Our state budget saga continues this morning, with legislators locked into the Assembly and Senate chambers for votes. While this budget deal may still pass, it doesn't seem like we're actually going to achieve the fundamental reforms that California needs to be competitive, to create jobs, and to build an economic recovery.
I don't care whether you're a conservative or liberal, but most people believe that government has to live within its means. Years of double-digit spending increases that weren't backed up by corresponding increases in revenue have come home to roost. Deficits are not a sustainable practice. (This is one of the truths we decided to make as policy at Sierra College, and four years later, the results are clear: we have a structurally balanced budget, and 10.5% reserves as a "lifeboat" to protect the stability of our institution.)
Now, some of my more liberal friends think the solution is simple: just raise taxes so we have enough revenue to keep the spending going. The problem, of course, is that we already have the highest tax burden of any state in the union (highest income taxes, highest sales taxes, and average property taxes), and more importantly, especially in this economy, raising tax rates can actually reduce revenue, rather than raise it.
On the other hand, if our state government was to live within its means, and target its spending to making California competitive, equipping people to create and fill jobs, and driving the generation of sustainable and long-term economic growth, this would actually increase revenue to state government, without an increase in tax rates.
The budget deal on the table is $14 billion in new taxes, $15 billion in spending cuts and $10 billion $11.4 billion in borrowing. Will this deal accomplish those goals and get California growing again?
Here are three questions to ask:
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Do you honestly believe that raising taxes by $14 billion will bring in $14 billion in new revenue? If so, why is this tax increase any different from all the other tax increases passed in this state in the past, which failed to generate more than a fraction of the revenues they promised? Do you just not believe the economic law that taxes provide a disincentive to economic activity? And how do you justify massive tax increases that will throw people out of work and further depress the economy when we're getting close to 10% unemployment?
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Do you honestly believe that a "state spending cap" ballot initiative as proposed will actually pass, given that voters would be voting to extend these tax increases for an additional three years by saying yes? Has there ever been a time when people voted for $42 billion in additional taxes in the past? And given that every interest group on the right and left will be opposed for their own reasons, why do you think this will work?
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$10 billion $11.4 billion of this year's budget deficit will be paid for by borrowing. In the next budget cycle, you therefore start with a $10 billion $11.4 billion structural deficit, which will be compounded by #1 and likely be $15 to $18 billion $16 to $19 billion. What is your plan then, and how can you call this a balanced budget, since it doesn't close the structural deficit?
Bottom line: if this deal won't actually bring in the revenues it promises, borrows money to balance the budget, and does nothing to right-size our spending to get it in line with our revenues, why is this a good budget deal? How will this make California competitive again?
Part of me is conflicted because this is a relatively "good" budget deal when it comes to funding for community colleges. The CCLC, our statewide advocacy organization, is actively pushing this deal. And I firmly believe that community college education is going to be one of the key drivers of the economic recovery by equipping people to start new businesses, create new jobs, and fill those jobs with a qualified workforce.
But I have to say: any budget deal that fails to fundamentally reform California government, right-size spending in line with revenues, and give us a stable environment for creating jobs and opportunity in our state, is a budget that ultimately will do great damage to the incredible value that community college education delivers in driving economic recovery.
The state is going to have to do fewer things, and learn to live within its means. That's going to be painful. At the community college level, one example might be losing state funding for things like non-credit and life enrichment courses, and instead, charging those students self-supporting fees for those kinds of classes.
Above all else, I'm convinced that community colleges will have to shrink our mission to the core aspects of preparing students to thrive in any four-year university in the world, and equipping people with the skills they need to create and fill jobs. These are the parts of our mission that give people the skills and ability to create economic growth -- and these are the parts of community colleges that are critical to our state's competitiveness in the future.
I can't really predict whether or not this budget deal will pass. But I can say this: either way, the underlying crisis is far from over. The Governor and legislative leaders need to sit down and negotiate true reforms so that government starts living within its means, and invests in making California competitive, creating jobs and building a golden state yet again.
Correction 11:18PM: The borrowing is $11.4 billion, not $10 billion. "A billion here, a billion there, pretty soon you're talking real money." -Senator Everett Dirksen
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