Republican Budget Proposal

Sen. McClintock gave the following floor speech during the debate on the Republican budget proposal. The proposal failed on a straight party line vote.

Mr. President:

When we met on this floor on August 29th of last year to adopt the budget, I spoke this warning:

"…today we set in motion events that will require far more difficult and painful decisions starting just five months from now in what is likely to be a much worse economy.

"I am afraid that with this vote, for the second time in a decade, this state is being driven to another Gray Davis-sized fiscal crisis…"

I apologize to Gray Davis.

Those warnings, like those that I and others have been making in vain for many years, went unheeded. And today we meet to indeed face far more difficult and painful decisions.

This budget crisis has proven intractable for two reasons. The first is the collapse of the constitutional budget process that consistently produced relatively balanced and relatively punctual budgets for 150 years.

The Senate version of the budget should have been on the Senate floor in late May in amendable form where we could debate it day in and day out until any snags were worked out. But that's a discussion for another day.

The second reason this crisis has proven intractable is the refusal of this legislature and successive governors to address basic questions of efficiency.

It has never seemed to bother the majority of Senators on this floor that we put $11,000 behind every student — $330,000 per classroom - and yet only a fraction of this money trickles into the classroom.

It has never seemed to bother the majority that we pay $42,000 a year to house an average prisoner when Florida pays just $18,000 and the federal system runs for $26,000.

It has never bothered the majority that we pay the third highest tax per gallon of gasoline in the nation and yet 43rd in our per capita spending for highways.

And it has never bothered the majority that last year this state again spent the largest portion of personal income in state history and yet produced a lower level of service.

So here we are. And let me get to the stubborn facts of the matter.

Last year, this legislature adopted a budget of $103 billion. But in reality, the state spent $107 billion. So any budget has to include a $4 billion reserve to cover over-spending.

But it gets worse. Last year, we received $96 billion in actual revenues. At the current growth rate, we can expect $97 billion this year. With that $4 billion reserve, it means we can spend $93 billion.

(If that sounds draconian, it's nearly $2 billion MORE than we spent just three years ago).

The Republicans today offer $3 billion of reductions to bring the budget to $100 billion.

That still leaves a very sizeable gap. The cuts are before us today in this bill; not the actual budget. I deplore the notion that we should pass a "get out of town" budget - it was "get out of town" budgets that got us into this mess.

The Democrats propose spending $103 billion budget including $4 billion of additional sales taxes. But if experience is a guide, it won't produce $4 billion of new revenues - we'll be lucky if we get half of that, followed by billion-dollar-a-year declines in state revenues as the economic impact of those tax increases takes effect.

That's not theory - that was our experience when Pete Wilson did it in 1991. And to those who say the revenue declines were the result of the national recession - let me remind you the national recession ended in the first quarter of 1991; California's tax increase was imposed in the third quarter of 1991 and in the fourth quarter, this state suffered the biggest plunge in retail sales in the prior 30 years.

The Senate needs to understand that Republican opposition to tax increases is not ideological and not political - it is purely practical - a major tax increase will make our state's fiscal problem WORSE and not better.

I am afraid that with last year's budget, this state's finances finally passed a tipping point. We are like an exuberant shopkeeper who took out too much space, hired too many employees and paid them too much. And every year he kept taking out more and more loans to cover the growing gap.

And with bank notes coming due, he begins to recognize that his contractual obligations are overwhelming him; that a growing portion of his income is being consumed by debt payments.

Additional loans simply eat up more and more of his waning income. Increasing his prices means fewer customers and less income. He reaches a point where every solution makes the problem worse because he has locked himself into fixed, contractual expenses that are eating him alive and the only way out is to declare bankruptcy.

This state cannot go bankrupt. But it is going to have to fundamentally change the way it is conducting its business - not tomorrow, but now.

I lay all this out to emphasize the enormity of the problem and the reality that the Republican budget reductions are only the beginning of the work necessary to repair this state's finances.

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