When
Governor Schwarzenegger took office in late 2003, he inherited from the
previous administration a state budget that was out-of-whack and a
budget-writing process that was broken.
There was
already a $16.5 billion problem.
When he
proposed his first budget in January 2004, Governor Schwarzenegger laid out a
plan to fix both the budget shortfall and the broken system. It had 4 parts:
Economic
Recovery Bonds
A
constitutional amendment for a balanced budget and a rainy-day fund to
begin fixing the budget process
Attack
the operating deficit with a responsible budget
And
once again make California a powerful job-creating machin
The Governor
put Propositions 57 and 58 on the March 2004 ballot, which attacked two of
those parts of the plan - respectively, $15 billion in Economic Recovery Bonds
to retire debt from the previous administration in a fiscally responsible way,
and the Balanced Budget Act to begin restructuring the budget process by
requiring the enactment of a balanced budget, allowing the Governor to declare
a fiscal emergency, and establish a budget reserve
California
voters passed the Economic Recovery Bonds Proposition 57 with 63.4
percent "yes" to 36.6 percent "no."
Voters
also passed Proposition 58 - 71.2
percent "yes" to 28.8 percent "no.
In 2005, the
Governor continued working to reform the budget system, placing Proposition 76
on the November ballot that would have limited irresponsible spending growth,
directed excess revenues to a budget reserve, allowed the Governor to reduce
expenditures in a fiscal crisis, protected local governments' funding and
prohibited certain kinds of borrowing.
Millions of
dollars in special interest money was raised to oppose the Governor and other
unrelated initiatives he was advocating, and Proposition 76 was defeated
at the polls, 37.6 percent to 62.4 percent.
Despite that
defeat, the Governor continued working to correct the state's budget problems
in 2006, proposing a budget that would make a historic investment in paying
down debt. In June, in one of only four on-time budgets in the past two
decades, the Governor and the Legislature agreed on a budget that
put $5 billion into debt repayment and a reserve fund.
By this
time, California was on path toward stronger financial standing, and in
January 2007 Governor Schwarzenegger proposed a budget that eliminated the state's operating deficit, paid off debt early, and
created a $2 billion budget reserve - all without raising taxes. Spending was
held essentially flat.
Additionally,
the state appeared to be creating jobs and bringing in increased revenues. In
August 2007, the Governor signed a budget
that put $4.1 billion into a reserve while eliminating the $16.5 billion
deficit that he had inherited less than four years earlier.
However, the
subprime mortgage crisis revealed itself, and continues to have worse
effects than anyone had predicted. By December 2007, the Governor called a special
session (allowed under Proposition 58, which the Governor had championed)
to address what, at the time, was projected to be a $3.3 billion shortfall due
to the housing crisis' impact on our economy.
That special
session resulted in mid-year
cuts to the state budget totaling over $1 billion.
But the
state knew immediately that that would not be enough and that deep cuts were
needed in the 2008-09 budget. After a record-long budget impasse, the
Governor's leadership led to an enacted budget with $9.3 billion in cuts. It also resulted in an agreement to put true budget reform
– that will stabilize our budget by strengthening our
rainy-day fund – onto the ballot and before voters.
Then Wall
Street collapsed, the credit markets froze up, and an economic emergency
that began in the housing industry ballooned into an international financial
crisis. Just weeks after signing the 2008-09 budget, Governor Schwarzenegger again
called the legislature into a special session and outlined a plan to
not only correct the budget - at that time projected to be $11.2 billion lower
in revenues - but also to stimulate California's economy to counteract the
impacts of the global economic crisis on California.
To date
(12/29), the Legislature has failed to do its job of addressing the budget situation and has also done nothing to
create jobs or help keep California families in their homes.
State General Fund Spending Over the Past 5 Years
2003-04
General Fund Spending: $78.345 billion* (*Gov. Davis' last budget)
2004-05
General Fund Spending: $79.8 billion
2005-06 General
Fund Spending: $91.59 billion
2006-07
General Fund Spending: $101.4 billion
2007-08
General Fund Spending: $103.33 billion
2008-09
General Fund Spending: $103.4 billion* (*fiscal year not yet completed; also pending
further mid-year reductions sought by the Governor)
Health and Human Services