Limiting California’s Future

January 21, 2009
Republican lawmakers have called for the Legislature to place a “hard spending cap” on the ballot in return for Republican support of a tax increase to help close the state’s budget gap. First, it is important to note that California already has a hard cap in the state’s constitution. In fact, we’ve had one since 1979. Proponents of a harder cap would return the state’s spending limit to its pre-1990 version, a limit based on the annual change in population and inflation. In contrast, the current cap is based on the change in per capita personal income, which is designed to limit public spending as a share of the state’s economy.

 In order to assess what a hard cap would mean for the budget, the CBP modeled the impact of the cap described in ACA 19 (Villines) of 2008 if it had been enacted beginning with the 1995-96 budget.

Limiting California's Future

Our analyses found that such a cap would have limited total state spending in 2008-09 to $39.7 billion below budgeted levels. The General Fund’s share of the necessary reductions would be $31.2 billion. What would it take to cut $31.2 billion out of the General Fund budget? Eliminating all General Fund support for higher education; the judiciary; child support services; health care services; resources – including fire protection; and environmental protection. Maybe that’s why the campaign to modify California’s original cap was led by then-Governor George Deukmejian, then California Chamber of Commerce president Kirk West, and then-California Taxpayers Association president Larry McCarthy.

– Jean Ross

4 Comments | Ballot Propositions, State Budget | Permalink
Posted by cbporg

Listen In When the CBP Weighs In

January 14, 2009

At 10 a.m. tomorrow, Governor Arnold Schwarzenegger will present his vision for the state’s future in his 2009 State of the State Address. CBP Executive Director Jean Ross will be among a panel of guests commenting live on the Governor’s speech on Capital Public Radio. You can listen to the speech and analysis here from 10 a.m. to 11 a.m. Thursday. Audio and text of the Governor’s speech will also be available here.

 – Lisa Gardiner

Comments Off | Uncategorized | Permalink
Posted by cbporg

A Good Place To Start Balancing the Budget

January 13, 2009

A new report published by the prestigious National Bureau of Economic Research (the folks who get to decide what is and is not a recession), Do Enterprise Zones Create Jobs? Evidence from California’s Enterprise Zone Program, by Public Policy Institute of California researchers David Neumark and Jed Kolko concludes that California’s enterprise zone program doesn’t increase employment and actually leads to a reduction in the number of businesses located within zones. Neumark and Kolko find that, “Our analysis of California’s enterprise zone program fails to find that the program has increased job growth…At the same time, we find some evidence that enterprise zones reduce the number of establishments, which coupled with lack of an employment effect implies that establishments are growing in size.” The study uses new data sources and a long time period (1992 to 2004) that spans ups and downs in the economy. Based on their analysis, the researchers conclude, “that the safest conclusion is that California’s enterprise zone program is ineffective.”

We came to a similar conclusion in our 2006 report California’s Enterprise Zones Miss the Mark, and last year, the Legislative Analyst’s Office recommended phasing out enterprise zone incentives. With California facing a $40 billion plus budget shortfall, one might reasonably ask why neither the Governor’s proposed budget nor the Democratic leadership of the legislature’s alternatives for balancing the budget take on a program that cost the state $361 million in 2007 (the most recent year for which data are available) and that is not only ineffective, but appears to have the unintended consequence of reducing the number of businesses actually located within zones.

Addressing California’s massive budget shortfall will take tough choices. Eliminating ineffective tax breaks is a good place to start.

 - Jean Ross

2 Comments | State Budget, State Taxes | Tagged: | Permalink
Posted by cbporg

The CBP’s Blog is Born!

January 12, 2009

We’re joining the ranks of the bloggers! Our new blog, California Budget Bites, a name shamelessly stolen from our colleagues at the Minnesota Budget Project, is our attempt to get you the information you want and need on a timely basis. We plan to use our blog to disseminate the latest news on critical budget and policy debates, share data and resources that we find particularly interesting, and comment on current events as they happen.

California Budget Bites also responds to the accelerating pace of budget developments and economic news, as well as the 24-hour news cycle. We remain committed to getting the facts right, but we also understand that it doesn’t matter how right your information is if it isn’t timely.

We would greatly appreciate your feedback as we start our new endeavor. What would you like more of? And what would you like a little less of? Is this a valuable addition to our work? Send us an email or post a comment. Thanks!

– Jean Ross

5 Comments | About Our Blog | Permalink
Posted by cbporg

Next Entries »
Follow

Get every new post delivered to your Inbox.