Filling California’s Budget Hole


 By: Dr. Lynn Reaser

This past week California’s Governor, Jerry Brown, delivered the bad news.  The budget gap for the coming fiscal year beginning July 1st will not be the $9 billion projected in January but about $16 billion.  As a result, he is proposing spending cuts of $8 billion along with another $8 billion of revenue increases and he hopes to see if voters approve sales and income tax hikes.

 Is there another way to fill the state’s budget hole?  The answer is clearly yes.  Many formulas exist for closing the mismatch between spending and revenues, although none will be painless.

 One simple framework might be a “5-10-15” plan.  Better job and income growth would be the best solution and might help aid a 15% rollback in the various government regulations that many businesses decry.  An across-the-board 10% cut in government spending would be a blunt axe but may be the only way to escape the political battles that could sabotage a web of more finite cuts.  Many enterprises have endured reductions of 10% or more.  Finally, a 5% increase in all revenue sources could be considered to achieve buy-in of other planks in the proposal. 

 Other mixes should be on the table, but our budget problem must be resolved.  Greece has shown the world the perils and fallbacks of “kicking the can down the road”.

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