California’s budget crisis

It is no secret that California’s budget is an entity whose existence often gets called into question. Given the powerful political incentives to continually send money from the State’s coffers, through legislative session if possible and ballot initiative if necessary, it’s no exaggeration to say that trying to contain spending in California often looks similar to trying to contain water within a sieve. However, given this sieve-like situation, it appears that State comptroller John Chiang has done his level best to do to the state’s money precisely what one would do to water to keep it from leaking – namely, freezing it.

A recent article in the San Jose Mercury News reports that Mr. Chiang “issued a stern warning Friday about California’s cash reserves, telling legislative leaders and Gov. Arnold Schwarzenegger they must act on nearly $9 billion in budget cuts the governor is seeking by March — or the state will run out of cash to pay its bills.” So dire is the situation, according to Chiang, that the State may even have to hold off on giving out tax refunds just to keep itself from going bankrupt before April.

To those tired of California’s persistently profligate economy, the budget cuts proposed by Chiang may sound like manna from heaven. For everyone with even the slightest level of dependence on the State, they are sure to be painful. The BBC reports that “Spending on health, welfare, transport and the environment is to be reduced,” with the foreboding news that even Governor Schwarzenegger “acknowledged that the cuts would be painful, but said there was no conceivable way to avoid them.”

Moreover, so deep are the cuts that they are sure to offend interest group leaders both Left and Right, as the BBC adds that “Less money will be spent on prisons, health services, transport and environmental programmes, but education will not see cuts.” The talk of decreasing prison funding will almost certainly make pro-law enforcement activists furious, whereas decreasing funding for the environment and health services will likely infuriate more liberal figures with an interest in government activism. However, neither of these reactions fully grasps the larger policy problem in the cuts, which comes at the very end of the BBC’s analysis – education funding is left untouched.

In California especially, this provision is bewildering. As already documented on this site, education spending accounts for 40% of California’s budget. Moreover, tens of millions of currently existing education funding may be unnecessary, to the point where teachers’ unions have so much spare funding that they can afford to spend millions of it on political issues that appear unrelated to education (such as opposing Proposition 8). A slight dent in educational funding would not only make defunding many of the other institutions comparatively less necessary – it might negate the need for that defunding altogether, if pushed far enough. As such, one has to ask why the Governor is ignoring the elephant in the budget.

Several answers present themselves, some more charitable than others. The charitable excuse is that, given the state’s recent (and ongoing) dust-ups at public colleges and universities, any further attempts to cut the education budget would be political suicide, as well as potential fuel for social unrest, even if those cuts did not target colleges and universities specifically. Given that Schwarzenegger can hardly afford more costly law enforcement problems at a time when law enforcement is itself an unaffordable expenditure, to avoid antagonizing public education is a politically wise move.

However, a less charitable (and by no means mutually exclusive) alternative presents itself, which is that Schwarzenegger is simply too invested in his “respectable,” bipartisan national image to tackle California’s most influential left-leaning special interests. Given the impatience which the California GOP has been increasingly showing with their gubernatorial standard-bearer, this is the explanation which will probably be adopted by its incoming candidates once the “fiscal teeth” start getting pulled.  And there is much to recommend it, especially from the perspective of the conservatives who still feel betrayed by the governor. At the end of the day, however, this explanation, however emotionally satisfying, provides the standard-bearers of fiscal sanity, whether on the Left or the Right, with cold comfort, given that it offers no concrete plan by which to proceed. Mutual recriminations are by all accounts overdue, but for now, let’s focus on getting the budget back in the black.