Brown’s final budget plan proposes $132 billion in spending

Democratic Gov. Jerry Brown proposed a $131.7 billion state spending plan Wednesday, launching his final year of budget negotiations as he prepares to leave office.

Brown’s proposal is up 5 percent from last year but includes little new spending on new programs. Once again warning that he believes a recession looms, Brown dedicated $5 billion toward the state’s Rainy Day fund, more than is constitutionally required. He also proposed a new online community college program.

“It’s not exciting, it’s not funding good and nice things, but it’s getting ready and that is the work of a budget,” Brown said.

Notably, Brown’s plan makes no changes related to federal tax changes out of Washington, which are expected to hit taxpayers in high-tax states like California the hardest. That’s because Brown had to finalize his plan in December, before the federal changes were finalized. He said he expects to make revisions to his plan during ongoing negotiations with the Legislature. A final plan must be passed by lawmakers in June.

The spending plan also includes nearly $59 million in special funds and bonds, which are dedicated for specific purposes. …

Click here to read the full article from  KPPC

Gov. Jerry Brown’s LAST budget

Jerry Brown Budget 2017Governor Jerry Brown and his Finance Department are putting finishing touches on his final budget to be presented soon. This is a second time that Brown has wrapped up two terms as Governor of California offering a final budget. While much has changed in California government, politics and demography since that “first” last budget in 1982 was completed, a look back may offer some hints on where Brown will go with his second final budget.

Brown’s budget will reflect California’s current circumstances of a big economy with surpluses into the near future. The Legislative Analyst’s Office projected in November $19.3 billion in reserves for the 2018-19 budget if the legislature doesn’t create new budget commitments. Brown will do his best to keep those commitments in check.

But much can happen in the next few months to affect the budget Brown plans to present. Decisions out of Washington, D.C. on health care and the federal tax law changes, and also a possible repeal of California’s gas tax may upset any near-term picture on the budget.

One key difference from 36 years ago was that California was still living in the shadow of the tax revolt of 1978. Another key difference, while no longer running for governor, Brown would be on the 1982 ballot as a candidate for United States Senator. Recently, California legislators and voters have loosened their grip on the purse strings in recent legislative terms and elections. This time around Brown is not seeking another office and political considerations will not cloud budget decisions.

Ironically, just like the end of Brown’s current term, the year prior to his final budget the gas tax was increased in California. In 1981, the gas tax was raised two cents from 7-cents to 9-cents, a 28% increase. In 2017, the gas tax rose 12-cents from 29.7-cents to 41.7-cents, a 40% increase.

Brown was still famously speaking about the “era of limits” when he signed the $25.3 billion 1982 budget on June 30. The budget he offered in 1982 came at a time a recession hit. Brown’s 1982 budget was barely 1-percent larger than the previous budget.

Brown had an eye on his senate race and didn’t want to offer ammunition to political opponents. Reserves in certain accounts were tapped and gimmicks employed to make the budget appear balanced. It wasn’t. By the close of 1982 the budget was nearly $1 billion out of balance and the Senate Finance Committee held several hearings to come up with a fix.

The budget solution would not come under the Brown Administration. As tax historian David Doerr stated in his book, The California Tax Machine, “For the third time in four administrations, an outgoing governor used one-time revenues to balance the budget, leaving a dismal mess for the incoming governor (the exception was Ronald Reagan, who left Jerry Brown with a surplus.)”

The trend of inheriting a deficit was certainly felt by Brown when he took office for his third term in 2011. He does not want to leave a deficit again. His personal history from his first tour in the governor’s office and the experience of his recent gubernatorial journey will have him focused on the budget bottom line to maintain the surplus that the LAO projects.

Legislators should put their spending plans back in their pockets.

This article was originally published by Fox and Hounds Daily

How to Reduce the California State Budget by $40 Billion

BudgetAs of a few days ago, high-wage earners have a new reason to leave California: their state income taxes are no longer deductible on their federal income tax returns.

Can California’s union-controlled state legislature adapt? Can they lower the top marginal tax rates to keep wealthy people from leaving California?

The short answer is, no, they cannot. They cannot conceive of the possibility that California’s current economic success is not because of their confiscatory policies, but in spite of them.

Earlier this year California’s union controlled legislature approved a gas tax increase that will increase state tax revenue by about $5.0 billion per year. Next in their sights is changing property taxes to a “split roll” system, whereby all commercial properties will no longer be protected from steep tax rate increases. Also under consideration is extending sales taxes to services, along with taxes on watermarijuana, and, who knows, maybe even robots.

These new taxes have attracted a lot of attention, but in reality California’s state government derives most of its tax revenue, 58%, from personal income tax. In recent years personal income taxes have contributed as much as 65% of the California state government’s total tax revenue. California’s top marginal income tax rate of 13.3% is by far the highest in the U.S. Oregon has the 2nd highest rate, at a much lower 9.9%. The impact of this can be seen on the chart depicted below, which is taken from the State Controller’s most recent annual financial report for the fiscal year ended June 30, 2016. As can be seen, state income taxes accounted for 58% of all tax revenue in the most recent fiscal year for which we have data. Nothing else even came close.

California Tax Revenue By Source – 2015 and 2016

Taxes graphic

When around 60% (or more) of all state tax collections depend on how much money individual residents make each year, revenue can be volatile. A recent analysis by the Franchise Tax Board, as reported in the Sacramento Bee, showed that the top 1% of California taxpayers by income paid 45% of the total income taxes collected. This means that in the last fiscal year, the top 1% paid 26% of ALL taxes collected in the State of California. If you extend that comparison to the top fifth – those Californians who earned on average over $237K in 2013, it can be seen they paid nearly 90% of the total income taxes collected, or 51% of ALL taxes from all sources.

California Income Tax Burden by Income Group – 2013 vs 1994

Income tax burden

When you have the top fifth of your wage earners paying more than half of ALL taxes collected in your state, you definitely don’t want those folks moving to other states. California has really great weather, but there are a lot of reasons to leave: An inhospitable business climate, a global economy with burgeoning new opportunities in many low tax regions, and an increasingly virtual work environment which means you don’t have to live within 50 miles of the California coast in order to attract venture capital or find business partners.

Just for the sake of argument, here are ways to cut expenses in the state budget, in order to keep California’s state government solvent without punishing the wealthy, or, worse, losing them to other states and nations.


(1) Reduce Costs for Prisons – $2.0 billion or more:  California now spends over $75,000 per year per prisoner, a cost that has doubled since 2005. In Alabama, it costs less than $15,000 per year per prisoner. If California contracted with the State of Alabama to have them house its 130,000 prisoners, that would save California taxpayers $7.8 billion per year. If doing business with Alabama is unpalatable, how about right across the border in Nevada? The State of Nevada spends under $18,000 per year to house their prisoners – sending California’s prisoners across the Sierras to Nevada could save taxpayers $7.4 billion. Obviously relocating California’s prisoners to other states is an extreme solution. But there are many other less extreme, bipartisan solutions to lower prison costs, including alternatives to incarceration.

(2) Cut Ratio of Administrators to Faculty in Public Universities – $2.0 billion or more: In 2000 California’s UC System employed around 4,000 administrators and 7,000 faculty. Only 15 years later, in 2015, the UC System employed 10,500 administrators and 9,000 faculty. Just assuming for a moment that the administrative overhead in the UC System wasn’t already bloated in 2000, the UC System could reduce their administrative headcount by over 5,000 administrators, and save at least $500 million per year. Do the same thing in California’s much larger Cal State and Community College systems, and you can probably achieve total savings of around $2.0 billion per year

(3) Outsource CalTrans Work and Eliminate Redundant Positions – $2.5 billion or more: CalTrans is set to consume $12.8 billion of the State 2017-18 budget. As recommended by State Senator John Moorlach after an audit of the agency, just eliminating 3,500 redundant positions would save $500 million. But competitive outsourcing of roadwork contracts could save much more. CalTrans only outsources 10% of its roadwork, whereas, for example, Arizona outsources 80% of their roadwork. It is common to take competitive bids from private contractors to do public road maintenance and upgrades – CalTrans is the exception. A very expensive exception.

(4) Fund all CalTrans Work With Proceeds from Bullet Train Financing – another $10 billion per year for ten years: Ok, this isn’t entirely fair. Bonds are deferred taxes. But just imagine if instead of paying for a train that will never make any meaningful contribution whatsoever to relieving the congestion on California’s roads and freeways, all that money was used to improve the roads? Redirecting Bullet Train funds – which are destined to total well in excess of $100 billion – into CalTrans projects would save taxpayers nearly 100% of CalTrans budget for a decade or more.

(5) Slash State Agency Headcount and Pay/Benefits by 20% – $6.5 billion: In 2015 the average pay and benefits for the 154,000 full time employees of state agencies was $116,887. Eliminating 20% of these jobs would save taxpayers $3.6 billion per year. Reducing pay and benefits for the 123,000 remaining state employees by 20% would save another $2.9 billion – their average pay package would “only” be $93,500 per year after this reduction. Is this feasible? Recent history proves that it is. In 2009, cash-strapped California state agencies implemented “Furlough Fridays,” which functionally achieved both objectives described here – there was a 20% reduction in work being performed, and state workers collected 20% less in pay. And guess what? The state government continued to function.

(6) Reform Pensions – $2.1 billion: When you talk about pensions, it is understating the problem to restrict the discussion to state agencies. Local cities, counties and school district pensions combine with state agencies to produce an unfunded liability that – depending on who you ask – ranges between $200 and $700 billion. Moreover, pension reform might be subsumed under the preceding Option #5. Nonetheless, here are the numbers for state agencies: Taxpayers contribute, on average, $21,900 towards each state workers pension, representing 26% of their pay. Just lowering that to a contributory 401K equivalent to 10% of pay would save at least $2.1 billion per year. In reality, because these pensions are so underfunded, getting control of pension benefits would actually save much more than this estimate.

(7) Face Reality and End the “Sanctuary State” – around $20 billion: According to the United Nations, there are now over 250 million displaced refugees in the world. Right behind them are another 1.2 billion individuals living in extreme poverty. America, with only $330 million residents, is not nearly capable of absorbing even a fraction of these multitudes, much less California with not quite 40 million residents. Yet California has thrown open the doors and foots the bill, betting that the tech boom and asset bubble will last forever. A study by the Federation for American Immigration Reform estimated the cost of undocumented immigrants to California taxpayers at over $25 billion per year – $14.4 billion for education, $4.0 billion for health care, $4.4 billion for justice and law enforcement, $0.8 billion for public assistance, and $1.6 billion for general government services. This scrupulously footnoted study, published in Sept. 2017, got virtually no coverage in the media. What did receive extensive media coverage was a study promoted by the Institute on Taxation and Economic Policy that estimated the total state and local taxes paid by California’s illegal immigrants to equal nearly $3.0 billion per year. Net cost and potential savings: $22 billion. At the least, California should stop being a magnet state for undocumented immigrants, and instead should help craft then adhere to a realistic national policy.

The most powerful special interest in California, government unions, wants nothing to change. They are hostile towards corporations and individual wealth. They have strong incentives to want inefficient, expensive prisons, universities, and infrastructure projects. They have strong incentives to expand all government services to accommodate destitute immigrants. Why? Because the more government workers are hired and the more taxpayers’ money is wasted, the more dues paying government union members they acquire.

Joining these government unions are California’s powerful Latino Legislative Caucus and their allies in the identity politics industry, who recognize a huge political opportunity by spewing separatist demagoguery, nurturing a bleak, tribal paranoia in the collective minds of recently arrived immigrants. Also joining these government unions are left-wing oligarchs and the monopolistic businesses they control, who see in an expanded government and a hostile business climate a chance to prosper through legislated scarcity and mandated product choices. And, of course, the asset bubbles produced by contrived shortages add precarious value to the pension funds and increase property taxes.

So these solutions, while eminently practical, may never see the light of day. But California’s voters should understand that around $40 billion could be cut from the state budget if California’s government was ran in the interests of the people, instead of in the interests of government unions and their elitist allies. If $40 billion were cut from California’s state budget, not only could the new gas tax be repealed, but the top marginal tax rate could be dropped to under 10%. And as any student of the Laffer Curve knows, that might actually keep California’s wealthy from leaving; it might even cause income tax revenue to go UP, as fewer high income individuals feel the need to shelter or defer their taxable earnings.

The Laffer Curve
Depending on where you are on the curve, lowering taxes can raise tax revenue.

Laffer curve

*   *   *

Edward Ring is a contributing editor for the California Policy Center.


Beware of Props. 51, 55, and 56 Wreaking Havoc on CA Budget

budget-constantin-cagle-Nov.-26-2013-300x203As a professor of public budgeting and someone who has worked their entire career analyzing public budgets, I can say that ballot box budgeting wreaks havoc on the California budget process and taxpayer interests.

Yet it is something that voters are so accustomed to doing that most average voters don’t even know what “ballot box budgeting” is.

In short, ballot box budgeting is the practice of making major budget decisions at the ballot box. And unlike the normal budget process, these decisions are commonly written into the California Constitution, and not subject to change in any way short of another ballot measure.  

The result is that funds are locked in to being spent for a particular purpose regardless of other budget needs and priorities, and commonly lack the same accountability and oversight that the rest of the California budget is subject to through the legislative process.

There are three measures on the November 2016 ballot that represent ballot box budgeting at its worst, and should be rejected — Proposition 51 School Bonds, Proposition 55 School Funding and Proposition 56 Tobacco Tax Increase. There is one other measure, Proposition 64 Marijuana Legalization and Tax, which represents ballot box budgeting, but is less egregious and is worthy of consideration on its policy merits given that marijuana is not currently legal and therefore not taxed at all but should be considered on policy grounds.

The reality is that nearly all initiatives have some type of budget impact, but initiatives that allocate a significant dollar amount of public funds should generally be looked at with great skepticism, particularly those that raise taxes or reallocate existing public funds in some way.

Another common element in ballot box budgeting is a “pay to play” element, characterized by a situation where special interests sponsor a ballot measure that allocates public funds that benefit their private financial interest.   All four initiatives mentioned above have a significant “pay to play” element, that should be considered as well, and viewed with great skepticism.

In generally all such cases, initiatives are sold as being crafted in the “common good” or for the “public interest” but the real motivation is to benefit the private interests that raised the money to quality the measure and run a support campaign.

For example, Prop. 51 authorizes $9 billion in general obligation bonds for construction of K-12 public schools.  The construction of school facilities is done through a process at the local level, with state bond funds providing a state match, but this local process has come under great fire in the media recently, largely due to California Treasurer John Chiang’s efforts.

Treasurer Chiang has stopped short of criticizing Prop. 51 specifically but he has came down hard on the local municipal bond process as being a “pay to play” process that “rips-off taxpayers,” according to Treasurer Chiang’s press release.

Chiang says this “pay to play” process rewards special interests including developers, bondholders, and construction companies who offer to fund local bond campaigns in exchange for lucrative contracts, which are “no bid” contracts in many cases.

“Not only are these “pay-to-play” arrangements unlawful, they rip off taxpayers and endanger the integrity of school bonds,” Treasurer John Chiang declared, noting that between 2012-15 K-12 school districts issued $43.8 billion in long-term debt.

Without cleaning up this “corrupt” process, Prop. 51 essentially puts $9 billion in public funds at risk for misallocation by school districts and public agencies.  And will subject taxpayers to huge future costs, for spending with questionable public benefits given the process through which these bonds are issued under the current system.

Of course, the same special interests who benefit from this “pay to play” process are the primary proponents of Prop. 51, and are putting up millions of dollars to lock in these lucrative contracts for public bond spending.  A number of local districts are also proposing local bonds on the November 2016 ballot to provide a local match for these highly questionable public projects.

Prop. 55 is the example of another measure which might appear legitimate on its face because it raises money for “schools” and “health programs.”   But should also be rejected on ground of being a terrible case of “ballot box budgeting” and “pay to play” corruption of the state’s initiative process.

Prop. 55 extends the Prop. 30 (2012) income tax increases taxes on individuals and small businesses, which expire at the end of 2017, for another 12 years until 2030.  The effort is being sold as being a legitimate effort to fund schools and health care because Prop. 30 is something that the Governor, Legislature and business community agreed on back in 2012.

But Prop. 55 is not the same as the deal cut back in 2012, and should be rejected.  First, Prop. 55 is much more expensive, nearly twice as expensive as Prop. 30—and represents an $8-11 billion tax increase, as opposed to a $6.5 billion annual hit from Prop. 30.  Secondly, the measure is not “temporary,” and results in a broken promise Governor and Legislature made to voters in 2012—that’s why Governor Brown says he will not endorse Prop. 55.

Lastly, Prop. 55 adds a significant “pay to play” element as well by giving private hospital interests a piece of the action.  Specifically, Prop. 55 locks in another $2 billion in funding for “health programs,” which did not even exist in Prop. 30, and is a pure handout to the hospital interests which have already contributed more than $21 million to the Yes on Prop. 55 Campaign.

Public employee union interests get the bulk of the funds, estimated at $75 billion over 12 years, in salary and benefit spending primarily but the public generally does not view them as being the same type of “special interest” as purely private interests.  Yet, these public employee union interests have put up another $18 million thus far to support Prop. 55, and stand to reap huge rewards for their members and dues increases if Prop. 55 passes.

From a ballot box budgeting perspective, both Prop. 55 and the Prop. 56 $2 per pack tobacco tax increase are terrible budget policy because they lock in significant expenditure of public funds that will be allocated outside of the state’s annual budget process without regard to actual need or other pressing spending priorities.

Prop. 55 locks in $8-11 billion in spending with the bulk going for education, but another $2 billion going to “health care” programs—again not allocated according to need or the accountability standards under the state’s annual budget process which subjects all public spending to annual review.  Prop. 56 locks in another $1-1.4 billion in health care spending that will be allocated outside the state’s budget process.

Voters are encouraged to reject Propositions 51, 55, and 56 on grounds that they are terrible examples of “ballot box budgeting,” in which special interests put up millions of dollars, even tens of millions of dollars, to try to pass “public interest” measures with the expectation of a big payday at taxpayer expense for the years to come.

David Kersten is executive director of the Kersten Institute for Governance and Public Policy ( He is an expert on fiscal issues and teaches a masters’ course on public budgeting for the University of San Francisco.

This piece was originally published by Fox and Hounds Daily

California budget vote dominates agenda

As reported by the Sacramento Bee:

Working under a midnight deadline to pass a budget, lawmakers face a busy day – though still likely a smoother endeavor than the protracted, head-banging budget battles of yore.

Central pieces of the budget deal announced last week include a hefty deposit into the state’s rainy day fund, $1.3 billion for new state office work (potentially including Capitol renovations) and the repeal of a rule denying welfare payments for new kids that lawmakers have attacked for years as cruel and counterproductive. Some other pieces of note:

▪  Affordable housing has vaulted up the agenda this year. But Gov. Jerry Brown isn’t offering money for nothing: if lawmakers want hundreds of millions for lower-cost accommodations, Brown wants them to agree to controversial language easing barriers to local building.

▪ The politically perilous vehicle registration fee would increase by $10, though a long-sought transportation funding deal still hasn’t coalesced. …

CA’s cap-and-trade program faces daunting hurdles to avoid collapse

As reported by the Los Angeles Times:

The linchpin of California’s climate change agenda, a program known as cap and trade, has become mired in legal, financial and political troubles that threaten to derail the state’s plans to curb greenhouse gas emissions.

The program has been a symbol of the state’s leadership in the fight against global warming and a key source of funding, most notably for the high-speed rail project connecting San Francisco and Los Angeles.

But the legality of cap and trade is being challenged in court by a business group, and questions are growing about whether state law allows it to operate past 2020. With the end of the legislative session in August, Gov. Jerry Brown, lawmakers and interest groups of all stripes are laying the groundwork for what could become a battle royal over the future of California’s climate change programs. …

Click here to read the full article

Increase In CA Vehicle Registration Fee

As reported by Capital Public Radio:

The state will charge Californians more to put their cars on the roads next year as part of the state budget deal reached by Gov. Jerry Brown and Democratic legislative leaders.

The agreement includes a $10 per year increase in the vehicle registration fee that funds the Department of Motor Vehicles and California Highway Patrol. It’s effective April 1, 2017.

The governor proposed the hike in January (see bottom of pg 7 in the link). His Department of Finance says without the increase, the state would need to make “significant budgetary cuts” such as reducing the number of CHP officers on patrol and closing DMV field offices.

The vehicle fee, currently $43, would increase to $53. It would then continue to rise incrementally based on the California Consumer Price Index. …

Click here to read the full article

Budget Deception: Weird Accounting Diminishes Accountability

BudgetThis week, after reaching agreement with Gov. Brown, the California Legislature will pass the state budget for the 2016-17 fiscal year. In so doing, it will meet its Constitutional deadline of June 15th.

A few weeks ago, this column attempted to provide some clarity to ordinary citizen taxpayers on basic state budget issues. This included an explanation of the difference between “general fund” expenditures and “special fund” expenditures. The column also reviewed California’s higher than average level of taxation and its legendary wasteful practices.

Those budget issues are confusing enough but there is something else going on that confounds even those of us who have at least some familiarity with government finance. Specifically, California has manipulated accounting rules that are, at best, confusing and, at worse, intended to conceal the true condition of state finances.

For most folks, figuring out the family finances isn’t all that difficult. Most people have a relatively stable and predictable amount of income they can spend and, on the flip side, they have a pretty good grasp of their expenses. Of course, even the best laid plans can be thrown off with the layoff of a breadwinner or, on the positive side, an unexpected bonus or inheritance.

But with government, predicting revenue can be tricky. Given this unpredictability, one would think that the state would want to base its accounting decisions on best practices. But that isn’t the case at all. Without going into all the wonkish details, the Department of Finance uses various “accrual” techniques to attribute revenue, not to the year in which it was received, but rather to a previous or future fiscal year depending on what political ends the administration seeks to achieve. Venerable Sacramento Bee columnist Dan Walters calls this “hide the pea” accounting and even the Legislature’s own Legislative Analyst has criticized the practice.

For all the funky accounting on the revenue side, it is much worse on the spending side. Here, under proper “accrual” rules, California should be counting the massive amount of debt we’re racking up differently. But with manipulative accounting, the state can actually spend more money than it receives in a given year and still report a budget surplus. This debt, as it relates to public employee pension obligations, is nothing more than spending tomorrow’s money today. But if it is spending money today, it should be counted as such.

David Crane is a Lecturer in Public Policy at Stanford University and president of Govern For California who has written extensively on California’s deceptive accounting practices. He points out that proper accounting could have stopped the largest non-voter-approved debt issuance in California history. That 1999 debt was not a bond. Rather, it was retroactive pension increase for state employees. Had that cost been “booked” the way businesses account for future liabilities, the legislature may very well have thought twice about undertaking such a huge financial burden.

The good news is that the days of deceptive government accounting may be numbered. The Governmental Accounting Standards Board has, for the last several years, been forcing government entities to finally begin reporting pension obligations and “Other Post-Employment Benefits” in a way that is both more honest and transparent. Also, the California Legislature now has as a member Senator John Moorlach, a no-nonsense accountant who predicted the Orange County bankruptcy several years ago. He, like Crane, is shining a light on California’s budgetary shenanigans. With a looming downturn in the economy, this enhanced transparency will be critical.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

Excessive State Budget Pushed Forward by Dems

BudgetThursday, Sacramento Democrats all voted in support of a budget that has an unknown cost, but is estimated to easily exceed the governor’s record-level budget spending that he proposed just two weeks ago. The Assembly’s current budget proposal is essentially a blank check committed to using record levels of taxes collected for a laundry list of bloated bureaucracies and wasteful projects.

This new budget proposal hides unilateral government plans to increase fees on every car owner and taxes on every cellphone user in California. Wasteful projects like the high speed rail are rewarded with $145 million of additional largesse. Furthermore, mismanaged bureaucracies such as Caltrans receive increased funding with zero oversight while California drivers experience worst in the nation traffic conditions.

On top of the $10 yearly vehicle registration fee hike and nearly 400 percent cellphone tax increase, some of the other highlights from the Democrats’ “Blank Check” Budget include a $145.2 million appropriation for high-speed rail, $2.1 billion for an “optional” Obamacare expansion, and an additional $3.2 billion for the recently raised minimum wage.
Undoubtedly, the constant flow of high profile businesses leaving California will only accelerate with the Legislative Democrat’s budget proposals. Costly new mandates like the $15/hr minimum wage and highest in the nation taxes have prompted CEO magazine to once again name California as the worst state in which to do business, a distinction it has held every year the survey has been conducted.

Simply put, California voters need to clearly understand that the Democrat agenda of higher taxes, unending regulations, and “blank check” government spending has led California off the cliff and resulted in massive debt, job scarcity, and the nation’s highest poverty rate. June and November elections are coming, and it’s time for Californians to stand up and just say no to Democrats and their free spending ways.

This piece was originally published by the Flash Report

What CA Taxpayers Need to Know About Gov. Brown’s New Budget

BudgetAverage taxpayers in California are probably aware that the state budget was in the news again over the weekend. But even folks who follow both presidential politics and local issues probably couldn’t be blamed if they tune out stories about the California budget. It’s not that they don’t care. It’s just that public finance issues can be horribly confusing and difficult to follow.

In terms of timing, the process itself is easy to grasp. The annual budget year runs from July 1st to June 30th of the following year. That’s why people refer to a single budget using two years. For example, the budget currently being discussed is the 2016-2017 budget. The Constitution requires that the governor present a budget in January and that the Legislature enact the budget by June 15th. Because state bean counters and analysts don’t have a full grasp of the economy or revenue projections in January, the governor’s budget goes through an update, or “revision,” in May. It was this May “revise” that the governor presented on Friday that has been in the latest news cycle.

But perhaps the most confusing aspect of the state budget is the fact that many of the numbers that are bandied about are inconsistent. Thus, an average citizen might hear on the radio that the state budget is $122 billion dollars. And yet, when they get home, they read that spending is actually $173 billion. At this point they are more apt to turn on the Giants v. Dodgers game rather than make sense of the huge disparity.

The inconsistency in these budget numbers usually is attributable to the fact that there is a big difference between “general fund” spending and total state spending which includes “special funds.” General fund revenue comes from the state income tax, sales tax, corporate tax and a handful of other sources. “Special funds” come from the gas tax and fees from regulatory programs like cap and trade funds. For average taxpayers, the worst example of “special fund” revenue consists of the illegal CalFire “fee” which slams property owners with hundreds of dollars of additional property taxes. The legality of the CalFire fee is currently being challenged in court.

When it comes to the state budget, citizen taxpayers are justified in being both confused and angry. Not a day goes by without some scandal surfacing about those who spend our tax dollars. Whether it is the Bay Bridge, which exceeded the original cost estimate by a factor of six, or California’s feckless policies that have driven up state debt so high that, were the state a private company, it would be immediately eligible for bankruptcy.

As should be expected, California has the largest state budget in the United States. But what should not be expected or tolerated is the hostility of our political leaders toward those of us who pay the bills. California has the highest income tax rate in America as well as the highest state sales tax. Our fuel costs are also the highest due to both the current gas tax and environment regulations. The result of these policies has been an accelerated exodus from the state by both businesses and individuals. It should be painfully obvious even to the Governor and left-leaning legislators that you can’t have a vibrant state budget unless you have a vibrant economy.

Finally, Gov. Brown, while not officially endorsing a proposal to retain California’s sky-high income tax rates, implicitly endorsed it by noting that the state would be in a deficit situation if the measure didn’t pass in California. But this deficit projection is only attributable to higher state costs due to the foolish policies of elected leaders, not state revenues which are actually increasing faster than population and inflation.

The real cure for California’s budget woes is a combination of policies that would make California competitive in the global economy, not higher taxes and more burdensome regulations.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.