Governor Jerry Brown breathed a sigh of relief on election night, and so did the state of California. Not only did the victory of his tax proposal keep his legacy intact, but it is also expected to stop the severe hemorrhaging of the state’s educational system.
The additional $6 billion in revenue from Proposition 30 will prevent disastrous cuts to schools that would have further increased college tuition, laid off staff and shortened the K-12 school year. That’s obviously a good thing. Brown’s victory was particularly impressive in a state where residents don’t trust Sacramento’s ability to spend money wisely.
But, as Brown himself said the day after Prop 30 passed, the measure is not a cure-all. It draws on a temporary sales tax and increased income taxes on the wealthy that will expire in four and seven years, respectively. Some time after they do, there will inevitably be another economic downturn, which could again leave the state with another large deficit and no easy way to plug it. Officials, say experts, can prevent this by seeing Prop 30 as a window of opportunity. Now that lawmakers are no longer pressured to fix a massive deficit, they can proactively pass smart reforms that address the underlying structural problems that drove California into fiscal chaos in the first place.
The time couldn’t be better: the election will most likely give Democrats a two-thirds majority in both houses of the state legislature, the first time either party has had a supermajority in nearly 80 years. That means the bipartisan logjam in Sacramento is broken and the party has the freedom it needs to move toward a sustainable balanced budget. Prop 30 also gives politicians a chance to learn how not to overspend when they have money, an indulgence that has plagued the state.
But if lawmakers and the governor don’t go this route, Prop 30 could actually do more harm than good in the long term. That’s because the victory could take away any sense of urgency to be proactive and prudent. “Crisis is a wonderful opportunity for reform,” says Christopher Thornberg of Beacon Economics, an economic-research and consulting firm in California. “You take away the crisis and the drive for reform goes away as well.” That would be problematic for education because Prop 30 in itself doesn’t do enough to undo the long-lasting impact of multibillion-dollar cuts to public schools since 2008. For example, California ranks 46th in the nation in spending per student and 50th in the country in ratio of students per teacher, according to a 2011 report by the California Budget Project.
More structural reform may be painful — and difficult news to deliver just as students and teachers are rejoicing over the infusion of cash. But those with institutional knowledge and experience of the boom-and-bust cycle are aware of the risk. “If there’s enough money, people aren’t going to want to undertake the big-picture kind of things that need to be done,” says David Doerr, who spent 24 years as chief consultant for the state assembly’s revenue and taxation committee and is now chief tax consultant at the California Taxpayers Association, a group that advocates for lower taxes.
Fortunately for California, Brown is unlikely to go on a spending spree. The governor built a reputation for austerity in his first term in the 1970s and has reinforced it with his dogged persistence to fix the state’s fiscal mess this time around. Speaking with reporters on Wednesday, Brown retold the biblical story of Joseph, who advises Pharaoh to save food produced in years of abundance in order to prepare for years of famine. “We need the prudence of Joseph going forward, and I intend to make sure that’s the story we look to for guidance,” Brown said.
But Brown won’t be in office forever. And in any case, prudence may not be enough if California wants to prevent a repeat of the recent fiscal debacle. It also needs better legislation. Economists say potential reforms could include broadening the tax base, lessening the state’s dependence on volatile income taxes, making it easier to cut spending in the budget or creating a rainy-day fund. The state could also cut back on wasteful government spending, an approach favored by Doerr. Prop 30 “gives them some breathing space to potentially enact some more enduring fiscal reforms,” says Gabriel Petek, a senior director at Standard & Poor’s. “That’s the kind of thing that could benefit the state credit rating for the longer term.”
There may not be political appetite for such moves, however, says Dan Schnur, director of the Jesse M. Unruh Institute of Politics at the University of Southern California. He points out that Democrats have opposed a rainy-day fund in the past and are likely unwilling to tackle the issue of property taxes, which is tied to the controversial Proposition 13. As for cutting wasteful spending, that may be too tedious for the legislature’s liking. Surprisingly, the supermajority could also inhibit reform more than encourage it. “Once you’ve got a two-thirds majority, you’ve got the votes and you’re in charge,” Schnur says. “So there’s less incentive to mess with a good thing.” Plus, Democrats may not be able to come to an agreement within the party. Some lawmakers are already talking about reforming the tax code, while Brown says the people must decide on any such changes.
Of course, it’s important to recognize that even if California doesn’t get any more significant budget legislation, at least it has saved its schools, which are in themselves a long-term investment in the economic and social health of the state. Michele Siqueiros, executive director of the nonprofit group Campaign for College Opportunity, was thrilled with the victory for both professional and personal reasons. It will make a huge impact on her efforts at work to help college students overcome the challenges of higher tuition and fewer classes. It will also prevent a shorter school year for her daughter, who is in fifth grade, and paycheck reductions for her husband, who is an assistant principal at a Los Angeles–area high school. “There have just been too many cuts,” Siqueiros says. “We’re saying that enough is enough.” Hopefully, politicians can ensure Californians won’t be saying that again in a decade.