Spending and Taxes in California

| Thu May. 28, 2009 12:15 PM PDT

Are California's budget woes due to skyrocketing spending?  Michael Hiltzik says this is a myth:

Analyzing the 2008-09 budget bill last year, the legislative analyst determined that since 1998-99, spending in the general fund and state special funds — the latter comes from special levies like gasoline and tobacco taxes — had risen to $128.8 billion from $72.6 billion, or 77%.

During this time frame, which embraced two booms (dot-com and housing) and two busts (ditto), the state's population grew about 30% to about 38 million, and inflation charged ahead by 50%. The budget's growth, the legislative analyst found, exceeded these factors by only an average of 0.2% a year.

There's a lot of truth to this, but I think it goes too far.  For starters, Hiltzik uses a special measure of inflation, not the usual CPI-U, and he doesn't include spending from bond measures.  The chart on the right, using budget data from the Department of Finance, shows per-capita spending including bond measures, adjusted for inflation using the standard CPI figures from the BLS.  There are two things that jump out at you.  First, even using a standard measure of inflation, Hiltzik is right: per capita spending in the decade between 1999 and 2009 has barely budged.  It's up about 6%.

At the same time, if you compare it to 1997 it's up 23%.  California went on a spending spree during the dotcom boom and we never returned to our old levels even after the bust.  What's more, spending in the years between 1999 and 2009 was up even more.  In the decade between 1997 and 2007, per capita spending increased an impressive 39%.  We've tightened our belt considerably in the past couple of years, but that's against the background of some pretty sizeable increases in the intervening years.

California has multiple problems.  Prop 13 reduced our tax base permanently and made it all but impossible to adjust other taxes to make up for it.  Citizens have approved bond measure after bond measure in the seeming belief that because they don't raise taxes, they also don't cost any money.  The governor and the legislature have relied on way too much smoke and mirrors.  But spending has also gone up.  There's just no way to understand the whole picture without acknowledging that.

UPDATE: California's population actually grew about 15% between 1998 and 2008, not 30%.  However, that was just an arithmetic error on Hiltzik's part.  The overall budget growth result that he quoted from the LAO is correct.

(I used population figures from the Census Department in my calculations.  So the per capita spending numbers in the chart should be correct.)

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