Logic and Evidence is Not a Reason for CA Legislature to Curb Deficit Spending

Governor Jerry Brown put just about everything he could in the May Revise, except for the “kitchen sink,” to try to convince the Democrat-controlled Legislature to “hold the line” on new deficit spending.

The Governor cited economic risks as the most important reason to spend less and build up the state’s reserves. As illustrated by the chart above, the state is projected to experience significant deficits in the immediate years to come.

But the unfortunate reality in today’s politics is that the Democrat leadership and rank-and-file does not respond to evidence, logic and facts. The facts just get in the way of their desire to spend as much as possible, without regard for cost to taxpayers and future liabilities for the state.

20160516-UW-KerstenSource:  California Governor’s revised current fiscal year budget.

Former State Senator Gil Cedillo (D) used to give a speech in which he made total state spending seem minuscule compared to the economy, and even suggested that the state could simply double its total spending without much trouble in terms of tax or economic burden. I believe that many, if not most California Democrat elected officials, still believe in this line of thinking.

This type of thinking on the Democratic side of the aisle is pure fantasy and not grounded in any type of evidence or sound logical reasoning. Doubling spending will double the tax burden on Californians, something that the vast majority of the electorate is opposed to and exacerbate an already hugely inefficient, ineffective, and unaccountable government.

California Democrat elected officials have a long history of spending as much as possible, even if it means big deficits, and financial catastrophe for the state. This is what happened in the late 1990s and early 2000s, and it is exactly what happened since 2012, according to Governor Brown’s May Revise.

The passage of $7 billion in annual Prop. 30 “temporary tax increases” in 2012, where indeed supposed to be temporary. But the Democrat Legislature and its base has already apparently forgot that, and committed nearly all of that money to ongoing programs.

The Governor says that California has dramatically expanded the welfare state since 2012, particularly health care. Prop. 98 spending has also increased dramatically since 2013-14, according to the Governor. The chart below shows that Prop. 98 education spending has increased dramatically since 2013-14–by more than 22%.

“California has an extensive safety net for the state’s neediest residents who live in poverty, and the state maintained these core benefits despite the recession. Compared to other state, California provides broader health care coverage to a greater percentage of the population including in-home care,” wrote the Administration in the May Revise.

Gov. Brown stated that since 2012 the state’s General Fund has incurred new obligations in the effort to counteract the effects of poverty totaling more than $19 billion (these costs are summarized in the table below).

Both the Governor and the Legislative Analyst’s Office (LAO) note that there has been significant spending increases and increases in the “cost of government” due to Legislative actions taken since January 2016.

The passage of the minimum wage will raise State General Fund cost by an estimated $3.4 billion annually in future years.

The recent collective bargaining contracts entered into by the state with a portion of its bargaining units will also dramatically increase state costs. The LAO notes that the Correctional Peach Officers’ Association (CCPOA) contract alone will increase ongoing state costs by more than $500 million annually.

CCPOA is only one of the state’s 21 bargaining units, and another 17 are currently in negotiation. The results of those negotiations will inevitably be the same–a significant increase in the cost of government to the tune of billions of dollars annually.

The Governor’s May Revise and the LAO also note that Obamacare and the state’s decision to expand health care benefits will result in massive cost increases.

Medi-Cal caseload growth will increase from 8 million in 2012-13 to a projected 14.1 million in 2016-17, covering over 1/3 of the state’s population. This expansion is projected to cost the state $16.2 billion, and federal cost sharing will decline over time, leaving California taxpayers with a bigger and bigger Medi-Cal bill.

The State Legislature implemented a tax on Medi-Cal managed care plans and commercial plans which is expected to raise more than $1.7 billion in 2017-18. But this Medi-Cal bill is likely to continue to grow beyond budgeted expectations, and is a target for further expansion by the Democratic Legislature, even though the baseline costs are already huge and increasing.

But you rarely hear any Democrats say wow, we have done a lot to expand the welfare state and broaden health coverage, maybe it is time to focus on programs other than expanding the welfare state, such as infrastructure, roads, water storage, transportation, or at least make existing programs more efficient.

The unfortunate truth is that more spending is never enough for this Democrat Legislature–they believe that state spending, and corresponding taxes should be much higher, exponentially higher, than they currently are, so no amount of new spending will apparently ever be enough to satiate the Democratic Legislative majority. It’s always more, more, more….which means….tax, tax, tax.

The list of reasons why fiscal responsibility is the most reasonable course of action goes on and on–but it’s almost as if nobody listens on the Democrat side of the aisle other than to find out a way to best spin the “need” for more spending.

The Democrat Legislature as proven time and time again that they are not going to let the facts and evidence get in the way of their desire to spend more taxpayer dollars, even if that spending means deficit financing—piling the state’s debt higher and higher into the future.

Surprisingly, Democrat leaders held off repeating their calls for new spending in their immediate response to the Governor’s Revise–choosing to make innocuous statements like we look forward to the debate and negotiation with the Governor.

But the left-wing propaganda machine is already churning with “evidence” that deficit spending is indeed needed.

Chis Hoene, executive director of the labor-backed California Budget Project says “there is more room for progress in this year’s budget” and encourages further “investment” and expansion of the welfare state in a whole host of new costly ways.

It is likely that as we speak, Democrat Leaders and the spending lobby are coming up with ways to spin their desire for more spending, dramatically in excess of the Governor’s “hold the line” level of baseline spending.

That’s all fine. But any new spending needs to be zero sum. If they want to spend more in one area, they should take away from another area because this budget is already maxed out at about $122 billion in General Fund spending, the same amount called for in January, despite declining revenues and a worsening economy.

Let’s not voluntarily chose to further drive the State of California into the ground beyond the huge hole that we are already in, considering the state’s $400 billion plus in mounting debt.

California Republican lawmakers get this issue and the need for fiscal prudence.

But the California Democrat majority is not able to make fiscally responsible decisions based on logical facts and evidence. They only know one course of action to any budget issue–spend.

The reasons for this spending phenomenon are enough for another discussion but relate to the nature of the Democratic base, electoral districts, and electoral incentives, among other considerations.

About the Author: David Kersten is an expert in public policy research and analysis, particularly budget, tax, labor, and fiscal issues. He currently serves as the president of the Kersten Institute for Governance and Public Policy – a moderate non-partisan policy think tank and public policy consulting organization. The institute specializes in providing knowledge, evidence, and training to public agencies, elected officials, policy advocates, organization, and citizens who desire to enact public policy change.

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