CA Budget About HOW We Spend … Not Just How Much

Jerry Brown Legislature BudgetGov. Brown’s opening general fund budget gambit of $122.6 billion – total spending including bond and special funds is $170.7 billion – sets a new record for state government spending.  That the big increases are coming from the man many regard as one of the more sane of Sacramento’s top politicians does not bode well for taxpayers. After all, this is just a starting point.  Now the real fun begins with those less well grounded in economic reality starting the annual ritual of “making it rain” for their favorite projects and special interest employers.

To the governor’s credit, he is paying attention to paying down debt and strengthening the state’s rainy day reserve, a wise move considering that state revenue is highly dependent on top earners and is thus very vulnerable to an economic contraction.

Still, leading Democratic lawmakers want more – a lot more.  They are already complaining that that the budget does not spend enough on early childcare programs, grants to families on welfare, or provide more money for affordable housing.

Let’s concede at the outset that Californians have widely divergent views about how much money should go to all the various things government does. For example, there is a legitimate debate about how much money we, the taxpayers, should be paying to deal with the water crisis. Or how much for K-12 education? Prisons?  The list is fairly extensive.

But too often we neglect a very important topic when it comes to spending. That is, are we actually getting value for our tax dollars?  Per pupil education spending is important, but a poor indicator of educational outcomes. Total spending on prisons is irrelevant if we are releasing dangerous criminals back out on the street. Californians are angry at traffic congestion, but what good is more transportation spending if it doesn’t actually help people get to where they want to go? Californians are sympathetic to the needs of the poor, but are justifiably outraged when needed assistance fails to get to the truly needed and, instead, is used to buy luxury goods or pay for expensive vacations.

We know that Governor Brown is capable of recognizing waste, fraud and abuse. Just a few years ago he put forth a very credible 12 point pension reform plan that would have corrected most of the pension abuses in California. Regrettably, except for dealing with the most obvious of abuses, the reforms were shelved due to intense pushback from public sector unions. This means that the ever increasing percentage of the general fund budget going to address pension obligations is more than it needs to be.

Taxpayer advocates are constantly told that the amount of tax dollars lost to waste, fraud and abuse is but a tiny fraction of government spending. To be blunt, we don’t believe it – and mounds of evidence supports our disbelief. Even the Los Angeles Times several years ago pegged Medi-Cal fraud in the hundreds of millions of dollars.

To understand why more focus in the budget process should be on oversight, the observations of Nobel Prize winning economist Milton Friedman are instructive. He noted that there are four ways people can spend money:

  1. You can spend your own money for yourself. (Being careful both about how much you spend and on what you buy);
  2. You can spend your own money for somebody else. (Being careful about how much you spend but less careful about what you buy);
  3. You can spend somebody else’s money for yourself. (Being careful about what you buy but less careful about how much you spend); and
  4. You can spend somebody else’s money for somebody else. (Where you care less both about how much you spend and what you buy).

Friedman’s thesis is that what government does is spend money in the fourth way. And that is why any discussion about the California state budget needs to include the question of whether taxpayers are getting value for the hard-earned dollars they send to Sacramento.

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.

Originally published by at

Gov. Brown budget plan boosts spending but Democrats seek more

As reported by the Associated Press:

SACRAMENTO, Calif. (AP) — On its face, Gov. Jerry Brown’s proposed $122.6 billion California budget plan would seem to please Democratic interests by pumping billions of new dollars into public schools, health care for the poor and public infrastructure, even as it bolsters the state’s rainy day fund.

Brown touted his income tax credit for the poor, a cost-of-living increase for the elderly, blind and disabled and more funding for universities and colleges when he laid out his general fund plan Thursday. He also urged fiscal prudence, calling for the state to put $2 billion more than legally required into its rainy day fund, bringing it to $8 billion by the end of fiscal 2016.

“You’ve got to plan for the down and level that out,” Brown said at a news conference, pointing to a chart showing the state’s boom-and-bust revenue history. “That’s what I’m trying to do in the budget.”

The Democratic governor’s general fund proposal marks the first step …

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VIDEO: Jon Coupal on the California State Budget

California state spending has increased 30 percent in the last five years, even with the recession. The Howard Jarvis Taxpayers Association is concerned about the level of spending and the level of debt.

CA State Revenues Down Over 10 Percent

State Controller John Chiang announced today that there is more bad news for the Golden State: Revenues are down over 10 percent, or $538 million, from projections. Steven E.F. Brown for the San Francisco Business Times wrote the following:

State Controller John Chiang said California’s revenue was 10.3 percent, or $538.8 million, below budget projections in July.

July was the first month of the Golden State’s new fiscal year, and the tax take was lower in many areas. Only personal income taxes were higher than budget estimates — they came in 2.9 percent, or $89 million, over estimates.

Corporate taxes were 19.3 percent, or $69.5 million below estimates while sales taxes and use taxes were 12.5 percent, or $139.4 million worse than guesses made in the most recent budget.

Both corporate taxes and also sales and use taxes were below their level in July 2010, too, though overall general fund revenue was up $39.9 million, or 0.9 percent, in July 2011 over a year earlier.

California’s budget is a series of guesses about revenue and spending for the year running July 1 through June 30. The controller keeps track of cash levels — how much money the treasury actually has.

Chiang’s office blamed the acrimonious debt-ceiling debate for creating “a great deal of uncertainty for state and local governments, the bond markets, banks and businesses, and the economy.”

In his summary of the situation, Chiang said consumer spending has been dropping, but no one’s sure whether it’s for “a genuine slowdown” or because of logistical problems from natural disasters like this year’s earthquake and tsunami in Japan.

“This is cause for concern, but not panic,” he said.


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