It was easy to miss California Governor Jerry Brown’s State of the State address on Monday this week. Besides competing with events in the Middle East, his speech had the disadvantage of being little more than a pitch to California voters for the budget plan his office published in January. The plan is touted as inflicting pain on everyone, but it doesn’t. It postpones, for separate deliberation, a remedy for California’s looming $700 billion public-pension deficit. And it leaves the state’s regulatory posture untouched.
The Brown budget plan does propose significant cuts in health, higher-education, and welfare spending. It proposes a “fundamental realignment” of government that would shift more of the responsibility to pay for police and fire services, criminal courts, prisons, and parole programs to the counties and major cities. Brown plans to ease this transition with a five-year extension of the current, elevated tax rates, from which the revenues would be distributed to local governments. His budget includes consolidation of administrative functions in the state government, along with cuts of 8-10 percent in state-worker compensation.
But ultimately, the Brown approach is narrow and exclusively fiscal. The governor is trying to balance the books without addressing the government-imposed conditions that tend, inevitably, to unbalance them. The problem of unsustainable pensions is one of those conditions — and while Brown does propose to address it, he hasn’t attached any real incentives to the debate. By contrast, however, he is prepared to hold state funds for police and fire services hostage to the people’s willingness to vote for a tax extension. It’s a tribute to his laid-back brand of pugnacity (and the quiescence of the California media) that this veiled threat has gone virtually unrecognized for what it is. A New York politician would not be so lucky.
As alarming as the pension problem is, a more fundamental dysfunction is California’s vigorous, energetic, enthusiastically experimental regulatory environment. Regulation, as much as the tax code, drives businesses and jobs out of the state. Besides creating the artificial drought in the San Joaquin Valley, regulation has shut down entirely such potential sources of revenue as offshore drilling and modernized refineries, while ensuring that the state’s power and water infrastructures will not be adequately updated, and imposing some of the nation’s highest compliance costs on businesses and customers.
But Jerry Brown doesn’t propose to change policy on these matters, nor does he propose any changes in the administration of the regulatory environment. State regulatory agencies and their charters will be affected, in his budget, only by the government-wide consolidation of functions.
At some point, it may occur to California voters that they’re being asked to do all the adjusting so that the state government need suffer no interruption in imposing an ideological vision on them. I don’t see any other state government proposing to make these same choices in 2011; as usual, California is out on its own limb. It will be instructive, and no doubt cautionary, to observe what happens.