Student 7

The Budget Crisis

In California, we have faced problems with debt in recent years. Due to budgetary problems, the government has been forced to cut payments to many institutions, including schools. As a result, teachers are being forced to leave while the class sizes grow larger. It is important that we find an alternative way to cut spending on something other than school. It is important to find a long lasting solution.
Firstly, the California’s budget must be balanced because it is a requirement of the state’s constitution. In order to meet the shortfall, and balance the budget, the budget has been cut by $15 billion including $6 billion from schools, $3billion from colleges, and $1.2 billion from prisons. Medi-cal, a state health program from the poor will be cut by $1.3 billion. The impact of these cuts will be great. With fewer teachers, the classroom size will increase. Another problem will be colleges dropping courses. There will be fewer choices for students pursuing higher education. Prisoners will be getting released from jail early before their sentences have been completed, putting criminals back on the streets. The cuts to Medi-Cal will reduce the health benefits to the disadvantaged and poor.
The root of California’s financial problem is the result of the government’s overspending. From 1990-2008, the state’s income has increased by 167 percent while the spending has increased by 181 percent. A solution to the problem is to restore The Gann Spending limit from the 1980’s. This bill restricted state spending increases so that they would be in step with population growth and inflation. The bill prevented California from a pattern of financial chaos in the 1981 recession by limiting government spending. It also forced lawmakers to refund $1.1 billion in excess revenue back to the taxpayers in 1987. The bill lost its effectiveness in 1990 when it was diluted with the passing of Proposition 111, which excluded spending limits for infrastructure projects, disaster relief and others. If the Gann spending limits were still in place, it is projected that there would have been a $15 billion surplus for this year.
Instead, California has a $26.3 billion budget deficit. To meet this shortfall, the budget had to be cut by $15 billion. The signing of the budget was delayed as politicians battled as to whether to cut services or to raise taxes. Neither one is a popular option. Typically the Democrats favored additional taxes, while the Republicans tended to be pro cutbacks. After Governor Schwartzenegger’s budget was rejected, the lawmakers fought long and hard over what would stay and what would go. Finally the budget passed with no tax increases, but with drastic cuts. The budget cuts were chosen over tax increases as the lesser of two evils. There is a problem with increasing taxes and fees in the midst of the troubled national economy. There is 11.6 % unemployment (up from the normal 5%) and that brings in less income tax revenue. Unemployment also brings about less consumer spending. People are buying only what they truly need when they do shop. Less consumer spending means less sales tax revenue. Also, the record home foreclosures in the state have resulted in reduced revenue from taxes on home sales. With fewer people working, fewer people spending, and decreased real estate revenue coming in, additional taxes would be particularly unpleasant and may not even fill the gap.
Although cut backs are maybe preferable to increase taxes, the better solution is to reinstate spending limits for all government programs. If the government doesn’t have money to spend on the projects, then it won’t be able to get into debt. It has worked in the past and it can work today.