This week, the Legislature will vote on a partisan agreement in an attempt to reduce the $73 billion state deficit.
Spearheaded by the governor, the $17 billion plan includes gimmicks, borrowing, cost shifts, deferrals and some cuts.
The governor claims to reduce spending by $3.6 billion. Lifting the lid off of this proclamation, we learn that nearly all of these reductions are unspent one-time funds from last year. And less than one percent are ongoing reductions that will help reduce deficits in future years.
Negotiated in secrecy, the governor touts this plan but fails – again – to position the state on stronger footing in preparation for darker financial years ahead. What happens if the state faces another deep deficit next year? Known in Sacramento as “early action,” this will actually increase the state’s debt. It includes approximately $1.4 billion of new borrowing from special funds. When implemented, the state will owe more than $4.6 billion to more than 50 different special funds.
In an affront to small businesses and their employees, the governor penalizes employers by raiding the $100 million Employment Training Fund. This fund was set up to pay for worker training programs to benefit job creators. Now, the governor wants to use this money to pay the interest on federal unemployment insurance debt the state incurred during the EDD fiasco of the COVID pandemic. Instead of helping employers create jobs, the governor is now asking them to pay both the principal and interest on this debt, further hemorrhaging the tight finances of mom-and-pop shops.
The biggest accounting gimmick in this plan is the punting of one month’s salary for state workers from this fiscal year to the next, from June to July. State costs remain the same, but this deferral artificially reduces the budget by $1.6 billion. It should come as no surprise that in the private sector, businesses are not allowed to do this on their taxes.
There are no structural reforms to rein in spending. The state has an ongoing spending problem, but there are no ongoing solutions. This is critical to putting California on a more stable financial foundation.
This plan also proposes to spend half of the state’s savings without a clear and sustainable plan for the future.
Until ongoing spending is under control, the Rainy Day Fund should not be touched. The state’s reserves were not meant to cover bad spending decisions.
Papering over the massive budget hole and declaring victory does not make the financial problems go away. In fact, it will only make matters worse.
The governor ought to implement sensible solutions that Republicans have proposed. Each year, the state senselessly sends $10 billion to the High Speed Rail Authority to build a train that goes from a field to an orchard. Voters can certainly agree that there are higher priorities like curbing the high cost of living.
Delaying the minimum wage hike for healthcare workers would save the state approximately $4 billion.
The governor fails to address the fiscal and economic consequences of his policies like providing free healthcare for illegal immigrants.
The Democrats’ habit of cutting deals behind closed doors got us where we are now – in a fiscal mess.
Let’s not make the mistakes of the past. Important decisions like the state budget must be done in the open with public input.
Taxpayers deserve more transparency and a change in how the state budget is crafted to bring real solutions to protect precious tax dollars.
Vince Fong serves as the vice chair of the Assembly’s budget committee.
