Opinion Columns & Blogs

Dan Walters: Pick a plan, any plan

It's self-evident that the current occupants of the Capitol, including Gov. Arnold Schwarzenegger, don't know how to negotiate effectively.

But if they weren't endemically dysfunctional, what would be a reasonable way to close the state's budget deficit? If they would set aside their self-importance, ideological baggage and pressure from interest groups if they were responsible adults, in other words sensible spending cuts and new taxes would be fairly easy to devise. All the elements have floated around the Capitol but no one has put them together, possibly because no one has really wanted to do so.

The problem, it's said, is a $15 billion gap between income and outgo this year and another $25 billion in 2009-10. The Solomon-like approach would be a 50-50 split of revenues and cuts.

Let's say we need $10 billion a year in new revenues, frontloaded to avoid a looming cash flow crunch. Two tax increases would do it, restoring the "vehicle license fee" that Gov. Arnold Schwarzenegger foolishly slashed five years ago, and boosting the sales tax by two cents immediately, scaling back to a penny in 2009-10 for two more years.

The VLF tax should be restored because it shouldn't have been cut in the first place. Schwarzenegger did it as a crowd-pleasing move and then immediately borrowed money to pay for it, scarcely a fiscally responsible action.

The sales tax raises lots of money very quickly and doesn't increase dependence on the very volatile personal income tax, although a time-limited income tax surcharge could be in the mix. Over the longer run, the sales tax rate could be cut back as it's extended to services, and/or as the economy recovers. And our ridiculously low liquor taxes also should be raised.

We'd need about $10 billion a year in spending cuts, maybe $3 billion of that coming from schools, coupled with eliminating arbitrary restrictions on the $16 billion a year in so-called "categorical aids" to schools. Flexibility would be a grown-up tradeoff for receiving less money.

The prisons should take a big hit. It's ridiculous that, unlike any other state, two-thirds of those inducted into the prisons each year are parole violators or that it costs taxpayers $45,000 a year per inmate, nearly four times what it costs in Texas.

The other $5 billion or so should be scattered among other categories, including the indirect spending of about $40 billion a year on tax loopholes. College fees should be raised at least to the national average.

Finally, the state needs some kind of spending cap to counteract the tendency of those in office to squander one-time windfalls of revenues on permanent but unsustainable spending and tax cuts. A proposed measure that would allow spending to increase by 5 percent by a simple majority vote of the Legislature, but require a two-thirds vote for anything beyond would be a sensible compromise.

Balancing the budget isn't easy, but neither is it impossible if those doing it have the integrity and the will.

Dan Walters is a columnist for The Sacramento Bee.