The biggest budget news of the week was the June 18 unveiling by Assembly Republican Leader Mike Villines and Senate Republican Leader Dave Cogdill of a proposed spending limit.
The spending limit proposal would limit year-to-year spending increases to the combined growth in inflation and population. The Republican leaders said this would restrict spending growth to about 5 percent per year. If revenues outpaced this level of spending, half the surplus would go into a "rainy day fund," and half would be used to pay off bond debt. The rainy day fund could grow to a maximum level of 10 percent of the spending allowed under the limit, after which any overage would be returned to taxpayers through a temporary reduction in the state sales tax.
Additionally, the plan would require a two-thirds legislative vote for tax-like "Sinclair fees."
Cal-Tax President Teresa Casazza said the proposal "offers the reforms needed to get the state off the fiscal rollercoaster." Ms. Casazza continued:
"The California Taxpayers' Association supports budget reform, including the creation of a rainy day fund, and we will work with legislators and the governor to find the most effective way to take these needed steps toward getting the state's finances in order. Under the current system, one-time revenue spikes are committed to ongoing programs, and no long-range plan exists for dealing with revenue shortfalls. This inevitably leads to budget problems during economic downturns, when taxpayers are least able to shoulder the burden of tax increases. This has to stop.
"Also, we support strengthening the constitution's Proposition 13 taxpayer protections by ensuring that tax-like 'fees' are covered by the same vote requirement as taxes. This protection is popular with Californians because it has served the taxpayers well, and it only makes sense to provide the same safeguard when the Legislature is considering taxes that masquerade as fees."
The Big 5 (the governor and four legislative leaders) met for the first time on June 17, but there was no report of any agreement on how to resolve the 2008-09 state budget impasse. At the conclusion of the meeting, Senate President Pro Tempore Don Perata said, "Everybody doesn't like something, and some people don't like anything."
Cal-TaxReports June 23, 2008
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