As the annual wrestling match continues in Sacramento over this year’s state budget plan, the key debate has come down to tax rebates. How big should they be, and in what manner should they be granted?
Here’s a novel suggestion: Don’t give any rebates at all. Instead, spend the surplus where it is so desperately needed on the state’s aging infrastructure.
Spending money on infrastructure has never been a politically expedient thing to do. California’s old waterways and aqueducts are crumbling away at an alarming rate, but not many people other than Department of Water and Power workers ever get to see the damage. The water still comes out of the tap, so why worry? Sure, there are a few potholes on the expressway; just drive around them.
Tax rebates are a lot more popular among voters than spending on such relatively invisible things, so it’s no wonder politicians enjoy giving them away.
Yet decades of irresponsible spending plans have taken their toll on California’s streets, bridges, pipes and other infrastructure systems. Last year, the Riordan administration estimated that the city of L.A. needs $3.4 billion in street and traffic improvements, and another $2 billion for projects like flood control systems and sewer upgrades. That’s $5.4 billion in immediate needs and that’s just the city of L.A. It would take about $90 billion over the next 10 years to make needed infrastructure upgrades for the entire state, according to a 1998 report by the California Business Roundtable.
Local planners say it is critical that these infrastructure funds be allocated now, while the economy is strong and the state is experiencing budget surpluses. If it’s hard to get money for infrastructure during boom times, it’s all but impossible during an economic downturn. That makes this year’s budget fight a particularly crucial one: If more money isn’t allocated for infrastructure spending now, it may never be available.
During most of the discussion and news coverage of this year’s budget battle, the Gann spending limit has been invoked as a reason why tax rebates are necessary. Approved by voters in 1979 and amended slightly by more recent ballot measures, this law set up a formula that calculates a maximum state budget based on tax revenues, population growth and the cost of living. Any surpluses above this limit must be evenly spent on education and tax rebates.
Yet there is an easy way of getting around the Gann limit just give the money back to local governments, which are responsible for much of the state’s infrastructure. California started looting local governments in the early 1990s, diverting local property tax revenues to balance the state’s own budget. The state can return as much money as it wants to local governments without regard to the Gann limit, as long as it doesn’t dictate how that money is spent. Given the $3 billion the state has taken from local governments over the past few years, it seems high time to send at least some of that money back.
Gov. Gray Davis has proposed a plan to send a one-time check for $150 to all California income taxpayers. This doesn’t apply to very low-income residents, because they don’t pay income tax. Senate Democrats are calling for a yearly sales tax rebate of perhaps $50.
A check for $50 or even $150 isn’t going to have a big impact on the lives of any California taxpayers. But if the roads fall apart, bridges crumble and critical pipes burst, it will have a big impact on everybody.
