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Press Release · January 31, 2007

Budget Reality Check: Huge Mismatch Between What Californians Want And What They’re Willing To Pay For

… And Golden State Residents Already Spend More on Public Services Than Rest of Nation

SAN FRANCISCO, California, January 31, 2007 — A new study shows in great detail the disconnect between the public services Californians want and how much they’re willing to pay for them. Released today by the Public Policy Institute of California (PPIC), the comprehensive analysis examines revenue and spending in every major budget category, reviews years of public opinion surveys, and then evaluates what it would take to make residents’ spending preferences a reality.

One of the strongest themes to emerge is that Californians’ most desired policy goals would be extremely costly. For example, over 70 percent say they would like the state to spend more on K-12 education, particularly to reduce class size. However, reducing class size so that teacher-student ratios match ratios in other states would cost California governments an additional $15 billion per year.

Where would this funding come from? According to the analysis, it would require difficult, and possibly infeasible, tradeoffs from other areas. For example, raising residents’ property taxes to match the rest of the country would add up to $7 billion – but would require amending the state constitution. Reducing payroll and other operating costs for prisons and corrections to match national averages could free up $3 billion – but a federal receiver controls the state prison system and is forcing the governor to spend more – not less – money on corrections. Raising tuition for public colleges and universities to national averages would generate $2 billion but possibly violate California’s commitment to broad access to higher education.

“This analysis lets us see exactly what kinds of tradeoffs the state and its residents have made in the past and would have to make in the future to achieve their budget priorities,” says PPIC research fellow Tracy Gordon, who co-authored the study with research fellow Jaime Calleja Alderete, adjunct fellow Patrick Murphy, senior fellow Jon Sonstelie, and former research fellow Ping Zhang. “It’s a challenge – many of these tradeoffs pose political and legal hurdles that will require real ingenuity and boldness from voters and elected officials to overcome.”

The study finds that Californians already pay about 20 percent more per capita for public services than in the rest of the nation. Much of this difference – but not all – can be explained by the state’s demographic make-up and higher labor costs, but other differences are the result of policy choices, according to the study, Fiscal Realities: Budget Tradeoffs in California Government.

The Public Policy Institute of California is a private, nonprofit organization dedicated to improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett.