California’s “budget crisis was quite a few years in the making” and according to State Senator Fran Pavley, “the future doesn’t look particularly bright.”
Pavley made her remarks to the Santa Monica College Faculty Association on December 10. She attributed the crisis partially to the long- term effects of Proposition 13 which had the “unintended consequences of large commercial properties not being reassessed.” It used to be that sixty percent of tax revenue was from commercial real estate and forty percent was from residential but now that has been reversed. There also are a lot of loopholes.
Another contributor was the lowering of the state vehicle licensing fee which resulted in the state receiving $4 billion to $6 billion less revenue annually. These losses were then back-filled with money from the general fund. California also got really “hammered with the downturn of the economy.”
Pavley noted that the “fastest growing part of the budget is in prisons.” She then explained that a society has to “either pay up front costs for quality schools and vocational training, community colleges, and higher education or you are going to pay at the other end by putting more money into the criminal justice system.”
The State Senator also pointed out that the State receives the bulk of its revenue from sales tax and income tax on its upper income earners. The State is also now paying ten percent of its budget on bond interest where before it was six percent because they have had to borrow more money.
Pavley also stated that the budget is the “most challenging thing I’ve ever been involved in. The politics of Sacramento are extremely challenging largely because of the required two-thirds vote. We don’t have our priorities expressed in the budget the way we would like.” The two-thirds vote has also prevented the legislature from looking at California’s revenue side.
California needs to diversify its tax base to increase its revenues. With this in mind Pavley is sponsoring a bill that would tax oil extraction and another legislator is looking at taxing tobacco.
Pavley also noted that the legislature is looking at different ways to improve our initiative system as well as our budget system. They are also looking at having a two year budget cycle, diversifying its tax base, building up a reserve for financial uncertainties, getting rid of duplicate services (realignments), and not approving new programs unless a revenue stream is identified to pay for them.
Pavley concluded by mentioning the legislature needs to cut $6 billion from the budget in the next few months. “There are signs that the budget crisis is turning around but California will turn around slowly.”
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