A Time For Budget Reform

This article was originally published in the “CAPITOL BUSINESS : The Business-Government Connection” section of the Sacramento Union on May 5th, 1992.

The battle over Governor Pete Wilson’s initiative for budget and welfare reform in California is beginning to heat up this week.  Proposed last December and likely to qualify with 1.1 million signatures given to the Secretary of State two weeks ago, the “Government Accountability and Taxpayer Protection Act of 1992” proposes far-reaching changes in the area of “autopilot” spending.  In that regard, Wilson is exercising leadership in an area that deserves earnest attention and that will have a significant impact on business.

Too much of California’s budget is based on automatic cost-of-living adjustments (COLAs) and “open ended” appropriations where the amount spent is determined by the number of applicants rather than by a decision based on the fixed amount of money we have available to spend.  As Wilson points out, “California government is running up a bill that California can’t afford.”

If California does run up a gargantuan bill, who’s going to pay for it?  The answer – business and those who reinvest capital.  The value of this initiative, according to proponents, is to place stronger management controls on our budgetary affairs.  Furthermore, it serves to protect the legislative system from continuously bending to pressures for increased taxes – taxes which destroy competitiveness, spur business flight and reduce the jobs available to Californians.

The initiative proposes some refreshingly serious steps for these serious fiscal problems.  Major provisions include 1) requiring a budget to be passed by June 15 of each year or else the Governor and Legislature forfeit their salaries and per diem until it is passed; 2) moves the deadline from January 10 to March 1 for submitting the budget proposal so that the proposed budget is more closely tied to current economic conditions with more accurate information; 3) allows the Governor to declare a fiscal emergency if the budget is not passed and signed by July 1.  The current budget then extends into the new year and the Governor can propose reductions in spending programs that are not protected by the constitution.  The spending reductions take effect in 30 days unless the Legislature enacts a balanced budget by a two-thirds vote; and 4) if the budget goes out of balance by 3% or more due to declining revenues or overspending, the Governor can then declare a fiscal emergency and propose budget cuts if the Legislature doesn’t balance the budget within 30 days by a two-thirds vote.

These measures really give the Governor additional clout in the budget.  However, opponents worry that too much authority is relinquished.  According to former legislative analyst A. Alan Post, the initiative gives the governor “total control over the state’s expenditure program.”  This is especially true when the 3% budget imbalance is defined per the budget estimates of the Governor’s own Department of Finance.  Nonetheless, we do need a much better management handle on our state spending.

While the initiative can be attacked from a “balance of power” perspective, it really gets emotional when the welfare reform provisions kick in.  California’s welfare system is now growing four times faster than our overall population – almost 12% annually and a recent report by the Legislative Analyst found that if a welfare recipient took a job paying $1,200 a month that their monthly income would drop by $150.  Obviously, welfare reform deserves some attention.

Common Cause and the League of Women Voters think they’ve found the proposal’s Achilles heel by asking the Courts to throw the initiative out because it covers two distinct subjects – budget and welfare reform – in violation of the Constitution’s “single subject rule”.  However, Wilson’s consultants contend, “You can’t have budget reform without spending reform!”

Common Cause and the League of Women Voters have sued under this provision to keep the initiative off the ballot.  They claim that obviously welfare reform and budget reform are not the same thing,

However, this is the part of the initiative which is receiving the most heated rhetoric by groups claiming that Wilson wants to “force mothers to choose between buying food for their children and paying rent.”

Unfortunately, even though the courts have been liberal in their interpretation of the “single subject rule”, whereby an initiative can only deal with one topic, this could be the Achilles heel of this proposal.   while the Wilson camp says that welfare reform is integral to successful budget reform.  However, it is also apparent that welfare reform can be the “sexy” attention-getter to draw positive voter consideration to the measure while the “drier” elements of budget reform just get pulled along naturally.

Obviously, in big-stake initiative politics, not everything is always as it seems.  And in that vain one of the silliest statements made so far was by the executive director of Common Cause who claimed they were filing the lawsuit “because, in this time of fiscal crisis, we can’t afford to spend taxpayer dollars verifying signatures and preparing for an election on a measure that is plainly unconstitutional.”  Well, that may be a reason of convenience, but it is clearly not the compelling reason why they simply want the measure defeated.

Bruce Lee expresses the views of the California Business League, a trade association dedicated to restoring quality government.  His column appears Fridays in The Union.  If you have comments or an item for the column, write Capitol Business, P.O. Box 60267, Sacramento, CA  95860.

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