California

California Lawmakers Spend More, Avoid Reform

The latest budget has new spending but no attempts at serious reform.

|

Legislators in California announced a budget deal last week that spends a record $125 billion in the general fund. But most interesting isn't what's in the deal, but what isn't.

There's plenty of new spending, of course, but not so much that it outpaces the rate of inflation. There are controversial "trailer" bills that attempt to change the rules in an ongoing recall election and take away power from elected members of the Board of Equalization, the state's tax board. Missing are any attempts at serious reform of existing government programs or ways to stretch the already hefty tax dollars Californians send to Sacramento.

The budget's authors talk quite a lot about funding important priorities, especially the public-education programs that consume an awe-inspiring 43 percent of the general fund. Yet Gov. Jerry Brown (D) and the Democrat-dominated Legislature refuse to confront the main reason such programs typically are so costly and ineffective: public-sector unions.

These unions are so powerful that they stifle cost-saving reforms in every conceivable area of government – from the prison system to policing to transportation programs to the public school and college systems. Union work rules don't allow for experimentation and creativity, or even the firing of poorly performing employees. The state is thus left with just one approach: throwing more money at the problem.

This is why every year's budget kerfuffle centers on figuring out ways to come up with more money to spend in the exact same ways. The only difference this year is, because of Democratic supermajorities in both houses of the Legislature, the state now plans to spend more than ever. What else would you expect, given that the minority party has no power to thwart such efforts?

The investigative news site CALmatters provides perhaps the best example of the disconnect between higher spending and better outcomes, noting in a June 18 report that there's no evidence the tens of billions of dollars the state has pumped into failing schools under its new public education system have done much of anything to help the most disadvantaged students. The investigation found "the biggest districts with the greatest clusters of needy children found limited success with the policy's goal: to close the achievement gap between these students and their more privileged peers. Instead, test scores in most of those districts show the gap is growing."

The same is true for myriad programs, but as the single largest chunk of the budget, any failures in the K-14 education system certainly have the deepest financial ramifications. As I reported recently for the California Policy Center, while voters in the Los Angeles Unified School District and elsewhere are supporting candidates who back expanded access to charter schools for poor children, state legislators are backing legislation pushed by the California Teachers' Association that would make it much harder for locals to start such schools.

Charters operate with less funding than comparable school districts, yet often (but not always, of course) show remarkable progress in closing the achievement gaps that aren't being closed by truckloads of new state spending. Think of it this way: If a system is failing, there's little chance that giving the same agencies more money to do things in the same way will yield significantly different results. It's obvious, but not to legislators or Gov. Brown.

The budget deal also includes a provision that lets the state borrow $6 billion from a short-term investment fund to pay down some of California's growing pension debt. It's another example of the state's money-dumping approach to a massive financial problem. Instead of taking aim at overly generous pension formulas, or myriad pension-spiking and disability abuses, the state is borrowing money at low interest rates from one account and putting the money into another account (that is supposed to earn higher rates) to chisel away at some pension debt.

Some would compare this to a homeowner borrowing money from a low-interest home-equity account to pay off a higher-interest credit card. But there's a disturbing downside to the governor's approach here – namely that it shifts more of the costs and risks from public employees to the state's taxpayers. The plan lets the California Public Employees' Retirement System (CalPERS) keep its investment predictions artificially high, as the higher the predicted rate of return, the lower the predicted liability. The result—as observed recently by David Crane, a Stanford University lecturer who had served as Gov. Arnold Schwarzenegger's pension adviser—is that "using special fund cash to finance pension contributions would reward CalPERS's board for keeping normal-cost contributions—the only pension costs shared by employees—unreasonably low."

The budget plan also increases spending on Medi-Cal, expands benefits that poor people receive under the state Earned Income Tax Credit, expands funding for the two university systems (although it punishes the University of California Office of the President, following the recent scathing audit about its spending practices from the state auditor), appropriates new funding for water projects and includes a long list of expanded spending for myriad programs.

Gov. Brown said the budget is "balanced and progressive," but columnist Dan Walters gets to the heart of the problem: "The budget does little or nothing to whittle down that burden on future generations of taxpayers."

Again, it's not what the budget does, but what it doesn't do. It doesn't deal with debt, or even try to reform the education system. It doesn't try to reform any existing programs. How could it? That would mean first published by the California Policy Center.

NEXT: What If Donald Trump Doesn't Sink the Republican Party?

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. “Some would compare this to a homeowner borrowing money from a low-interest home-equity account to pay off a higher-interest credit card.”
    At least in that example you have to have some equity in an item of collateral (house) to get that loan.

    Taxifornia is using one credit card to pay off another credit card. The Bankruptcy Court system has seen lots of cases involving that stupid idea.

    1. The comparison is false as at least in the case of the home equity loan you have a fixed interest rate that is historically lower than the credit card’s rate. In Callie’s case, it is like betting on getting an inside straight. The cliche that comes to mind is that if you want to get out of a hole stop digging. Invariably using one form of debt to payoff another doesn’t work unless you change your behavior which we know is not happening in California.

      1. “invariably using one form of debt to payoff another doesn’t work unless you change your behavior ”

        Bingo!

    2. Well, recall that California passed their single-payer health bill as well. They are going to implode big time, it won’t be long now.

      1. Not quite:
        “The measure cleared the state Senate earlier this month and now awaits action in the Assembly. To make it to the governor’s desk, it would need significant changes ? namely to how to pay for it, since the bill does not currently identify taxes to cover its estimated $330-billion to $400-billion price tag.:
        http://www.latimes.com/politic…..story.html

        And for some background, this has been proposed every year for some time now.

        Also, there is some sense remaining in the state:
        “Why conservatives can cheer California’s single-payer health care bill”
        […]
        “If enacted, such a law would likely shake California worse than the San Andreas Fault and tip the state into the fiscal abyss. But bully for them for plodding ahead on their own.”
        http://www.sacbee.com/opinion/…..rylink=cpy
        The article reads there is tongue firmly planted in cheek.

        1. Yeah. Due to a strange quirk of history, which progressives would change if they could, California requires a balanced budget of sorts. It is not allowed to spend money it does not have. It can’t print money, it can’t spend bonds it hasn’t sold, etc. There are games it can play on the margins, but it can’t act like the feds and just spend spend spend.

          We’re in a recovery period, and California is currently riding a technology boom, but all it takes is a minor recession and we’re screwed. Or rather, all those public union members are screwed. You can’t get blood out of a turnip. We (Californians) were facing some dire consequences in the recent recession, and it was pure luck we got out of it without dozens of municipal bankruptcies and massive government layoffs. I don’t see how we can face the next recession without someone somewhere getting a haircut.

          1. FAIL! The taxpayers are the one’s that are screwed. Based on the court decisions known as the California rule, 1) CalPERS is a state agency and, 2) therefore the State is on the hook for the unfunded liability in the pension trusts and 3) the state has the power to tax so can raise the needed shortfall from the taxpayers.

            It’s really not very funny!

            I work in local government (we aren’t in CalPERS) and, I work with many, many other local and state government personnel. They all believe in the PERS magic and would fight to the death to keep their ill begotten gains.

            I’m not kidding!

    3. Well, recall that California passed their single-payer health bill as well. They are going to implode big time, it won’t be long now.

  2. Of course the politicians and the unions don’t want to improve the failing public education system. They don’t want educated voters who would kick them out of office. That accounts for the strong resistance to charter and magnet schools. NC NAACP President Rev William Barber vehemently opposes charter and magnet schools, blocking funding and new schools whenever possible. Study results show the Black students attending charter and magnet schools do much better than those who attend NC public schools.Yet Barber opposes the better education system because it keeps Black people malleable and voting Democrat.

    1. I think the simpler explanation is that the teachers’ unions use their considerable financial clout to support candidates who oppose any sort of privatization because they greatly prefer negotiating their contracts with the politicians that they bought rather than with a CEO tasked with managing a non-profit efficiently.

  3. And some juicy bits are really well hidden:

    “Legislature approves $125 billion budget with unusual provision”
    […]
    “The $125 billion state budget has an accompanying bill that calls for immediate changes to election laws that would affect a recall effort under way in Orange County against state Sen. Josh Newman, D-Fullerton. The budget bills now head to Gov. Jerry Brown for his signature.
    Newman won office last fall after a tight race against a Republican opponent, giving the Democrats supermajority control in both houses of the Legislature, which means they can pass taxes without GOP cooperation. But after he voted in April to help fellow Democrats pass gas taxes and vehicle fees to fund road repairs, a group of Republicans launched a recall process to oust him from office.”
    http://www.sfgate.com/politics…..224192.php

    Wouldn’t want voters to choose their representatives, would we?

    1. Recalls are undemocratic fascism invented by the koch brothers.

      1. Recalls have been a thing in California since the heady days of early progressivism.

        1. Progressives tend to be all about democracy, until it looks like the people don’t want progressives to be in charge.

      2. Someone should tell Gov. Walker that piece of news.

  4. “If a system is failing, there’s little chance that giving the same agencies more money to do things in the same way will yield significantly different results”

    It’s amazing how that concept NEVER occurs to proponents of bigger govt.

    1. Are we sure that California isn’t being deliberately obtuse? Perhaps they thought “The Mouse that Roared” sounded like a good plan.

      1. Finally, a lucid question. I had an assignment in Calif back when electricity prices were where the Dem platform thinks they should be today. The hotel sent people to check every room lest a guest might have forgotten to turn out the lights. This was supposed to be the result of some hedging operation that backfired on them but transferred cash to Texas. Chicken-entrails readers predicted the imminent collapse of California into anarchy and cannibalism… which hasn’t happened yet. It’s been 30 years or so. There is something the predictors are not figuring in, probably some aspect of the underground economy.


  5. The investigation found “the biggest districts with the greatest clusters of needy children found limited success with the policy’s goal: to close the achievement gap between these students and their more privileged peers. Instead, test scores in most of those districts show the gap is growing.”

    You can lead a horse to water, but you can not make it drink.

    Or, in this situation, you can make people who have zero desire to learn anything show up to the places of learning but you can’t force them to pay attention or care.

    Yet, for some reason, in these United States we pretend that you can force someone to become educated.

    This is such a central lie in public education that it’s no wonder the entire system routinely fails. Nor is it surprising that the teachers themselves pretend otherwise and always, always, ALWAYS demand more money. After all, they are the one’s who are forced to deal with these kids who have zero interest in learning day after day. They might as well get paid big bucks for teaching material no one is listening to, right? And on top of that, they should be insulated from being fired for bad performance because there is no chance at good performance.

    Winning?

  6. I had no idea that Heaven’s Gate guy was still around.

    1. +1 pair of white Nikes
      -2 balls

      1. Hah, those white nikes. +1 bunk beds.

  7. Yawn – California
    Secede already!!

    1. The progs are free to leave, but the real estate isn’t theirs.

  8. And this is why I take every possible opportunity to cheat on my state returns. Fuck you Moonbeam!

    And by cheat, I mean demonstrate creative deduction practices *wink wink*

    1. I applaud your efforts!

  9. Congress will need to be strong when California comes to them hat in hand. They dug their own hole, let them die in it.

    1. All those retired public employees who voted emocrar their whole lives can sell their homes dirt cheap. To speculators like me. They can use the money to scrape by, while living in the new high density single room favelas constructed for their kind.

  10. I found a great site that focuses on stay at home mom’s complete guide to gaining a serious amount of money in very little time. While being able to earn an passive income staying home with your kids. If you are someone who needs more money and has some spare time, this site is perfect for you. Take a look at…

    follow this link?..????????????

    Trump”s New Opprunuties See Here

Please to post comments

Comments are closed.