An Economic Backdrop for Fiscal Reform in California

As we share this information with you, California Forward is making progress on its efforts to promote public understanding and support for fiscal and governance reforms. The Beacon report along with those by the state’s fiscal analysts make it clear that the short-term policy responses to the crisis must be integrated into long-term structural reforms. Among them:

1. California will need a multiyear strategy for responding. This plan should enable public managers to find ways to reduce costs as much as possible without reducing services. Similarly, California will need to develop an ongoing process for multiyear budgeting – one that focuses policymakers and the public on the long-term implications of revenue and spending decisions.

2. Policymakers will need to focus on the priorities. As state and local leaders consider raising taxes and cutting programs, officials need to establish priorities, ask the hard questions about the best way for programs to achieve those objectives and be clear with the public about those choices. Similarly, California should put in place a budget process that is guided by results and focuses policymakers on how to best use available resources to meet those priorities.

3. As the fiscal crisis deepens, California will need to rethink the role of the state and its local partners. Scores of reports and recommendations have advocated for realigning state and local authority – over resources and programs – as a way to reduce costs, improve results and increase public accountability. Increasingly these reports have focused on ways to encourage local agencies to work together regionally to prepare their workforces and grow their economies, while helping vulnerable families and ensuring public safety.

In the coming days California Forward will put forth a proposal for a new state budget process with the potential to help legislators make difficult choices in ways that over time can improve the value of public expenditures and begin to restore public trust. This proposal is predicated on the principles for reform published earlier this year, refined by conversations with thousands of insightful state, regional and community leaders. We look forward to discussing and refining this proposal – with confidence that a bipartisan agreement on budget reforms can be the catalyst for bipartisan agreement on the difficult choices required to respond to the immediate budget dilemma.

In addition, we are exploring how we can best contribute to an informed and thoughtful discussion with Californians about the choices for restructuring the revenue system to provide the necessary resources, create stability and improve accountability. We look forward to hearing your thoughts on this issue as that project unfolds.

This is the time for all leaders to stand tall. California will almost certainly recover. But the speed of that recovery – the ultimate impact on schoolchildren and university students, and their futures – will depend overwhelmingly on the choices made. Our position in the global economy, the potential of all Californians to prosper, will be determined in part by how the budget is “balanced,” but more significantly by whether we adapt our systems of governance to deal with this and future challenges.

We are committed to developing solutions that match those challenges.