The last time we saw government officials so excited was in the late 1990s after Gray Davis took office. Fueled by the dot.com boom, state government took in unexpected revenue over three successive years of $6 billion, $10 billion and then $12 billion.
Government watchdogs like the Howard Jarvis Taxpayers Association recommended that the state make prudent use of the windfall by returning the money to taxpayers; using it for one time expenditures like school construction and thereby eliminating the need for costly bonds; establishing a "rainy day" fund; or a combination of the three.
However, with all this new revenue, state leaders had a major relapse with their spending addiction. Assuming these elected worthies have even taken Economics 101, their apparent euphoria made them forget that economies -- by their very nature -- are cyclical. Significant upturns and downturns are not the exception, they are the rule.
With unrestrained glee, California politicians during the Gray Davis years took on new long-term spending commitments by expanding programs, hiring thousands of new employees and providing generous benefit increases to current workers.
Several years latter, when the Silicon Valley miracle became the "dot.bomb," the state found itself handcuffed by a structural deficit that continues to plague finances to this day. Commitments to unsustainable spending cost Davis his job, and the Herculean task of undoing the damage has eroded a good chunk of the popularity and political capital of successor Arnold Schwarzenegger.
So what about our local officials who are now giddy over unexpected revenue? Have they learned anything from the disastrous conduct of their Sacramento brethren who faced a similar dilemma?
During state government's boom times, many local officials joined the party by agreeing to lavish benefit increases for local government employees. Now that the bills are coming due, they are learning that supporting these obligations, too, is proving unsustainable, so they are thrashing about, always searching for new sources of revenue, i.e., more taxes.
The budget decisions now being made by local politicians will be heavily influenced by the new property tax revenue. Taxpayers will be watching closely. We hope they pass the test by acknowledging that even in real estate there are peaks and valleys and that these major increases in tax receipts cannot be expected to continue indefinitely.
*Jon Coupal is an attorney and president of the Howard Jarvis Taxpayers Association, California's largest taxpayer organization with offices in Los Angeles and Sacramento.
* Published July 3, 2005
