Ten Myths of the California Budget

Editor: The following Ten Myths was prepared this month by the California Budget Project. Go here to see their nifty graphs and pie charts.

Myth #1 : The Largest Share of the State Budget Goes To Prisons

The Facts:

• The State spends more than four times as much on K-12 education as it does on corrections and one and one-quarter times as much on higher education as it does on corrections.

• The state spends three times as much on health and human services as it does on corrections.

Myth#2 : State Spending Is Out of Control

The Facts:

• Current year spending is $16.9 billion below 2007-08 levels and Proposed 2010-11 spending is $20.1 billion below 2007-08 levels.

• 2009-10 General Fund spending is $21.5 billion below the baseline level projected by the Legislative Analyst’s Office in 2004.

• As a share of the state’s economy state spending is at its lowest levels since the early 1970s.

Myth #3: The Budget Can Be Balanced By Cutting “Waste, Fraud, And Abuse”

The Facts:

• More than two-thirds of General Fund spending goes to schools, local governments, individuals, and health care providers.

• California’s overall spending levels are moderate in comparison to those of other states.

• State spending is low in major programs areas, such as health and education, in comparison to other states.

Myth #4 : California’s Schools Don’t Have a “Money Problem”

The Facts:

• By all measures, California’s schools rank near the bottom in terms of per pupil spending.

• Under the Governor’s budget proposals, 2010-11 per pupil spending would be $1,543 less than in 2006-07, after adjusting for inflation.

Myth #5 : California Has a “Bloated” State Bureaucracy

Facts:

• California ranks 48thamong the 50 states with respect to the number of state employees per 10,000 population.

• California ranks 41stwith respect to the number of state and local government employees per 10,000 population.

Myth #6: High Taxes Are Driving Business and the Wealthy Out of California

The Facts:

• Measured as a share of the state’s economy, California is a moderate tax state.

• The number of millionaire taxpayers has increased more rapidly than the number of taxpayers as a whole since the passage of Proposition 63, which imposed an additional tax rate on high-income individuals.

• There is no empirical evidence that businesses are leaving California.

Myth #7: California’s Budget Problems are Spending Problems, Not Revenue Problems

The Facts:

• California is growing, aging, and becoming more diverse creating new demands on the budget.

• Tax cuts enacted over the past two decades have taken a large bite out of the budget and recently enacted reductions further widen state budget gaps.

Myth #8: Raising Taxes During an Economic Downturn Is Bad for the Economy

The Facts:

• Prominent economists argue that spending cuts are more harmful to the economy than carefully targeted tax increases.

• An analysis by Moody’s.comfor the Senate Human Services Committee concluded that the largest “bang for the buck”in terms of state spending would come from spending on food stamps and cash assistance.

Myth #9: Rising Welfare Costs Are a Major Source of the State’s Budget Problems

The Facts:

• Welfare spending dropped $349 million between 1996-97 and 2009-10, without adjusting for inflation. On an inflation-adjusted basis, spending is down by $2.5 billion.

• The share of Californians with incomes below the poverty level receiving cash assistance has dropped by more than half since 1995.

Myth #10: There Are No Alternatives to an “All Cuts” Budget

The Facts:

• Budgets are about values and choices.

• In 2009, 24 states –including California –increased taxes to help balance their budgets. However, California’s temporary tax increases begin to sunset.

• However, California is the only state in the nation to require a supermajority vote for passing a budget and any tax increase.

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