A GREAT PRESENTATION ON
STATE AND LOCAL FINANCE
If you missed the March League meeting where our former legislator, Fred Keeley, spoke, you missed a great meeting. Our League invited Mr. Keeley to make a presentation about state financing issues in keeping with the League of Women Voters of California Issue for Emphasis on this topic. Mr. Keeley clearly outlined several needed changes to our state budget process.
He reminded us that the personal income tax and the state portion of the state sales tax are the source of most income for the state's budget. This is a volatile basis for our general fund expenditures in that it changes so quickly based on the economy. Mr. Keeley spoke about some structural changes that could help to reduce the volatility of the budget so that income can be better tracked and accommodations made.
We were reminded that we are one of only three states that require a two-thirds vote of the legislature to pass the state budget. This empowers the minority with a disproportionate vote, whereas a majority vote would actually place a huge responsibility on legislators making them take ownership and responsibility for the budget passed. There would be far less negotiation about desired (pork barrel) budget items.
The hidden budget - tax credits, tax expenditures - is also a big impediment to a budget. In that tax credits are not considered as part of the budget process it is difficult to make choices about the revenues and programs most important to managing our state. Additionally, there is a structural deficit in the budget due to the growth in the need for services. These include such programs as education, services for elders, and roads to accommodate a larger population. Mr. Keeley stated that it would be impossible to close this gap in caseload growth simply by returning to a robust economy.
The $15 billion bond has given the governor and legislature the time to address these structural impediments to a balanced budget. We need to consider the budget as a document that manages our state toward the vision of what we want it to be. We need to consider what size budget is necessary when we have more people living longer, more children in our schools and the need for a healthy society. Mr. Keeley predicts that the bond (borrowing) will not be enough. Making difficult cuts and raising taxes will be necessary to move us toward a livable California.
After answering questions from the audience, we were invited to place stickers next to structural budget changes that could help California balance its budget. These included: making taxes more progressive, increasing all taxes, taxing both products and services, reforming the property tax, distributing sales tax by population rather than by geography, reviewing tax expenditures in every budget cycle and disallowing initiatives that have budgetary implications (known as ballot box budgeting). Knowing the issues a bit better, what changes would you advocate?
