The limits of interactive budget tools

Did you ever want to write your own state budget? Maybe not, but some media outlets and progressive organizations have created interactive websites where ordinary citizens can do just that.

These are intended, we suppose, for educational purposes and perhaps, more specifically, to demonstrate how difficult and complex it is to create a budget for the nation’s most populous state.

For example, in 2019, CalMatters created a “Budget Decider” that allowed anyone to input various dollar amounts on both the revenue side and the expenditure side to create a state budget. The website states that it was designed “to improve your understanding of where taxes come from and where all that money goes.”

A similar interactive website was created by the progressive organization Next 10 called the “California Budget Challenge.” Its stated purpose is “to educate citizens about the state budget and the tradeoffs that are made to bring the budget into balance.”

Any attempt to educate the public about public policy and the tradeoffs that come with fiscal issues and state budgeting should be applauded, as long as it does not deceive the users.

But an argument can be made that the superficiality of these models doesn’t paint a complete picture about how government  taxes its citizens and businesses and how it spends that money.

First, these exercises assume a zero-sum game. If you add revenue to one program, such as education, you must either raise taxes or reduce spending on something else, such as transportation. But budgeting is not a zero-sum game because changes in tax policy and spending have secondary impacts. This is the problem with what is known as “static scoring.”

For example, it is assumed that if a current proposal to impose a big increase in California’ corporate income tax passes, it would generate about $2.4 billion. But businesses frequently react to higher taxes either by changing their business models, reducing their business activity or moving out of the state. In order to properly project what might happen if there is a change in tax policy, “dynamic scoring” must be used, which attempts, as best as possible, to predict changes in behavior due to changes in law.

Second, the real issue here is how efficiently public services are delivered rather than how much we spend. Obviously, the provision of public services requires funding.

But many Californians who travel out-of-state wonder how it is that other states provide a higher quality of public goods at a much lower cost. California has the highest gas tax in the nation and yet ranks near the bottom in the quality of our roads. Also, we rightfully spend a lot of money on education, but how much of our K-12 and higher education spending is either wasteful or actually counterproductive to the education of our children?

What got us thinking about these interactive budget challenges is the current scandal regarding the staggering amount of fraud in the distribution of unemployment funds.

According to the State Auditor, it could be as high as $30 billion. To put this in context, the level of fraud far exceeds twice what was projected to have been collected annually had Proposition 15, the split roll initiative, passed.

Inquiring taxpayers who visit the “California Budget Challenge” might justifiably ask “where is my option to eliminate that fraud so that we can actually spend the $30 billion on public services or reduce taxes?”

Interactive “budget challenges” can serve a useful purpose. Just give us more options that actually address the dysfunction that is California.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.