It’s time to reconsider rules that deny policymakers the tools needed to fulfill the promise of a California dream for all Californians.
By Scott Graves, Special to CalMatters
Scott Graves is the director of research for the California Budget & Policy Center, a nonpartisan, research and analysis nonprofit.
California faces a frustrating paradox. The state budget is flush with cash, but a decades-old ballot measure could soon limit the amount that can be used to support millions of Californians who need help now.
Meanwhile, fortunes are rising for corporations and the wealthy, and most Californians think the enormous gap between rich and poor will grow in the years ahead.
It’s time for state leaders to chart a path toward overhauling the antiquated spending cap that limits our ability to make the ongoing investments needed to help all Californians be healthy and thrive.
Californians’ concern with rising inequality isn’t surprising: Millions continue to suffer the effects of a pandemic that has exacerbated long-standing health and economic inequities, especially for communities of color, who are experiencing higher rates of illness, death and overall hardship. To make matters worse, key housing, sick leave and economic supports ended for California families last fall.
Californians strongly support expanding safety net programs to improve economic security. And the continued growth in state revenues – as recently highlighted in Gov. Gavin Newsom’s proposed state budget – means the money is there to do so.
But there’s a hitch: Policymakers’ hands are tied by an archaic rule that links state spending today to the budget priorities of the 1970s – a disco-era spending cap known as the Gann Limit.
California voters approved the Gann Limit in 1979, in one of the lowest-turnout elections in modern state history. The Gann Limit applies to state spending as well as to spending by local governments. If the state exceeds its limit over a two-year period, the Legislature must spend the revenue over that limit in specific ways – providing half to taxpayers and the other half to K-12 schools and community colleges.
The Gann Limit challenges California’s ability to adequately support current services. The cost of many public services – from health care to support for seniors and people with disabilities – can easily increase faster than the spending cap is allowed to rise each year. If we don’t allow growing revenues to meet the cost of basic services, policymakers could be forced to make major cuts to spending outside of K-14 education, such as for health care, child care and housing assistance.
The spending cap also constrains state leaders’ ability to advance bold policy solutions. These include affordable child care for all working families and ongoing investments to address the homelessness and affordable housing crises. Funding significant new investments to help all Californians thrive can best be achieved by removing the straitjacket of an outdated spending limit.
State policymakers have limited options to avoid hitting the Gann Limit. For example, they can spend more on items excluded from the limit, such as infrastructure projects. This is a key reason why major infrastructure proposals have been prioritized by state leaders as part of this year’s budget deliberations.
In contrast, the spending cap restricts state spending on critical supports like child care, in-home care for seniors, and assistance with housing costs. The Gann Limit doesn’t prioritize these kinds of people-focused investments, implicitly viewing them as excessive or unnecessary.
Since the spending cap is in the California Constitution, state leaders would need to ask voters to approve any changes to it. Substantially reforming or – better yet – repealing the Gann Limit would allow the state to plan for and make the bold investments needed for all Californians to share in the state’s wealth.
Californians want to address growing income and wealth inequality, and we have the resources to support those who have been left behind, both before and during the pandemic. It’s time to reconsider rules made by a previous generation of Californians – rules that deny policymakers the tools needed to fulfill the promise of a California dream for all Californians.