of:

  • A “statute enacting a budget implementation bill;”
  • Costs related to state worker union contracts that are approved by the legislature;
  • The budget act;
  • Costs incurred for general obligation bond debt; or
  • Costs required by federal law.

The proposals would also allow the Legislature, by a two-thirds vote, to waive the pay-as-you-go requirement with a simple declaration that a measure would not result in added costs or lower revenues. This type of disclaimer could easily lead to claims that tax cuts “pay for themselves” despite economic and fiscal evidence to the contrary. Such claims are made now, even in the absence of pay-as-you-go rules. Consider, for example, the statement in a recent legislative analysis of the sales tax exemption for alternative energy and transportation projects enacted by SB 71 (Padilla) that, “According to the Department of Finance, the program would have no impact on the budget, since absent the program, the projects approved by CAEATFA would not have occurred.” (The CAEATFA is the authority within the Treasurer’s Office that would administer the exemption).

Perhaps most troubling are the exemptions for bond debt service and “budget implementation” bills. The former because bonds impose a 20- to 30-year obligation on the state that cannot be reversed once a bond has been sold if priorities change or good economic times turn bad. The exemption for budget implementation bills is troubling because of the breadth of what might be considered a budget implementation bill and the fact that it would likely result in an even larger share of state policymaking occurring through the budget process – so as to circumvent pay-as-you-go requirements – where lawmaking is often rushed and where tradeoffs and major decisions often occur behind closed doors with little notice or opportunity for public review, and away from the policy committee process.

Even more fundamentally, absent a level playing field between spending and taxing – the California Forward proposals would allow a budget to be approved by majority vote, but would retain the two-thirds requirement for state tax increases – a pay-as-you-go rule would also tend to pit universities against the elderly and parks against child care, rather than program demands against obsolete tax loopholes.

What’s a reasonable alternative? Congress operates under a pay-as-you-go requirement contained in the rules that govern the operation of the House and the Senate. This approach imposes fiscal discipline without sacrificing flexibility or limiting the ability of Congress to respond to emergencies ranging from natural disasters, such as Hurricane Katrina, to the economic calamity of the Great Recession.

— Jean Ross

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