Source: Office of Gov. Arnold Schwarzenegger. Caption text: "Governor Schwarzenegger, Senate and Assembly leaders reach agreement on California’s 2005-2006 state budget. The budget decided upon devotes more than half of California’s general fund dollars to education and fully invests in reducing traffic and improving our roads. From left to right: Assembly Republican Leader Kevin McCarthy, State Assembly Speaker Assembly Fabian Nunez, Governor Schwarzenegger, Senate President Pro Tem Don Perata, and Senate Republican Leader Dick Ackerman."
[begin Governor's July 5 release text]
Governor Arnold Schwarzenegger today announced a 2005-2006 budget agreement with Legislative leaders that does not raise taxes, contains no new borrowing, pays down our debt and invests in education, transportation, public health and public safety.
“Together we have reached the best budget agreement California has seen in years, proving again that when we are a unified team we are unstoppable. This budget does not raise taxes or increase borrowing. It provides $3 billion more for our schools, provides $1.3 billion more for crucial transportation projects and invests in both public health and safety,” said Governor Schwarzenegger. “This is a budget to put us on the path toward rebuilding California. Now we must work together to reform and repair our broken budget process and break the cycle of budget deficits so that nothing will stand in the way of creating more prosperity and opportunity in California than ever before.”
The 2005-2006 budget agreement:
- Is balanced and contains no new taxes and no new borrowing.
- Funds education at the highest level in the history of California by increasing K-14 funding by nearly $3 billion and going beyond Proposition 98 requirements.
- Pays down our debt and invests in public safety and local services by paying back all of the $1.2 billion in funds owed to cities and counties one year early.
- Puts $1.3 billion in gas taxes into California’s roads and transportation system by fully funding Proposition 42 for the first time so Californians can spend more time at home and less time on the road.
- Invests in health care through education programs that will increase the number of nurses in the face of a growing nursing shortage.
Specifically, the budget agreement provides the following in the areas of: education funding, transportation, local government funding and increasing the number of nurses in California.
- This year, total education funding including California State University and University of California funding will rise to more than $61 billion, the most ever spent on education in California.
- State funding to K-12 and higher education will total $50 billion, more than 50 percent of the state budget.
- True to the Governor’s May budget proposal, education will receive a $3 billion increase, going beyond Proposition 98 requirements.
- Per pupil spending will increase to an all-time high of more than $10,000.
- University of California and California State University student fees will continue to be lower than comparable universities across the country.
- California Community College fees will remain the lowest in the nation.
Paying Back Cities and Counties Early:
This budget pays off all of the $1.2 billion state debt to cities and counties one year early. This means:
- More savings for taxpayers and more funds for important local services like law enforcement, firefighting and vital health services.
- A reduction in next year’s budget debt.
Investing in Transportation:
Governor Schwarzenegger is the first governor to fully fund Proposition 42, putting $1.3 billion in taxes paid at the gas pump directly back into transportation construction. The Governor’s investment in roads and transportation infrastructure will create jobs, improve our economy and get Californians out of traffic so they can spend time doing the things they enjoy.
Increasing the Number of Nurses in California:
By 2010, California will have a shortage of 47,600 nurses. That shortage will have grown to 116,000 vacant nursing jobs by 2020. In March, Governor Schwarzenegger announced the release of $13 million in funds to support statewide nursing job-training and education initiatives. In April, he announced the California Nurse Education Initiative, a public-private partnership to provide an added $90 million in funding for nurse education. This budget expands upon that initiative with an additional $20 million to help California produce more nurses by:
- Offering loan forgiveness to graduate level nursing students to encourage more nurses to become faculty.
- Purchasing simulators to create regional simulation laboratories so that more nursing students have access to clinical education facilities.
- Increasing slots in high-demand nursing programs within the California Community College system.
The 2005-2006 budget will put California on the path toward rebuilding to make our state great once again. However, California still has a budget system that allowed the state to incur a $22 billion debt which the Governor inherited upon taking office. Without reform, that system could bring the state to the brink of bankruptcy again. Reforming the budget process is essential to keeping California on the path of progress.
|CA State Sen. Tom McClintock|
Floor address on budget passage, July 7, 2005
Sen. McClintock: Mr. President: I am sorry to interrupt the chorus of self-congratulations, but I feel compelled to state an obvious fact -- that this budget is $6 billion out of balance; that the state’s chronic deficit spending is getting worse, not better; and that the growth of general fund spending is growing and not shrinking.
Nor can I join applauding the "painstaking negotiations" that have produced this document. The fact is, in May the Governor proposed spending $88 billion (General Fund), the Democrats countered at $89 billion, and they have now compromised at $90 billion. I suppose it is a blessing that the negotiations didn’t go on any longer.
Let me run through the vital statistics of this spending plan. According to the Legislative Analyst’s Office in June, inflation and population will grow 5 percent and revenue will grow 6 percent. But according to the budget staff analysis, spending will grow by 10 percent. That makes it measurably worse than the plan the Senate rejected on June 15th.
On June 15th, we rejected a $5 billion operating deficit. This budget spends $90 and takes in only $84 -- for a SIX BILLION DOLLAR shortfall -- THIS YEAR.
On June 15th, we rejected a 9 percent increase in state spending. This budget is a 10 percent increase -- averaging 7 ½ percent over the last two years. Spending increases under the Davis administration averaged 7 percent.
Let me repeat: This budget spends $6 billion more than we take in. Last year we spent $2 billion more than we took in. That means that this year’s operating deficit is THREE TIMES bigger than last year’s.
Now, I’m sorry to throw cold water on the celebration, but that is not progress. That is the opposite of progress.
And yet, once again, we’re told that the budget is balanced. But the blunt truth is that it is only balanced with borrowed funds carried over from last year.
We’re told that there is additional debt repayment in this budget. But listen carefully: you’re using borrowed money from last year to repay borrowed money. That gets you precisely nowhere.
And by next year, according to the staff analysis, we will have completely maxed out on our Prop 57 credit card and we’ll still be about a billion dollars short. And our cumulative budget deficit will have grown to nearly $30 billion. That’s more than $3,000 in taxes that an average family will be obligated to repay just as surely as the balance on their credit card statement.
IF this budget is adopted today, I believe that it can be safely said that "Never in the field of California finance has so much been owed by so many...because of so few."
And this is only if everything goes perfectly. And that requires us to ignore the urgent warnings of the Anderson Forecast -- and others -- that difficult economic times lie directly ahead.
If there is so much as a hiccup in the economy, this state will be plunged into a financial crisis that will make 2003 look like the good old days.
There is, however, one good thing that this budget accomplishes. It makes it absolutely imperative that we restore to the governor the authority that he held from 1939 until 1983 to make mid-year spending reductions without having to return to the legislature.
This authority served this state extremely well until it was bargained away -- over my objections, I might add -- back in 1983.
Restoring the authority of the governor to halt this state’s chronic deficit spending is at the heart of the "Live Within Our Means Act," and with the adoption of this budget, it is now about the only thing that stands between our state and financial insolvency. We would be well advised to adopt that measure right here as an adjunct to this budget.
This is my 19th state budget vote. It might surprise many of you to know that I voted to support five budgets in the 1980’s -- budgets that were actually balanced and that had prudent reserves. The concept seems almost quaint today. Those were days when we had a Triple-A credit rating and our debt service was 1.3 percent of the budget.
And then in the late ‘80’s we saw the budget process gradually shifted from the legislature to the so-called Big Five. And we began passing budgets that were brazenly unbalanced or that included massive tax increases that brought even bigger deficits as they crushed the economy.
And we are now dragging along the cumulative result of this folly. Some $25 billion of deficit-related general fund debt -- growing to nearly $30 billion by next year. Our credit rating is the lowest in the nation and our debt service costs have quintupled as a percentage of general fund spending.
I don’t know how much farther we can go down this road before the state’s credit will be completely exhausted. At that point, we will not only have failed to provide the sound management of our generation’s affairs -- but we will also have stripped our children of their ability to meet their generation’s needs as they struggle to repay the mountain of debt with which we have crippled them.
I’m sorry to rain on this parade but those are the facts, and as John Adams said, "Facts are stubborn things."