California budget “surplus”? …Nope, not so much.
posted at 8:11 pm on April 14, 2014 by Erika Johnsen
As I mentioned last week, it looks like California Gov. Jerry Brown isn’t going to have to put up too much of a fight to secure his fourth term in the state’s executive office — but one of the biggest signs of the success of his governorship to which he’s constantly pointing for his campaign is a basically fake budget “surplus” of a few billion dollars and an ostensibly “balanced budget” that he supposedly engineered. As David Crane at Bloomberg aptly notes, the state’s progressive Democratic coalition is less about responsible governance than it is about some tricky accounting methods that are in no way an honest portrayal of the state’s tremendously problematic long-term fiscal and economic outlook:
Similarly, Brown is using cash-based budgeting to underreport the cost of an employee benefit — retiree health care — by $3 billion. The governor could have chosen to report the expense at its full size, but to do that under cash-based budgeting, he would have had to actually contribute $3 billion in cash to a retiree health-care trust fund.
That’s exactly what governors are supposed to do. Retiree health-care expenses, like pensions, are supposed to be pre-funded in order to protect future generations from having to pick up an earlier generation’s costs. But Brown chose not to do so, making his budget look rosier than it is. This shortchanges future generations, which will have less money for their own services because they will have to pay off the skipped costs.
Businesses aren’t permitted to use cash-based budgeting. Instead, they must accrue expenses whether paid or not. During Brown’s current term in office, his budgets will ignore more than $12 billion in retiree health-care costs. …
Brown’s budget this year also ignores more than $3 billion in required contributions to the state teacher pension fund. It’s the largest “skipped” pension contribution in the country and continues a pattern that has led the fund to build up an $80 billion deficit accruing zero-coupon interest at 7.5 percent a year.
As Crane notes, spending on state services like welfare, universities, and parks is down by more than 20 percent from 2007, while spending on liabilities like employee salaries, pensions, retiree health care, debt service, and Medicaid is up by 20 percent, and the state is in reality nowhere near to a “balanced budget” — despite the simultaneous increase in revenue Brown has actually engineered with the voter-approved Proposition 30 tax increase in 2012.
And speaking of those recently heightened taxes those oh-so-egalitarian Californians are now paying, J.D. Tucille at Reason points out a poll from last month reporting that most Californians think they’re paying too much in taxes — but they’re generally still in favor of soaking the rich still more. How glorious.
The results come in a wide-ranging poll (PDF) conducted last month by the Public Policy Institute of California. Asked, “Overall, how fair do you think our present state and local tax system is—would you say it is very fair, moderately fair, not too fair, or not at all fair?” 3 percent said “very fair” and 47 percent answered “moderately fair.” The results were consistent across income groups, with 53 percent of those making over $80,000 agreeing with the 49 percent of Californians earning under $40,000 that the tax system is just swell.
Of those polled, 51 percent also said corporations should pay higher taxes and 63 percent called for raising the top income tax rate on the state’s wealthiest residents.
But if Californians agree that the other guy should get it in the neck, they’re all ready for a little mercy on their own behalf. Fifty-six percent of those making less than $40,000 say they’re paying more than they should, 59 percent of those making between $40,000 and $80,000 agree, and 64 percent of those earning over $80,000 chime in with a “ditto.”