Highlights and Analysis of the Governor's 2014 15 Budget

by Senate Republican Fiscal Office
Friday, January 17, 2014

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Executive Summary

State Spending Achieves New Record High.  The 2014-15 Governor’s Budget continues to hit new record spending levels with both total state spending ($240 billion) and General Fund spending ($106.8 billion).  General Fund spending is $10.5 billion higher than the current budget act level, but despite the massive spending increase proposed by the Governor, legislative Democrats and their special interest allies have indicated a desire to spend several billion more than the Governor.  Those additional spending demands will impair our ability to pay off the state’s immense debt and unfunded liabilities, and will put the burden on future generations of Californians.  Our children deserve better.

Governor Embraces Republican Values – Let’s Hope He Means It.  The good news is that the Governor has generally adopted many of the same core values that Republicans have been advocating for years - spending restraint, paying off state debts, and building a prudent budget reserve.  It is also important to note that local schools will benefit from the state's new revenues since the budget provides an increase of more than $6 billion to K-14 education for 2014-15, assuming legislative Democrats keep the promises made to the voters when they campaigned for Proposition 30 and do not divert these taxes from schools to other purposes.

Budgets Are About Priorities.  Republicans were early and strong supporters of the Governor’s new local control funding formula based on its focus on increased local control and flexibility.   Maintaining this flexibility and keeping the promise to fully fund education programs continue to be top priorities, along with providing adequate funding to local governments to manage more than 100,000 criminals that the state made their responsibility under the 2011 state-local realignment.  Republicans remain concerned that the Governor hasn’t done enough to protect our neighborhoods from increasing crime.

State Debts and Liabilities Keep Growing.  The Governor should be commended for focusing on the massive $355 billion wall of state debt and liabilities.  This budget proposes to pay off $11 billion, which is a very good start. However, we must fund pension and health care commitments for teachers and other retirees. Money also must be set aside to repair and rebuild California’s aging roads, schools, parks, court buildings, and local jails.  There is no “budget surplus” for new state spending while these unfunded liabilities exist. 

No Such Thing as Temporary Taxes.  Both the Legislative Analyst’s Office and the Department of Finance have indicated that there will likely be large “operating surpluses” for the foreseeable future.  However, both fiscal agencies have also warned that there are many budgetary threats and that another economic recession is a serious concern.  Nonetheless, it has become clear that the Proposition 30 (2012) tax increases were not necessary to protect K-14 education programs, so the Governor has shifted his stance by focusing on long term debt as a continuing justification for the taxes.  At the same time, some leading Democrats, such as the Superintendent of Public Instruction, are already calling for those tax increases to continue beyond their expiration in 2018 to sustain new state program spending, support public employee salary and benefit increases, and fund state retiree pension liabilities.  It is important that the Governor keep his promise that the Proposition 30 tax increases truly will be temporary.

Will The Real Rainy Day Fund Please Stand Up.  In yet another acknowledgment of Republican influence, the Governor has outlined his concept for a new constitutional “rainy day fund” to put away money to alleviate the inevitable future economic downturn (see Governor’s Rainy Day Reserve on Page 7).  However a better and stronger rainy day fund already exists: ACA 4 was approved by both parties in 2010 and scheduled for the 2012 ballot, but legislative Democrats moved it to the 2014 ballot to delay a vote of the people.  Now, Democrats want to change it because they fear it will work. This new reserve proposal is less effective than the original.  The Governor and legislative Democrats should honor the agreement to let the people of California vote on ACA 4 – it’s simply the right thing to do.

The Real Challenge.  The Governor’s greatest challenge will be managing the spending desires of his fellow Democrats in the Capitol.  Since the Democrats are clearly the ruling party, controlling every statewide elected office and both legislative houses with a supermajority, Republicans cannot stop them from repeating the mistakes of the past.  However, Republicans will continue to hold them publicly accountable for their actions and maintain a focus on protecting Californians from future budget crises.  We will ensure that state programs are operated with integrity and efficiency, and we will maintain pressure to improve California’s economy so that all Californians have the job opportunities they want as opposed to the ruling party’s plan to simply channel them into a government program that doesn’t truly help.

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