Legislative Analyst's Office The 2003-04 Budget Bill: Perspectives and Issues

Addressing the State's Fiscal Problem 

 As discussed in "Part I" of this volume, California faces an enormous budget problem in 2003-04. To address this problem, the Governor's budget proposal includes deep spending cuts in most program areas; major reductions in local government subventions; and a variety of other loans, funding shifts, and borrowing. Our companion volume, the 2003-04 Analysis, evaluates the spending proposal in detail.

Approaching the Budget Problem

In evaluating and deciding how to respond to the Governor's overall budget-balancing plan and individual proposals, the Legislature faces a formidable challenge. It must first identify its own spending and revenue priorities. It must then assess whether the Governor's proposals in various areas are consistent with its own priorities, and if they are not, what other budget-balancing options it should consider.

In December 2001, we identified for the Legislature certain key budget-balancing principles, strategies, and tools that it might wish to consider in evaluating the Governor's proposals and formulating its own budget-balancing options. We continue to stress the need to:

• Undertake current-year actions to accompany the budget-year solutions that will be adopted later, so as not to concentrate the entire solution to the shortfall all in one year.
• Put everything "on the table" when considering alternative budget solutions, so as to neither overly rely on any one group of solutions nor overlook others. 
• Recognize that a significant amount of ongoing solutions will be needed to supplement the one-time ones if the state's underlying structural budget deficit is to be fully and comprehensively addressed.

We also have suggested the Legislature pursue such key strategies in order to (1) decide on the relative roles of expenditure and revenue options in dealing with the shortfall, (2) identify the appropriate contributions to come from different program areas, and (3) decide the appropriate mix of one-time versus ongoing solutions.

Overview of "Part V" Analysis

This part includes three pieces that are intended to assist the Legislature in addressing the state's fiscal problem and developing its own response and options to it. These three pieces deal with the following key topics:

• The Governor's $8.3 billion tax increase proposal and alternative revenue-raising proposals to help address the problem.
• The budget's realignment plan to shift roughly $8.2 billion of state program responsibilities (primarily in health and social services) to localities, and provide new tax revenues to support them.
• Alternative options for reducing state expenditures that the Legislature may wish to consider in addition to, or as substitutes for, the budget's proposals.