Historically there have been large imbalances in California's annual budget. What are the causes of budget deficits in California?

Question

What will be an ideal response?

Answer 1

Varies. (1) Ballot-box budgeting. Voters limit the choices lawmakers can make. One example is Proposition 13, which severely reduced the amount of money available through property taxes, and imposed a two-thirds supermajority vote to increase taxes or impose fees. (2) Majority versus supermajority rule. Historically, such supermajority requirements have hampered the legislature's ability to reach quick compromises, because usually some minority party's votes are needed to pass such proposals. Can be seen in the two-thirds vote requirement to raise taxes and fees. (3) Unwillingness to compromise. Increasingly, the two parties have been unwilling or unable to reconcile their fundamental political differences; the most visible difference lies in the Republicans' refusal to raise taxes, and the Democrats' opposition to cutting certain social services. (4) Special interest pressure. Special interest stakeholders, or those affected by potential spending cuts, also weigh in, and put pressure on legislators not to make difficult choices, either by threatening to use the initiative process against them or not to vote for them again (or even to recall them). Lobbyist and interest group influence is felt through their "education" of legislators about proposed changes to the funding levels. Risk-averse politicians (those who are eligible for reelection or election to another office) are wary of alienating groups perceived as instrumental to their reelection. (5 and 6) The larger economic and political climate also matter greatly: the kinds of initiatives or agenda items that receive more or less funding in a given year is tied to shifts in public opinion over time about what is important (crime? education? prison spending?), and who is in power (Democrats or Republicans in the legislature and/or the governor's office). The larger economic climate also strongly affects how much money is available: in bad years, far less revenue (sales tax, property tax, corporate tax, and income tax revenues) will flow into the state, forcing politicians to either raise taxes further or make spending cuts. (7) Structural budget deficits. Historically there was a "structural" budget deficit throughout the 2000s, meaning that deficits from previous years carried over into subsequent years, and politicians allowed the budgets to operate with deficits that were not closed with higher taxes or cuts. This structural deficit appeared because lawmakers made long-term commitments to programs that were initially paid for with temporary increases in revenues that disappeared, and necessary adjustments in spending to account for those shortfalls weren't made. It is almost impossible to make quick adjustments mid-year to a budget that was previously approved, so any gaps that appear between revenues and expenditures will result in a deficit that will carry over into the following year. Sometimes these gaps are bridged by borrowing (loans). However, as of 2013-14, the structural deficit appears to have been erased, and surpluses are projected. (8) Volatile sources of revenue. Because California relies heavily on volatile revenue sources such as the income tax, and relies on high-income individuals in particular to pay a huge percentage of all taxes collected, changes to their fortunes will also affect the state's treasury. (9) Incorrect projections. Balancing a budget depends on knowing exactly how much is coming in, and creating a budget is a series of educated guesses about how much money the state will collect and how much it will need to spend. Those forecasts can be wrong, and sometimes they are off-base by billions of dollars (which was the case during the recent economic downturn).