In the famous movie, Casablanca, Captain Louis Renault announced:
I’m shocked, shocked to find that gambling is going on in here.
[A casino worker gives Renault a wad of money.]
Casino Worker: Your winnings, sir.
Over this last week, we have seen many in the Governor’s office and the Democrat Leadership announced that they are “shocked” that the California Department of Parks and Recreation had hidden money while they were attempting to extort more money out of the taxpayers by threatening to close down parks. “How could they be so deceptive?” our liberal friends in politics and the media cried, “They lied to us.”
Oh, give me a break. This deception has been going on for years, aided by the full time budget staff at the Legislature, the Legislative Analyst’s Office, the “Career Executive Assignment” (CEA) staff in the various state agencies and departments, and the leaders of the various government unions. Who lost their job over this? A couple of political appointees, either too lazy, too stupid or too trusting to inquire from these career bureaucrats about the budget they submitted. The real culprits, the ones I described above, survive, without inquiry, without accountability, and without consequence.
There are two problems in the state budgeting process that this recent problem exposes, one, the growing reliance by the state government on the so-called “special funds” accounts to fund state operations, and two, the continuing, and pernicious, impact of the permanent bureaucracy, and its allies, the union bosses, the permanent legislative budget staff, and the Legislative Analyst’s Office, who are, quite frankly, the creator, and the continuing cause, of our ongoing budget crises.
In this post, I will address the problem of the special funds. I will talk about the continuing problem of the permanent bureaucracy in the next post. When I joined the Legislature in 1992, total general fund spending was approximately $39 billion. Special fund spending was $14 billion (check out schedule 6 in the Governor’s budget for exact numbers, http://www.dof.ca.gov/budget/historical/2012-13/governors/summary/documents/BS_APP.pdf). In the last budget, the 2012-13 budget, according to the estimates in schedule 6 for the January budget (those changed with the enactment of the budget, but the numbers show the problem), the budget estimated $94 billion in general fund spending and $44 billion in special fund spending. In other words, twenty years ago, special fund spending was about 25 per cent of the general fund budget. It is now almost 50 per cent of the general fund budget. Why the change?
In 1996, the Supreme Court, in the Sinclair Paint case, provided that “fees” for government spending were not taxes, and therefore could be passed on a majority vote of the Legislature, rather than the two-thirds vote required by Proposition 13. The court then went on to give a very broad definition of what would constitute a fee as opposed to a tax (for those of us who opposed Ron George as the Chief Justice of the Supreme Court, this is just one of the many pro-government rulings that came from his court, proof that it doesn’t matter if the judge is tough on crime, Republicans need to appoint small government conservatives, not “tough on crime” judges to the courts). The Democrat majority took this decision as the license to disguise every kind of “revenue enhancement” device, i.e., tax increase, as a fee, and stiff categories of taxpayers with all kinds of new bills to pay.
That means today, hidden throughout the budget, is $44 billion worth of special funds, basically slush funds, for the bureaucracy to play with. No one in the Legislature scrutinizes these funds, because they come from “fees” not taxes. Voting for fees is not the same as voting for taxes, and many Republicans have voted to increase fees over the years thinking they haven’t violated their promises not to increase the burden on taxpayers. This was a bureaucrat’s dream of revenue nirvana, and they have abused it over the years, sometimes with Republican help.
The taxpayers changed the Sinclair Paint decision by initiative, but the damage has been done. The Department of Parks and Recreation slush fund is only one ($54 million out of a $44 billion spending orgy) special fund. There are thousands of them hidden away in hundreds of budget line items. Legislative Staff, the LAO, and the CEAs know where this money is, but they don’t inform the elected officials, and if anyone asks about these funds, they are told the fees “cover the costs of services” provided to the fee payers.
Well they don’t. The fees fund these bureaucratic slush funds. Elected and appointed politicians are too lazy, too stupid, or too busy to look into these funds, and the permanent bureaucracy counts on this to avoid scrutiny of how they spend the money in these funds. The latest proclamations of “being shocked” about this hidden money rings hollow. State government doesn’t need more money, it needs political leaders who will do their job of controlling the bureaucracy, rather than be an apologist for it.
[Publisher's Note: See the video clip referenced by Senator Haynes above, from Casablanca, here.]