State Budget: Fixing the Maintenance Factor - Pacific Standard

State Budget: Fixing the Maintenance Factor

Efforts to reform California’s governing system often focus on one or two ideas that can be turned into ballot initiatives. Billionaire Nicolas Berggruen’s Think Long Committee was different. Members agreed on a broader approach – offering a series of integrated proposals in seven major areas with the goal of designing a new governing system. Here are highlights of those recommendations dealing with the state budget, the most bipolar of California's maladies.
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Budget

THE PROBLEM: The California budget problem is Kafkaesque. The state constitution requires a balanced budget, but all the budget rules and formulas the state has adopted make a balanced budget virtually impossible. Among the symptoms: revenues are volatile and unpredictable, and insufficient for necessary investments in schools, higher education and infrastructure.

THE BACKSTORY: Even before the Think Long Committee met, Nicolas Berggruen and Nathan Gardels started budget work by supporting then-Gov. Arnold Schwarzenegger’s bid to get a rainy-day fund proposal on the state ballot. The fund, according to its backers, would gobble up surplus money from California’s volatile tax system in good years, which could be used to plug budget holes in bad years. The rainy-day fund was approved for the ballot, though the vote on the measure has been delayed until 2014.

California Issue

What is Think Long thinking?
The Think Long Committee developed specific recommendations for improving California's governance. Joe Mathews offers an in-depth look at seven specific areas afflicting the state, and what the reform organization proposed as remedies. The other six areas are:
Taxes
Voter Initiatives
Jobs
Citizens' Council
Education
Local Government

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Once the Think Long Committee convened, it looked at budget reform proposals first. The starting point was a series of complicated budget fixes advocated by California Forward, a foundation-backed good-government group. Think Long considered a host of other items as well, but eventually adopted recommendations very much like the California Forward plan.

Pieces of that proposal are on this November’s ballot as Proposition 31. (Berggruen has donated to the campaign for Prop 31.)

The committee did not undo the complicated set of formulas that govern the budget —with one prominent exception. After much discussion, including consultation with outside experts and government officials, it proposed eliminating a piece of the state’s school funding formula known as the “maintenance factor.” That’s money the state owes to schools in subsequent years when funding falls short of the formula’s requirements in low-income years.

Think Long committee members disliked the factor as they learned more about it. Their view: Since the state doesn’t have the cash, the powerful teachers’ union can win special concessions and other demands—often that reform-minded bills be killed—in negotiations with the Legislature.

THE PROPOSAL: Think Long’s recommendations include the rainy-day fund, changing the legislative calendar to focus every other year on budget oversight and performance review, and requiring legislation to be in print for seven days to permit more careful review. Think Long also backed pay-as-you-go rules for legislation and for ballot measures. Measures costing more than $25 million would have to include provisions to offset that cost.

In eliminating the maintenance factor, Think Long proposed to “buy it out”—eliminating the obligation and replacing it with $5 billion more a year for schools in its tax plan.

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