California confronts a budget deficit with more gimmicks
By Dan Walters - dwalters@[EMAIL PROTECTED]
12:00 am PDT Wednesday, May 14, 2008
Californians and their politicians have been dodging the budgetary
bullet for 30 years, refusing to reconcile demands for public
services, from education to prisons to firefighting to health care,
with a distaste for paying more taxes.
This could be the moment when this exercise in denial, which began
with the passage of property tax-cutting Proposition 13 in 1978,
begins to give way to reality since the state now faces an immense
budget deficit and the usual gimmicks have been largely exhausted.
Or not.
Gov. Arnold Schwarzenegger, who was elected five years ago on a
promise to end "crazy deficit spending" but morphed into an enabler,
is poised to release a revision of the 2008-09 budget he first
proposed last January, and by all accounts, the deficit will have
ballooned by several billion dollars, thanks to an eroding economy.
The governor has mentioned several different deficit figures in recent
public appearances, the last being a whopping $20 billion. But that
included about a $3 billion reserve and very quickly, the number was
informally whittled down by better-than-expected income tax
collections in April.
Late Tuesday, it was re****ted that the deficit will be pegged at $15
billion-plus, apparently not counting a reserve, or roughly twice, in
net terms, what it was in January when the governor released his first
version of the shortfall. The January number was $14.5 billion over
the remainder of the 2007-08 fiscal year and all of 2008-09, later
reduced to $7.5 billion by some fiscal actions early in the year,
including $3.3 billion in new borrowing.
Whatever the governor's number =96 and assuming that it's not
politically skewed =96 it will be a substantial jump, meaning that
reductions in spending alone, as Schwarzenegger half-seriously
proposed in January, won't suffice. He's since urged legislators to
"get creative" while indicating that he's open to closing some tax
loopholes, although still opposed to broad tax increases. And it's
apparent that he'll propose tapping the state lottery as an asset to
provide an up-front injection of cash to ease the current crisis and
set up a rainy day reserve fund.
Tapping into the lottery (and selling EdFund, a state student loan
guarantee operation, which is already in the works) sound like pain-
free approaches that spending advocates on the left and tax opponents
on the right might embrace, as does another move floating around the
Capitol, selling the State Compensation Insurance Fund, a state-owned
workers' compensation insurer.
All, however, would essentially be gimmicks aimed at postponing the
day of fiscal reckoning, perhaps long enough for a movie star-turned-
politician to end his term without biting the big bullet. And, by the
way, those who propose "tem****ary" tax increases are also in gimmick
mode; one-time and/or tem****ary injections of cash don't really close
a permanent, structural gap.
How such stopgaps would work politically is also uncertain.
Schwarzenegger himself has said, for instance, that voters would have
to approve any alteration in the state lottery, since it was created
by a voter-approved initiative in the 1980s. And any change in the
lottery could face potentially stiff opposition from powerful
education groups (since the lottery's net proceeds now go to schools)
and from casino-owning Indian tribes that don't want more competition.
One thing is certain: Schwarzenegger will renew his demands for long-
term budget reforms as part of any budget deal. But what he wants has
already been rejected by Democratic legislative leaders and their
allies, including the school unions, which are just as implacable on
that point as Republican lawmakers are in opposing new taxes.
It could be a long summer.
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