EDITORIAL: A hedge against the next recession
By The Press Democrat, Santa Rosa, Calif. | |
McClatchy-Tribune Information Services |
Answer: All the money got spent when times were flush.
When there's a budget surplus, Republicans reflexively call for tax cuts or rebates. Democrats, meanwhile, want to expand programs or start new ones. Sometimes legislators compromise: They cut taxes and increase spending.
They may even extol the virtues of setting some money aside as a hedge against recession -- but next year, if the good times keep rolling. Principal before principle.
All of this is preamble to a special legislative session, beginning Thursday, to consider Gov.
Schwarzenegger was back six years later with another rainy day fund, explaining that his original plan had too many loopholes. Legislators put it on the ballot as part of a budget deal, then pulled it off two years later. Now, Brown wants to rewrite it before it's submitted to the voters in November.
There's every reason to be skeptical.
Yet a reserve fund makes sense, especially considering the gyrations in state tax collections. Saving in good times to ease the pain is bad times is wise public policy. Most cities and counties maintain budget reserves. They're legally mandated for
The markets -- and the state -- are enjoying one of those feasts right now. Six years ago, when the economy collapsed,
Expect the cycle to repeat itself as long as
The reserves would be available during a recession or following a natural disaster, but Brown wants more flexibility. His plan also allows the fund to be tapped for schools, to pay down debt and to reduce unfunded liabilities, such as those for state employee pensions and retiree health insurance.
On balance, this is an improvement over Schwarzenegger's proposal from 2010, largely because it addresses the state's hidden deficits. It also has the same shortcoming as past proposals -- providing the flexibility to react to a crisis means trusting that future governors and legislators won't invent a specious emergency.
Still, a properly tended rainy day reserve fund would help the state weather the next recession. For that reason, legislators should put Brown's plan on the November ballot.
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(c)2014 The Press Democrat (Santa Rosa, Calif.)
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