The Deficit Prevention Act: A Common Sense Solution for California

We have all heard the fictitious story about the person who says, “I can’t be overdrawn… I still have checks left.” While the concept is absurd, it is exactly the manner in which California’s finances have been run for many years. This spending without regard to money in the bank was the underlying cause of the recall of Governor Gray Davis. It is now time to fix the problem, and fix it permanently.

State Senator John Campbell (R-Orange County), the Howard Jarvis Taxpayers Association, ant the California Taxpayers Association have all joined forces to put a new measure before the voters that will forever change the way government is financed.

Called the “Deficit Prevention Act,” the measure that will soon be circulated for signatures, will set a limit on how much the state government can grow in any one year. Had this measure been in effect in 1998, California would not have had a single budget deficit, and the State’s spending would be roughly where it is today.

The key component of the Deficit Prevention Act is that it will control the growth in state spending. State government spending will not be allowed to increase any faster than the growth in population and inflation. Currently, that would allow approximately a 5% state spending increase on a year-to-year basis. Our state should have no problem functioning if it is allowed to increase its spending by up to 5% each year.

In addition to placing a limit on the growth of state spending, the measure also creates a substantial “Rainy Day” fund in case we are faced with a future budget deficit. The idea is actually quite simple—in good years, when more money comes into the treasury than the state is permitted to spend, we save that money in a bank account, so that when the government experiences a year when it doesn’t have enough revenue to support existing programs, we aren’t faced with program cuts or tax increases.

The Deficit Prevention Act also dedicates a fixed percentage of any future budget surpluses (like those we experienced during the technology boom that prompted so much of our additional permanent spending) to infrastructure development—roads and schools, to be specific. By investing surplus funds in one-time expenditures that help improve our infrastructure, we can help improve the state’s business climate and bring more high paying jobs to the state.

As a newly elected member of the State Assembly, I haven’t yet figured out why it is such a revolutionary idea that we control the growth of state spending and put money aside for a rainy day. To me, this is just common sense. The Deficit Prevention Act is simply bringing the fundamentals of personal finance (don’t spend more than you make, and keep money in your savings account in the event of an emergency) to the treasury of California.

Common sense is something that is needed in Sacramento, and the Deficit Prevention Act is a very good step towards fixing our financial mess in California.