The Schwarzenegger budget

An expert isn’t impressed.

My colleague Dan Mitchell, who has been paying expert attention to the California budgetary and policy scene for two decades from his perch at the Anderson School, is even less enthusiastic than Mike O’Hare about the Gubernator’s latest proposals:

Preliminary remarks on the governor’s proposed budget for 2006-07.

Dan Mitchell

*The proposed budget is still running a deficit (revenues < expenditures).

*The nominal deficit is over $6 billion but this includes repaying some earlier debt.

*Dropping the debt repayment out of the expenditures cuts the deficit to $4.7 billion (more than last year’s deficit). It is likely that the Legislature, seeing debt repayment int he proposal, will spend more and repay less. So unless there is a new blast of unanticipated revenue, the deficit is likely to be higher than $4.7 billion.

*If the debt repayment is in fact made as proposed, state “reserves” drop from $6.5 billion to about $1 billion – which isn’t a big cushion for a general fund whose expenditures are approaching $100 billion. Note that the only reason the state has “reserves” is that it borrowed the money under Props 57 and 58.

*UC gets about $3 billion from the general fund under the proposal (which is less than it got at the peak before the state got into its budget crisis). Of this, $75 billion is to “backfill” (compensate) UC for a proposed tuition freeze (which appears to cover not only undergrads but also grads and professional degrees). Freezing tuition now means at some point in the future (maybe the year after the election), bigger tuition increases will be needed. If granted then, there will be squawks and resistance. If not granted, the University will be further damaged.

*A footnote on page 105 of the budget summary indicates that while UC was supposed to have enrollment of 205,976 in 2005-06, it actually had 201,621. Look for problems about this matter, particularly from the Leg Analyst. (The 201,621 figure is below what it was two years earlier.)

*Prior to being a candidate for governor, the governor sponsored Prop 49 earmarking certain monies by formula for afterschool activities in K-12. Prop 49 now cuts in under the formula. Excluding its expenditure, K-12 will get about a 10% increase in funding from the general fund. Some of this is repayment of past underfunding under Prop 98. Although the school establishment has been making nice remarks lately, there may be pressure to raise the amount of repayment.

*There has been much in the media about the governor’s infrastructure proposals. Note that the general fund has only a minor role in infrastructure. However, it has been draining monies out of infrastructure in recent years by borrowing from transportation funds. However, the really big bucks that have been talked about will come from other sources.

Editorial comment: Oddly, raising the gasoline tax is off the table apparently. I say “oddly” because raising the gasoline tax and earmarking it for roads and freeways is what created the Calif. freeway system, thanks to Gov. Earl Warren in 1947. The US as a whole then took the Calif. model and did the same thing in 1956 to create the interstate highway system. There is much to commend the gas tax. It is a user fee that tends to be more costly to drivers of big heavy gas guzzlers (which wear roads more) and to those who drive at peak congested hours (thereby experiencing lower gas mileage and contributing to the congestion). It generally pushes toward conservation. You can stick a toll road here or there but given the current setup, a serious infrastructure proposal should include an earmarked gas tax increase.

Footnote I’m told that the budget includes funding for not one but two new prisons, in a state that already keeps 166,000 people behind bars but doesn’t bother to pursue people who abscond from probation. No doubt the California Correctional Peace Officers Association — the corrupt union of the overpaid and brutal prison guards, affectionately known as “dementors” — will be pleased. Potential crime victims shouldn’t be.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: