Assembly Speaker Fabian Nunez is already trying to use the massive financial shortfall of revenues against budgeted expenditures to make the case for why we have to look at tax increases. His Deputy Chief of Staff, Steve Maviglio, reposted on his blog an article that talks about how taxes need to be increased, and targets the 1978 passage of Proposition 13, lamenting the protection it afforded to homeowners.
One of the more credible voices in Sacramento on state finance is Assemblyman Roger Niello. As the lead Republican on budget issues, he lays out the case for why we do, indeed, have an over-spending problem in California State Government…
Revenues Are Not The Problem
By Assemblyman Roger Niello
The cries for tax increases have already begun. A week ago Sunday, the Sacramento Bee editorial section gave us this latest quip: “Given the [state budget] uncertainties, Californians should brace for severe cuts in public services. But they should also demand that the pain be distributed equally. That will mean higher taxes, user fees and elimination of tax credits benefiting certain industries.”
Other than the fact that it has been consistently demonstrated that new taxes will never bring in the revenues that are projected because taxes do indeed alter behavior, the real issue is not that California suffers from a lack of revenues, it’s that it suffers from overspending. This fact couldn’t be made clearer in the recent Fiscal Outlook presentation by Legislative Analyst Elizabeth Hill.
It’s true that revenues are falling short of predictions. Due to the housing market and other factors, the state is not collecting the revenue that it was forecast to last May when the budget’s economic and revenue forecasts were put together. But this fact doesn’t tell the whole story. While revenue projections are down this year, the fact remains that the state’s year over year revenue growth remains positive. Under the revised projections, California is expected to bring in nearly $99 billion in 2007-08, a 3.5% increase in total revenue over the $95.5 billion that we took in during 2006-07. 10 years ago, revenues to the state were $55 billion; a little more than half our current levels. Clearly, revenues are not the problem.
It only takes a quick look at the other side of the ledger to see the actual problem. California continues to enjoy positive revenue growth; however, those revenues are quickly swallowed up by spending. According to the LAO, “…General Fund expenditures will grow from $104.2 billion in 2007-08 to $111.4 billion in 2008-09, an increase of 7 percent, far outpacing any revenue gains we make during this same period.
And while revenue growth over the next five years pencils out at 5.6%, many state budget programs continue to grow beyond this level. For example, during this same five-year period, in home support services (IHSS) grows at a rate of 7.2%, funding for developmental disabilities grows at an 8.9% clip, and our debt service on the infrastructure bonds grows at a whopping rate of 12.2%. And let us not forget that almost half of all revenues automatically go toward education, regardless of the quality of outcomes.
We cannot continue to sustain these levels of spending growth. Spending has to be brought in-line with revenues – not the other way around. In fact, work must begin immediately to address this year’s projected $1.9 billion shortfall. My Assembly Republican colleagues and I stand ready to begin this work and in the meantime will not support a budget that does not address our long term spending addiction.
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