Setting the Bar Higher for “Fiscally Prudent”

Last week, Governor Jerry Brown released his proposed budget for 2014-15, reporting more than $6 billion in unanticipated General Fund revenues — for a three-year period running from 2012-13 through 2014-15 — and projecting relatively strong revenue growth through 2017-18. The Governor’s proposal prioritizes using the state’s improving fiscal outlook to pay down debt and save for a rainy day. Also, because changes in General Fund revenues tend to affect the state’s Proposition 98 minimum funding level, the Governor’s proposal also reflects significant additional funding for K-14 education.

From a “good budget” policy perspective, the Governor’s proposal continues to move our state forward in some significant ways. Generally speaking, paying down debt and saving for a rainy day are, in the words of the Governor, “fiscally prudent.”

However, we pointed out in our statement on the Governor’s budget release that the Administration’s proposal takes “only a modest step toward reinvesting” and that greater priority should be given to boosting spending for critical public programs and services that have been severely cut in recent years.

What makes a state budget fiscally prudent? Our take is that a strong, fiscally sound budget is one that truly improves outcomes for individuals, families, and communities. This means thinking beyond just ending up in the black. While the Governor’s proposed budget clearly is fiscally prudent on certain counts, it’s a spending plan that doesn’t work for many Californians, leaving various core programs and services operating at very low levels — and at a time when poverty and long-term unemployment remain high in many parts of the state. For example, the Governor’s proposal:

  • Leaves cuts in place that resulted in the loss of more than 100,000 child care and preschool slots in prior years;
  • Provides only modest increases for the state’s welfare-to-work program, CalWORKs, leaving cash grants for most families below the “deep poverty” cut-off of 50 percent of the federal poverty line; and
  • Does not restore a cost-of-living adjustment for grants that help 1.3 million low-income seniors and people with disabilities afford food and other basic necessities.

Further, a strong state budget is one that reflects a clear vision for investing in long-term economic growth and broadly shared prosperity. The Governor’s proposal presents an incomplete vision in this regard. For example, while his proposed budget includes slight increases for the UC and CSU systems, total General Fund spending for these systems remains well below pre-recession levels.

As state policymakers debate the 2014-15 budget in the coming weeks and months, they should ask some key questions. Is it fiscally sound to leave essential state programs and services operating at recessionary levels? Should we really put away so much for a rainy day when, for many folks in California, it’s raining now? And, at the highest level, will the 2014-15 state budget take significant steps forward in working for Californians?

The Governor’s forecast — a gradually improving economy and increasing revenues — is welcome news. And while his proposal includes some fiscally sound parts, it sets the bar too low for too many programs and services. Improving outcomes for California’s individuals, families, and communities means we need to raise the bar on what we mean by a fiscally prudent budget.

— Chris Hoene