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Ballot Measures Won't Fix California's Deficit or Cure Its Spending Addiction

Diverting funds and borrowing isn't a strategy for fixing the massive budget shortfall

May 14, 2009

Gov. Arnold Schwarzenegger is warning that the state’s budget deficit will reach $21.3 billion and the state will face a “cash crisis” if voters don’t approve the budget measures on next week’s ballot.  A new Reason Foundation study finds the measures are tax increases and accounting gimmicks that will do nothing but put a short-lived band-aid on the state’s massive $42 billion deficit.

“These propositions don’t bring any meaningful reform to California,” said Adam Summers, author of the report and a policy analyst at Reason Foundation.  “The state will never fix its budget problems until it controls spending and shifts to performance-based budgeting that sets goals, measures outcomes and funds only the programs that are delivering results. California should’ve learned it can’t tax and borrow its way to prosperity. These propositions are more of the failed status quo.”

Proposition 1A – So much for temporary tax increases. This measure would extend previously passed “temporary” tax increases for two more years, costing taxpayers $16 billion. It also includes a watered-down spending limit that is unlikely to effectively reduce state spending.

Proposition 1B – Education funding mandates already handcuff the state budget process. Prop. 1B would require that the state spend another $9 billion on K-12 education and community colleges.

Proposition 1C – For years California has been borrowing billions, diverting funds and covering up the red ink. This measure would allow the government to borrow against future potential lottery profits to help reduce the short-term deficit.

Propositions 1D and 1E –These propositions would redirect funds that taxpayers had specifically authorized for children and mental health programs to the General Fund, where legislators can spend the money as they see fit.

Proposition 1F – A common sense initiative that says lawmakers shouldn’t get pay raises in years in which the state government is running a budget deficit.

Reason Foundation notes that runaway government spending is really to blame for California’s budget deficit. Spending nearly tripled from $51 billion in fiscal year 1990-91 to $144 billion in 2008-09.  If California had simply limited spending increases to the growth in inflation and population since 1990, the state would be sitting on a $15 billion surplus today.

“California’s budget problems are structural,” said Adrian Moore, vice president of research at Reason Foundation. “For years, the state has been spending more than it takes in. When the real estate market is thriving or dot-com companies are booming politicians spend that money like addicts. Then when leaner times inevitably arrive, politicians claim there’s nothing they can do and they have to raise taxes. Gov. Schwarzenegger has talked about cutting up the credit cards. It is time to actually do that.”

Full Report Online

The full report, California’s May 2009 Special Election: Analyzing the Propositions and Offering Alternatives for Real Reform, is online here.

Reason Foundation’s report, California Spending By the Numbers, is online here.

About Reason Foundation

Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason Foundation produces respected public policy research on a variety of issues and publishes the critically acclaimed Reason magazine and its website. For more information, please visit Reason.org.

Contact

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