Choice, actions and consequences

By Senator TOM McCLINTOCK

Have you ever had to make serious cuts — 15 percent or more — in your family budget because of an unexpected job-loss or unforeseen expense? It’s not pleasant, but it’s not impossible.

And it’s also not permanent. As long as you’re willing to face your financial problems squarely, you can be sure the hard times won’t last forever and things will improve.

But if you’re not willing to face those problems — if you paper over your debt by borrowing and continue to spend as if that debt didn’t exist — those hard times will follow you far into the future.

State government is no different. And as the new Schwarzenegger administration decides which road it will take, it is important to understand the simple math of the state’s finances.

California’s current budget deficit is caused by two actions then-Gov. Gray Davis took last year to paper over his mismanagement: he illegally tripled the car tax and he attempted to borrow $12.6 billion unconstitutionally.

Gov. Arnold Schwarzenegger rescinded the illegal tax increase on his first day in office. It’s important to note the word “illegal.” Not one of the conditions required to raise the car tax had been met, and it was only a matter of time before the courts ordered the money to be returned to taxpayers with interest. By acting now, he saved California from having a multibillion-dollar hole blown in a future budget by court order. But repairing this problem requires that local governments be reimbursed for their losses.

In addition, the courts have already invalidated $1.9 billion of Davis’ borrowing plan, further deepening the deficit.

According to the Legislative Analyst’s Office, these developments mean the state will end up spending $76.9 billion this year, with only $74.2 billion in revenue.

It gets worse. The courts are also poised to strike down the additional wing in Davis’ last budget. It is not a pleasant financial situation. But it is also not impossible. If the current rate of state spending were reduced 13.4 percent on Jan. 1 and frozen through Schwarzenegger’s first budget, the state would be back in the black, free and clear of external debt, and able to start his second year in 2005 with a clean slate.

A 13.4 percent reduction would mean cutting $5.2 billion from this year’s budget before Jan. 1 and setting next year’s budget at $66.6 billion.

That’s a big cut — and it means giving up billions of dollars of programmed spending increases next year. But it’s still 15.2 percent more than California was spending when Davis took office. And after 18 months of austerity, Schwarzenegger would be able to plan his second budget with $12 billion of breathing room in 2005 when revenues are projected to reach $78.6 billion.

Like a family that has faced its finances squarely and tightened its belt, California would be solidly back on its feet and looking toward a sunny future.

The alternative is to borrow the difference at heavy rates of interest over the next generation. Like a family that can’t bear to change its ways, it would end up dragging its financial difficulties into future years as it struggles to meet its current expenses and pay down a crushing credit card debt, as well.

These are the two roads diverging in the budget woods and the choice that is made in the coming weeks may well determine whether California has the fresh financial start it deserves, or whether the ghost of Davis’ excesses stalks a generation to come.

State Sen. Tom McClintock represents Santa Barbara County. He can be contacted through www.sen.ca.gov/mcclintock.