On Wednesday evening, just after dinner, we sat down with the 2012 California Budget Challenge, worked our way through the detailed income and expense options provided, and balanced the state budget, with a $4.2 billion surplus, in about 20 minutes.
It was easy.
We took the challenge once before, in a Beirut hotel room in 2010, and it took a little longer because download speeds were slower. But the truth is, you could balance the budget just about anywhere – anywhere but in the state legislature in Sacramento.
That’s because in your living room you don’t have 120 state legislators screaming at each other, you don’t have lobbyists from labor unions and corporate special interests trying to twist your arm, and you don’t have Grover Norquist waving his Taxpayer Protection Pledge in your face.
How did we balance the budget?
Not in a way that would please Grover Norquist, but in a way that we believe reflects the economic realities and social obligations of a presumably enlightened, responsible and compassionate society.
We bumped spending on K-12 education by $2.5 billion. We gave a modest $400 million raise to higher education. We left health care spending where it is, made a $200 million cut in other human services and cut $100 million from criminal justice by reforming the three-strikes law to apply only to serious or violent felonies. Then we pared down the cost of public employee pensions by $200 million.
On the revenue side we locked Grover Norquist out of the room and adopted Gov. Brown’s tax package, upon which we also loaded a Proposition 13 reform to fairly reassess commercial real estate, adopted an oil extraction allowance, raised the vehicle license fee back up to where it sat for years and then bumped the taxes on cigarettes and alcohol.
We left the California corporate tax rate where it is.
In the end, we came up with a spending package of $99.5 billion, against $103.7 billion in revenues, and thus a tidy surplus that we would like to see locked away and unavailable for any purpose other than fiscal emergencies.
Having done that, it helps to put the figures in broader perspective, so here are a few salient California budget facts:
This year, 42 states will have budget shortfalls totaling more than $100 billion. California’s total state and local tax burden in 2009 was 10.6 percent of per capita income, which ranks it sixth highest in the nation. The national average is 9.8 percent. But according to the California Department of Finance, the state ranks 19th in state and local taxes, and fees.
California has property tax rates below the national average, an above average state sales tax, but it taxes fewer items than other states. We have one of the highest income tax rates for the top 25 percent of households, but one of the lowest rates for low-income households. The corporate tax rate is high, fifth among all states in per capita corporation tax revenues.
The California Budget Challenge is a product of Next 10, a nonprofit “focused on innovation and the intersection between the economy, the environment, and quality of life issues for all Californians.”
You can take the budget challenge at nextten.org. You’ll probably get a different result, but that’s the beauty of the exercise.