Little Pain, Real Gains

The Republican budget plan proposed on Thursday in the California Assembly wouldn’t fix the fundamental problems with the state’s budget or make long-term reforms to right this long-mismanaged state. But the plan, which Assembly Republican leader Connie Conway called “a no-tax budget blueprint,” does give the lie to Democrats’ insistence that the budget can’t be balanced without massive tax hikes. Further, it avoids borrowing gimmicks and revenue-swap schemes—typical of past budget “solutions”—and little in it would appear particularly painful, given the depth of the budget hole that has been at issue since Governor Jerry Brown’s election in November. Of course, it’s wholly unrealistic to believe that the Democratic majority will take up the minority’s plan. Instead, this was an unusually savvy political move from a Republican Party teetering on irrelevance. If legislators are serious about closing the state’s budget gap, the GOP plan shows them any number of ways to find the money without imposing higher taxes on a state that already carries one of the highest tax burdens in the country.

Conway’s letter to Assembly Speaker John Pérez, a Los Angeles Democrat, made the right point about taxes: “As a matter of principle, we believe that raising taxes on struggling families and employers is the worst thing we could do right now, for our economic and budget recovery and for our efforts to jumpstart the economy and bring back private-sector jobs.” But Conway also threw a bone to the Democrats and to the teachers’ unions—which have been running around the Capitol for the past week, holding sit-ins and protests—by acceding to their demands that there be no cuts to the state’s expensive public-education system. Nor does the Republican plan reduce spending on law enforcement.

So far, the legislature and the governor have already approved about $11.2 billion in cuts and funding shifts. How would the Republican plan close the remaining $15.4 billion gap? Partly by building on reductions that Brown has already discussed; indeed, the plan embraces an additional $3.2 billion in cuts that the Democratic governor has already made but that his legislative allies have yet to approve. It also takes advantage of the $5 billion in increased revenue projections estimated recently by the state, which is certainly helpful for any budget plan.

But much more encouraging is that the Republican plan suggests how simple reforms can save serious dollars. Take the provision of medical care for prison inmates. According to the Assembly GOP’s budget white paper, “The cost of providing health care to state prisoners has been the fastest growing part of the corrections budget. After the [federal] receiver took control of the system in 2006, medical costs skyrocketed. They reached $2.5 billion a year, including mental health care. The cost of health care for each inmate per year in California is approximately $11,600, while prison healthcare costs $5,757 in New York; $4,720 in Florida; $4,418 in Pennsylvania; and $2,920 in Texas. While costs have increased dramatically, it has not improved the quality of care enough to take the system out of federal court receivership.” Under the Republican plan, the state would contract out the correctional health-care system, saving $400 million. But that would mean taking on the powerful California Correctional Peace Officers Association, the prison-guard union that just won an absurdly generous contract from the governor.

Other budget cuts in the Republican blueprint include $3.7 billion from programs related to early childhood, mental health, the poor, and the elderly, as well as $1.1 billion from the state payroll. The plan also includes $2.8 billion in other savings from a bill that has already passed the Assembly but hasn’t become law. It doesn’t go far enough toward addressing the size and scope of California’s government, since the state faces even bigger fiscal problems down the road. But Republicans have made their point: California can fix at least its short-term budget problem if Democrats truly want to.

The majority party, however, seems convinced that the government is too small, taxes are too low, and union members don’t have enough protections. Those who argue that the Democrats are using this troubling budget situation as an excuse to grab more taxpayer cash have additional evidence on their side. And those of us who wonder at times about the direction of the state GOP, which often seems out of its element and lost in irrelevant issues, can feel slightly more confident that the party has a better strategy for challenging the state’s Democratic majority.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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