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Budget update: Straight talk on California’s fiscal crisis

Op-ed

The past six years have been a time of crisis management for California’s finances, but I’m encouraged that we are finally on the verge of recovery. When I took office, the state was grappling with a multi-billion dollar structural deficit made worse by Gov. Arnold Schwarzenegger’s 2004 decision to slash the Vehicle License Fee and to then borrow $15 billion (the “economic recovery” bond) to essentially paper-over the deficit he exacerbated.

The borrowing brought temporary budget relief, but by the time I started work on my first California budget in 2007, the chickens were already coming home to roost. The economy was slowing and revenues were falling below projections – a situation that grew worse over the next two years as the global economy collapsed, revenues plunged, and California found itself in the worst fiscal crisis since the Great Depression.

A balanced approach of cuts and reasonable revenue increases could have ended this crisis much sooner. But because of California’s unique 2/3 vote requirement to raise taxes, most of the budgets the Legislature has faced in the past six years have relied mainly on deep cuts, borrowing, gimmicks, and wishful assumptions – the net effect of which has slowed economic recovery and extended the structural deficit.

This year, to bridge a $16 billion deficit, the budget called for another round of painful cuts mainly to social services, and it proposed deep “trigger cuts” that will be avoided if the Governor’s Schools and Local Public Safety Protection Act is approved by the voters in November. The following is a summary of what I see as the good, the bad, and the ugly with this year’s budget.

The Good:

Education: Recognizing that education is our highest priority, the budget protects and invests in K-12 education this year and in the future, with a $17 billion increase in Proposition 98 funding over four years. It also begins the process of reining-in the cost of higher education by preventing a 2012-13 fee increase at the UC System and rescinding the 2012-13 CSU fee increase.

State Parks: The budget includes several creative solutions that I’ve been working on for the past year to help prevent state park closures. Key elements of my AB 1589 (State Parks Stewardship Act) were incorporated into the budget, including redirection of $13 million in bond funds for revenue-generating projects, creation of the State Park Enterprise Fund and creation of a new state park environmental license plate.

Taken together with the dozens of partnerships that are emerging with nonprofits and local governments, and the approval of $10 million in new funding to help avoid closures, the budget ensures that almost all of the 70 state parks originally slated for closure on July 1st due to budget cuts will remain open.

On-Time Budget: This was the second consecutive year that the Legislature met the June 15 constitutional deadline for passing the budget – a rarity in modern California history.

The Bad:

Local Government Impacts: This year’s budget includes another unfortunate raid on local government funds – this time, it is local property tax dollars from a small handful of counties, including Marin, that are being swept into the general fund at the expense of county government and local education. It’s frustrating that this action was inserted at the last minute, without any public deliberation, into a trailer bill that also included redevelopment-related provisions opposed by local governments. I voted against this trailer bill, but unfortunately it passed.


Healthy Families: The budget includes more painful cuts to our social safety net, the worst one being elimination of the successful Healthy Families Program that provides health care for 880,000 low-income children. Children who are served by this program will not be left without coverage, but they will be transferred into Medi-Cal which is less effective and harder to access for most Californians.


Line Item Vetoes: The Governor used his line item veto authority to make even deeper cuts than those approved by the Legislature. This included continuation of a 3.6 percent cut in reimbursement rates for providers in the In-Home Supportive Services program for the blind, elderly and disabled, and the elimination of $10.1 million from the child nutrition supplement program, which provides meals to needy children in private schools, child care homes and centers throughout California.

The Ugly:

Budget Process Still Needs Improvement: The last-minute raid of Marin County’s local property tax funds without any hearings or deliberation is a graphic reminder that the budget process is still far from transparent.

A total of 75 public hearings on the budget were held – the most I’ve ever seen – but on the downside, the decision to eliminate the “Conference Committee” process this year was a setback for transparency.

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Jared Huffman is finishing his final term representing the 6th Assembly District.