Thursday, October 7, 2010

Just What's Really Wrong with the California Budget?

No matter how the votes in Sacramento come out today California is still in a huge mess. Despite all the claims that this new budget will "erase" the deficit with no new taxes or "fees" there are major problems that our Legislature is just sweeping under the rug.

First, look at items such as Lease-Revenue Bonds. Seriously do you think any lender would allow you to take a 30 year construction "loan" off of your liabilities when looking at your creditworthiness? That's what the State has been doing for years. These items are not considered "constitutional debt", and so don't even show up for accounting on California's Budget. So bonds that are paying out $2. for every dollar borrowed through the bond sales are not considered "debt". If that is not a debt the State of California owes then what is?

And then there are all the items the Legislature has moved off the "General Fund" Budget, so they don't even have to consider them when balancing the budget. A lot of these are done by making the funding of agencies and departments "fees". Such as Vehicle License Fees. We've all seen how well that works just in the past year. The State needs more money, can't pass a tax? Just increase "fees". Local agencies need more money? Just increase the VLF !

Well, that works just fine, right? It doesn't if you consider that while raising money, it violates two items that the California Legislature should be doing. They don't have to have a 2/3rds vote to raise those funds, nor are they counted in the General Fund Budget.

"Fees" aren't taxes you see...according to California's Legislative Analyst Office and California law "fees" are "voluntary"...

OK, so you want to say it's voluntary to drive a vehicle, or a "privilege"? Even giving you that, how do you explain that the accounting never shows in California's Budget? Or that the uses, which change with the economic conditions, to which the VLF is put, are not put to a 2/3rds vote?

Or how about the oversight that the Legislature is supposed to have over the different departments and agencies? A part of that is supposed to come with the Legislature's General Fund Budget vote. Where's the oversight when an agency is no longer funded by the Budget?If an agency is improperly doing their job, the Legislature is supposed to be able to financially tell them to get their act together. When the Legislature is no longer responsible for the agency's funding, how do they do that?

So, now we come to this year's neat little package...

How many of you knew California now has a second State Fire Department? One that has no firefighters by the way? Only fire trucks and "emergency" equipment.

OK, I'll back up and explain how we got there. To start I'm sure most of you are aware of CalFire, the State Fire Department that is a part of CDF, the California Department of Forestry. So how did a Fire Department that is tasked with protecting State Forests end up being the State Fire Department and having precedence over local Fire Departments?? By becoming the Fire Department for many of the cities and counties in California, in part by convincing the counties and cities it would be cheaper for them to use CDF. At the charge of $20/acre/year in 2009 I don't know how true that is today. And now local and county fire departments not a part of CalFire, are subservient to CalFire and eMA(who's eMA you ask?hang in there I get to it. Promise!). But it gets worse.

That $20/acre/year turns into a $2Billion dollar budget for CalFire. That $2B does not show up on the General Fund Budget. CalFire was placed on this year's budget with a $2million funding, which looked to be just barely enough to cover the salaries of the 6,000+ firefighters. But that is above that $2Billion they take in from the counties and cities. But it gets worse.

California has an "Emergency" Fund that in the past was funded in the $5Million range. Last year CalFire hit that Emergency Fund up for $375 Million, a large part of which could not be justified as emergency use. But it was spent as if it was, although it should have been charged to their General Fund Budget monies according to California's Legislative Analyst Office. The Legislature not only did not do their job in overseeing how that money was spent, but in addition just rubber-stamped those expenses out of the Emergency fund.

Now it could be honestly argued that the Emergency Fund was not big enough, and should have been bigger in the first place. But the Legislature did not do it's job, and CalFire just went ahead and spent the money because they could. No one was over-seeing what they did.

So that brings us to this years budget. The Governor wants to take CalFire completely out of the General Fund Budget, and fund it like several other agencies in California. By creating a "fee" on the insurance of every home, personal real estate and business property in the state.

And what would be wrong with this?
  • A "fee" has to be voluntary. There is no way this "fee" could be voluntary according to the LAO
  • CalFire has no oversight now, as the Legislature has not done their job in the past to make sure they stayed within their budget
  • Taking them out of the funding from the General Fund budget means there will be no oversight as to how they spend their funds.
OK, you say since the Legislature hasn't been doing their job anyway what difference does this make? Should CalFire not be responsible to some entity in the State other than themselves? Is CalFire such a sacred cow that they are allowed to make their own rules and not have to account for how they are spending the State's money? And when they decide that that 4.8% fee on your property insurance is just not enough, and they want even more?

Think of them as the DMV on steroids...

Oh, that second State Fire Department? That would be eMA, Emergency Management Agency. That is also to be funded by that "fee". A fire department without firefighters, telling county and city fire fighters how they will perform under mutual aid responses, and using eMA's equipment instead of their own since the State won't be helping local fire departments upgrade as they could have done if eMA didn't "need" to buy the equipment...

Now, just multiply these problems by how many agencies and departments in the state operating under similar "rules".

The California Legislature has refused to do their job and has created for many agencies the moral hazard of both having no real oversight and the ability to have almost unlimited budgets. Until this problem and others are seriously dealt with by the Legislature, instead of voting away their responsibilities, California will never be able to fix the problems.

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