The Good, the Not-So-Good, and a Few Concerns: The Governor’s Proposed 2011-12 Budget

Per our last blog post, we here at the CBP have been in “huddle down” mode, reading through the budget and other organization’s analyses of the budget, and trying to assess the impact of the budget within its broader economic context. We will be releasing our signature budget “chartbook” at a briefing on February 3 at 10:00 a.m. in Room 100 of the Legislative Office Building at 1020 N Street in Sacramento. We will be sending out more information on the briefing as soon as we come up with a catchy title for this year’s chartbook (suggestions welcome!). Now that we have had several days to reflect, here are a few observations.

The Good

The Governor’s proposals:

  • Offer a balanced approach, with roughly equal shares of the “solutions” coming on the revenue and expenditure sides of the budget in contrast to the “cuts-only” budgets of recent years.
  • If enacted, would place the state on a glide path to a (temporarily) balanced budget.
  • To shift program responsibility and money to local governments, if done smartly, can encourage stability, innovation, and investment in prevention.
  • To end state subsidies for local economic development efforts that, according to independent research, produce few if any jobs and little “bang for the buck,” is a refreshing steps towards improving accountability and transparency.

The Not-So-Good

The Proposed Budget:

  • Targets a disproportionate share of the cuts to programs and institutions that low-income families rely on to help make ends meet. The impact of the proposed cuts at the street level will be magnified by the loss of federal matching funds, which can double or triple the impact of lost state dollars.
  • Would make cuts that are permanent – while most of the proposed revenues are temporary – making the Governor’s proposal less balanced over time. Moreover, as noted by the Legislative Analyst, “absent a place to replace these taxes, there could be a substantial fiscal ‘cliff’ for the General Fund after the five-year period” and the temporary tax increases expire.
  • Would leave many Californians, including the 230,000 children who would lose cash aid through the CalWORKs Program, with few options in a still struggling economy where jobs are scarce.

A Few Concerns

Our top-line response is that the Governor’s proposals provide a good starting point. As the debate moves toward the Legislature, here are a few areas of initial concern:

  • The potential for achieving innovation and efficiency under realignment may be lost if local governments are reluctant to invest the upfront effort and resources due to a lack of certainty over long-term funding. The solution: a permanent shift of responsibility should be coupled with a permanent funding stream.
  • Additional reductions to health and human services programs will compound prior years’ reductions, magnifying the impact on families and communities, as well as service delivery systems. In particular, we would urge the Legislature to carefully examine how the proposed changes to health programs will affect the state’s ability to implement the new federal health reform law.
  • The devil is always in the details. The Governor’s realignment proposal, in particular, is extraordinarily complex. We’ll have more to say in upcoming days and weeks as we learn more and dig deeper.

— Jean Ross