California: Intransigence and a Broken Budget Process Win Out?


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After a 76 day delay, California may finally have a budget for fiscal year 2009, as legislative leaders appeared to have struck a deal to close the Golden State's $15.2 billion budget deficit over the weekend. Those hoping for anything resembling sound public policy to emerge from these last-ditch negotiations will likely be sorely disappointed. It is being reported that, save for the suspension of a few business tax breaks, the agreement includes no major tax increases. Rather, it is premised on cuts in spending and accounting tricks likely to make next year's budget morass even deeper.

Specifically, it appears that the agreement will rely on "accelerated revenues" -- to the tune of approximately $5 billion -- to help close the budget gap. Those revenues are to be accelerated from fiscal year 2010 through stepped-up withholding and higher estimated tax payments. In short, California legislators seem to have decided to address their chronically under-funded budget by making next year's budget even more chronically under-funded.

The reason for the delay, and the reason the budget contains few substantive changes in tax policy, is clear. The California constitution requires a two-thirds supermajority in order to pass a budget, thus enabling Republicans in the legislative minority to block the kind of tax increases necessary to bring the budget into balance.

If there is any silver lining to this budgetary cloud, it is that individuals and organizations from across the political spectrum have started to raise real questions about whether such a supermajority requirement serves any purpose. Late last month, the Bay Area Council, a San Francisco-based and business-sponsored advocacy organization, called for a state constitutional convention to consider changes to California's budget process. Given the outcome of this particular budgetary negotiation and the fact that California has been unable to pass a budget on time in 23 of the last 32 years, it's not hard to see how some might be fed up with this approach to the budget. Indeed, such delays have real consequences for real people, as Jean Ross, the head of the California Budget Project, explained recently.

Of course, because it has served California so well, Senator John McCain, the Republican nominee for President, would like to see a similar super-majority requirement used at the federal level to constrain tax policy for the entire nation. There are certainly lessons to be learned from California's latest budget mess, but limiting one's options in the face of enormous budget deficits is not one of them.

Thank you for visiting Tax Justice Blog. CTJ and ITEP staff will soon retire this domain. But ITEP staff are still blogging! You can find the same level of insight and analysis and select Tax Justice Blog archives at our new blog, http://www.justtaxesblog.org/

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