This is how they broke you, FL.
-----------------------------------------------------------------------
Huge State Budget Gap Rooted in Three Major Spending Areas
By Doug Smith
LA Times Staff Writer
September 28, 2003
During the first four years Gray Davis was governor, state spending increased by $20 billion. That spending surge has become a main theme for those seeking his recall.
Anti-tax Republicans, in particular, repeat these numbers at almost every opportunity: Inflation and population increases would have driven spending up by 21%; state revenue grew 25%, but spending grew 40%.
"This is not a revenue problem," said state Sen. Tom McClintock (R-Thousand Oaks). "The problem is the 40% increase in spending."
The gap between revenue and spending is indisputable — it is the heart of the state's current budget crisis. But a close examination of where spending went up illustrates why keeping California's budget in balance has become so difficult, regardless of which party controls the governor's office.
Although the precise 40% figure used by Republicans is debatable, spending during the Davis years has grown faster than the combined effects of inflation and the state's population would suggest. But the same was true during the last Republican administration.
Spending from the state's general fund, currently $70 billion, actually grew by a smaller percentage in the first four years of Davis' tenure than during the preceding four years under Gov. Pete Wilson, when the inflation rate was lower.
Analyzing where the money went from the start of Davis' tenure through the peak of his spending shows that the big increases — 92% of the change, excluding tax relief — fell into three categories: health and social services, education and prisons.
Health, Social Services
California has more residents without health insurance than any other state. More than a million of the uninsured are children.
To provide health care to some of those children, the Wilson administration established a program called Healthy Families. Under Davis, that program became one of the fastest-growing major parts of the budget.
That growth was a key reason that health and social services accounted for the largest chunk of new spending under Davis — 43% of all the dollars added.
Three factors combined to swell the costs of health programs under Davis: The state expanded existing programs, such as Healthy Families. It began many new ones. And, as the state made those moves, health-care costs soared nationwide after having been relatively stable during the mid-1990s.
From June 1998 to June 2002, the state aggressively sought out children of working parents who lacked insurance and increased enrollment in Healthy Families more than fourfold, to 562,000 people. But the rapid rise in health-care costs made each person more expensive to cover. While enrollment went up four times, costs rose more than ninefold, from $59 million to $546 million, according to state figures.
Even as the economy soured, Davis continued to expand health-care coverage. His 2002 budget included $8.8 million to draw more people into Healthy Families. Currently, enrollment is up to about 660,000 children.
Davis aides defend the expansion of Healthy Families as cost-efficient over the long term. Healthy Families "is a matter of priority of the Davis administration and the Legislature," said Hilary McLean, a spokeswoman for Davis. "Providing health insurance for children saves money down the line."
The program's supporters, who include many Republicans, say that, by providing basic health coverage such as immunizations and checkups, the program reduces the number of children who will develop expensive medical problems as they grow up.
Davis aides also note that expanding the program made the state eligible for federal matching funds that otherwise would not have come to California. The federal government paid two of every three dollars spent on the program. But even the state's one-third share has added nearly $250 million to the budget.
Conservatives have objected to spending money to recruit people into the program — one of Davis' initiatives. But overall, Healthy Families has enjoyed bipartisan support.
"In this dire budget situation, one would think we, like everybody else, were going to be under the ax," said Kristen Testa, health program director for Children's Partnership, which promotes health coverage for children in California. "But everybody realized that was a good program, and we were doing the right thing."
For Davis, however, the large increases for health and social services programs have posed a political problem — the effects of the spending weren't visible to most voters, said John Ellwood, a professor of public policy at UC Berkeley.
Spending on medical care and other social services for the poor "are not the things that the middle class out there sees," Ellwood said. "They are good if you believe we should devote more of our resources to the young and poor. But the average Californian is neither young nor poor, particularly the average California voter."
Education
Unlike social services programs, education spending in California is tied by law to state revenues. In good times, that means schools get extra money to expand programs. When the economy turns bad, they often must scramble to make cuts.
During the recession of the early 1990s, Wilson cut education spending sharply. Then, as the economy improved and state revenues increased, he and the Legislature poured money into class-size reduction and textbooks. Smaller classes proved extremely popular, especially in the suburban areas that were Wilson's political base.
The need to hire more teachers aggravated an existing shortage. Schools, particularly in the big cites that had more trouble competing for talent, had large numbers of inexperienced teachers, many of them lacking full credentials.
Davis tried to alleviate that by directing a large portion of his new spending on education toward teachers. The state paid for more teacher training and provided tax incentives for teachers. It also provided an additional $1.8 billion that local districts could — and generally did — use to raise teachers' pay.
Critics called the pay increases a sop to the politically powerful teachers unions. Davis supporters said the raises were needed to keep experienced teachers in the classroom.
Davis also created a school accountability program based on expanding the state's standardized tests and rewarding those schools and teachers that performed well.
Overall, spending on kindergarten-through-12th-grade education accounted for 36% of the extra dollars spent under Davis. On top of those increases, money for higher education accounted for an additional 13% of the growth.
In elementary and secondary schools, spending per student rose 16%, going from $5,695 to $6,624 in 2002-03. That got California out of the bottom of national rankings of per-pupil spending and up to about the national average.
Because education spending is tied by law to state revenues, the amount school districts got from the state's general fund stopped going up since 2000, when the economy worsened. Overall state spending on education has continued to rise, but largely because of increased money from the federal government.
At the same time, the number of schoolchildren in California has increased about 7% since Davis took office. That has translated into more teachers, often at the higher salaries, locking districts in and limiting their flexibility when state funding leveled off or dropped.
As the recall gained momentum this year, and the budget crisis deepened, most districts wrestled with hard choices about what programs to cut, and some ended up laying off teachers.
Prisons
In 1995, the Prison Law Office, a nonprofit organization with offices just outside the gates of the San Quentin penitentiary, sued the state Department of Corrections, alleging that prisons were indifferent to the needs of mentally ill inmates. A court agreed and ordered the prison system to hire more psychiatrists and psychologists.
That was one of several court rulings and settlements of prisoner lawsuits over the last decade that have helped drive up the cost of running the state's vast prison system, which now houses 161,000 inmates.
Overall, the number of state prisoners, which grew rapidly during Wilson's tenure, leveled off after 1998. But the budget for prisons and the California Youth Authority continued to increase, going up by about 25% under Davis. The $1.2-billion increase in prison spending accounted for about 8% of the total rise in state spending under Davis.
Davis' opponents often criticize him for wage increases given to prison guards, whose union contributed to Davis' campaigns. Those raises accounted for a large part of the total increase, state figures indicate.
Another large chunk of the increased spending came from higher overtime costs, which added $13 million to the budget. That was attributable in part to changes in the contract, and in part because prison guards were able to take days off more easily under the state's Family Leave Act, requiring co-workers to put in overtime.
But much of the increase in prison spending was driven by one of the same factors that swelled the budget for social services: the cost of health care.
Prisons are required by federal law and court rulings to care for the sick, disabled and injured among their inmate populations. As lawsuits led to greater health-care requirements, and as the cost of health care rose, medical bills for the prison system soared by 70% since 1998, adding more than $350 million a year to the budget.
Davis has largely refused to consider spending cuts for prisons even in the most recent budget, arguing that he will not compromise public safety. But his close relationship with the prison guards has opened him to criticism that he is protecting key campaign contributors in the midst of a crisis.
Other Spending
Beyond those three areas — health and social services, education and prisons — Davis' overall record is more frugal.
In his early budgets, Davis steered some of the state's surplus revenue to one-time improvements, rather than commit it to long-term spending. His 2000 budget included an increase of more than $2 billion for transportation and housing, for example. But, as revenue began to shrink the next year, Davis cut that budget back in those areas rather than reduce his new health programs.
Davis restrained spending below the rate of inflation and population growth on consumer affairs, which grew 9%; natural resources, up 12%; and environmental protection, down 1%.
One final item that goes into the Republican calculation of spending increases under Davis involves a quirk in the way the state accounts for its vehicle license fee — the car tax.
In 1998, under Wilson, the state reduced the car tax. As part of the deal to cut the tax, the Legislature agreed to reimburse local governments for billions of dollars of car-tax revenue they would lose.
The money for local governments, which used to flow directly to them from the car-tax collections, was now coming out of the general fund. By the 2002 fiscal year, the reimbursements to local governments totaled nearly $4 billion and accounted for almost a fifth of the nominal increase in state spending.
Even allowing for that, however, spending under Davis still increased by 27%, which was faster than population growth and inflation combined.
The general fund — essentially the checking account for state taxes — does not include all state spending. In fact, it declined somewhat as a share of the budget under Davis.
But examining trends in the general fund remains the best way to assess the impact that elected officials have on the budget. The other two main sources of spending by the state — both of which have increased in recent years — are money from the federal government and proceeds from the sale of capital improvement bonds. The flow of federal money is determined mostly by policymakers in Washington; bond funds have to be approved by voters. The state budget is proposed by the governor, adopted by a two-thirds vote of the Legislature, and then signed by the governor, who can line-item veto individual amounts.
To avoid what they see as mistakes of the Davis era, many Republicans now advocate a cap that would allow state spending to increase only to the extent needed to match inflation and population growth.
Under such a formula, spending would have grown much less than it did since 1994. But some fiscal experts say the broad consumer price index measurement of inflation does not fairly measure the change in the cost of services paid by government.
For example, they note, spending on health care, which made up 15% of the state budget last year, has consistently outpaced the overall inflation rate, whether the spending was by government or private companies. The same is true of higher education, which stood at 7% of the state budget.
The challenge for the governor and Legislature over the last decade was to strike a balance between tax cuts and expanded services within a cyclical economy, said Steven M. Sheffrin, director of the Center for State and Local Taxation at UC Davis.
"The money wasn't being tossed down a rat hole," Sheffrin said of state spending under Davis' watch. "It was useful things that he wanted to spend money on."
The crisis arose because the spending was based in part on unstable revenues, and to keep spending in line with plummeting revenues would have required pulling back on initiatives begun when the state was flush.
"It does create a stop-and-go policy for the state," Sheffrin said.
latimes.com |
