Editorial - Balancing California's budget

From the Los Angeles Times

Editorial

Balancing California's budget

The state must make many painful cuts, but health and human services should be preserved.

June 8, 2009

Gov. Arnold Schwarzenegger is right: California is out of time. The state must cut $24 billion in expenses or find some new money -- or both -- and must do it before the month is out. The cuts will hurt people. In that, there is no choice. But there is choice in which services are cut, how deeply and for how long. Here are some principles that Sacramento, and the people, should follow in making their decisions.

* Avoid default. In recent months, some critics have openly cheered the possibility that California would go bankrupt, allowing some trustee or higher authority to "right-size" the state government or, in the alternative, to save some programs currently on the chopping block. It doesn't work that way. States can't get bankruptcy protection, but they can default on their obligations, and if this state does that, virtually all the cuts now contemplated will take effect, plus more besides. The state's credit, already crippled, will become nonexistent; investors will shun many states besides this one -- and local governments as well. The world's eighth-largest economy will suffer longer, and ramifications for the world will be severe. Default is not an option. Avoiding painful cuts is not an option.

* Don't just say no. Sacramento must take every reasonable suggestion seriously, and when lawmakers preserve programs, they must justify the costs. We must recognize that, in some cases, California must be penny-wise and pound-foolish, because it needs the pennies right now. We must be open to removing a function from government, even one with benefits and supporters.

* Cut health and human services last -- not just for humanitarian reasons but because these cuts more than others simply produce paper savings while multiplying costs, transferring them to counties and worsening outcomes. For example, a person who loses Medi-Cal and can't go to the doctor's office will delay treatment until he or she must go to the emergency room, where costs are higher and chances of recovery lower. A family that loses CalWorks welfare-to-work aid, training and job placement will turn to county general relief, which pays for about two weeks of rent each month; the family becomes homeless, and the costs return in jails, mental healthcare, drug addiction and hospitals. When health and human services funding remains intact, it brings with it federal matching funds. Cutting a dollar in state services eliminates $2 to $10 in funding.

Human services deserve special attention in these negotiations because they are easily neglected when pitted against services that reach the general population. Transportation, for instance, is paid for in part by gas taxes and enjoys broad public support. To those who rely on health and human services, however, even temporary interruptions can result in grievous harm, even death.

* Acknowledge that supposedly temporary measures often become permanent, and as such can be barriers to long-term reform. That's another reason why cutting a program with a powerful constituency, such as schools, is preferable to cutting one with a weak constituency, such as Medi-Cal. Cuts to schools are far less likely to become permanent simply by inertia. Cuts should become permanent only when they reflect the long-term desire of Californians for their state.

* Focus on the service, not the service provider. Saying no to a service cut is not the same as saying no to an organization or program. Don't, for example, simply write off the idea of eliminating CalWorks if the federal government will grant a waiver to keep its funding coming or if the programs could be picked up by another agency to eliminate administrative duplication. Keep in-home supportive services, but remain open to cutting the pay of those workers, temporarily, to minimum-wage levels, while remaining mindful that such pay cuts will certainly increase the burden on counties. Again, not making such cuts means cutting somewhere else.

As for agencies with state contracts, we can value their work and still conclude that we have to cut them loose if there is a less costly way, in the short term, to keep some of the service. Yes, cutting contracts has a ripple effect on the economy, as people lose their jobs and the tax base shrinks. There are negative consequences, but that is the lot we face right now.

* Say no to a wholesale federal bailout -- but say yes to federal matching funds and to federal payment for federal obligations. Expecting the U.S. government to bail out California programs that Californians won't pay for is fantasy. If it ever verges close to reality, though, the idea must be stiffly rejected. Such federal aid becomes an overwhelming disincentive for the state's people to make tough decisions to cut services or increase taxes, and, in turn, it relinquishes the people's control over their state to Washington. It would also dissuade taxpayers in any other state from ever again agreeing to fund their own services.

It's a different story with matching funds, which are an effective way to demonstrate state commitment while leveraging federal aid.

Nor should Californians continue to be forced to pay for federal obligations that Washington has failed to meet. The Times has said repeatedly that the federal government should pay the state's costs for failed or inadequate immigration policies. This is no time to demonize the working men and women who have come to this country illegally but who do, after all, pay taxes. Still, Sacramento can and should demand funding to cover the costs that illegal immigrants add to our schools, health programs and prisons.

* Be straightforward about empty fixes, but accept some as time-shifting mechanisms. For example, deporting criminal illegal immigrants currently housed in California prisons would save millions of dollars, and Sacramento should do it. But we should be sober about the consequences. These immigrants have established family ties and, in some cases, criminal networks in California. With or without a border fence, many deported criminals will return. We should take the step anyway, accepting the short-term savings and agreeing to deal later with the speculative long-term consequences.

* Be straightforward about empty fixes, but accept some for reasons that may have little to do with the budget. For example, getting rid of the Integrated Waste Management Board is a wildly popular idea because of a perception that it is a haven for termed-out lawmakers who squeeze millions of dollars from the state. In fact, the board does not operate on general tax revenues, and eliminating it, or similar boards, will have little effect on the state budget. There may be good reason to get rid of the board anyway, simply to eliminate the outrageous patronage. But we should make sure that the consumer protection provided remains, even if it's reassigned to another agency.

* Be smart about new taxes. Reject, for the current year, broad-based sales and income tax increases as damaging to the recession economy and as politically infeasible, but move forward on carefully targeted temporary taxes, specifically on tobacco, alcohol and snack foods, to prevent cuts in particular health and human services (but not necessarily agencies).

The Times has long opposed linking special taxes to special purposes, because they permit society to shirk communal responsibility for communal benefit and instead outsource the burden to unpopular groups, such as smokers. Still, such taxes must be considered if the revenue saves a needed health or safety net service, and if the tax automatically expires after a set period -- say, two to five years. Temporary taxes, like programs, tend to become permanent. But the state is soon to consider a wholesale revamping of its tax structure. In this case, Californians can -- and must -- insist that these focused taxes indeed expire.

* Distinguish between short-term (the rest of June and July) budget fixes and longer-term restructuring. One welcome side effect of this crisis is that it may generate support for creative and far-reaching proposals, such as shifting state taxing and decision-making power to localities, and perhaps a constitutional convention. Those are useful debates, but we cannot afford to hold immediate budget decisions hostage to these longer-term plans.

* Cut. Think the unthinkable, then do it. Deeply cut programs, knowing there will be long-term consequences, but knowing also that the alternative is even more damaging cuts. Accept, for two to five years, some defunding of K-14 education. Wince at the consequences -- teachers will lose jobs -- but move forward. Slash from higher education, and hope to rebuild the universities in better times. Release nonviolent inmates early, and brace for additional law enforcement and social costs. Allow nonviolent parole offenders to remain free, and hope for the best. Take millions from local government transportation funding and repay it within three years. But don't take local property tax revenue, which counties and cities need for public safety and human services. Appreciate the work of public employees but acknowledge -- despite the relatively low ratio of state workers to state residents -- that we cannot afford rich benefits such as dental coverage.

* Experiment. This is no time to cater to special interests or cleave to the status quo. Try something. If it doesn't work, try something else.