CA: Fixing the budget - Borrowing and gimmicks won't work this time

A year ago, California voters grew resentful enough of the state's fiscal condition to toss out Gov. Gray Davis. Arnold Schwarzenegger stormed into office on a promise to cure the state's fiscal ills. He did so in his first budget by proposing $15 billion in borrowing to cover the general fund deficit, which the voters approved, and with other budget practices that have become part of the budget-balancing process by his predecessors, such as taking from other, dedicated state funds.

After considerable sound and fury, the current budget was enacted, and the state breathed a bit easier. Now comes the hard part. Nothing that was done in the current budget seriously addressed the long-term structural deficit that began in 2001-02. The problem started after state revenues plunged following the recession and the stock market decline. The budget that Schwarzenegger will propose less than eight weeks from now will have to make some tough decisions concerning state spending for the 2005-06 budget year.

This week the nonpartisan legislative analyst, Elizabeth Hill, projected a $6.7 billion deficit for the coming year. While considerably smaller than this year's deficit, the spending gap cannot be solved by borrowing again. By 2006, Hill warned, the state will be spending $4 billion per year to pay off its accumulated debt. That's more than the annual spending for the entire University of California system.

If the governor and legislators choose to do so, there is a way out. Of the $15 billion in borrowing power voters granted to cover the current budget, $3.5 billion remains. Using that would cut the budget deficit to $3.2 billion. There is another $2.8 billion owed to schools because of a deal made to solve last year's budget crisis. If payment is delayed, presto, the deficit could be reduced to less than half a billion dollars.

While Hill did urge lawmakers to suspend the $2.8 billion payment to schools, which will be met with strong resistance from the massive education lobby, she urged lawmakers to resist using the $3.5 billion in borrowing authority, saying that it would make the problem much worst in the 2006-07 budget year, when the deficit is expected to grow to nearly $10 billion.

The solutions come down to what they always have: reduce spending and/or increase taxes. The governor has said repeatedly, and correctly, that he does not intend to raise taxes. His new budget director, Tom Campbell, has said the same thing. It is clear from the Nov. 2 election that voters feel the same way, that is unless taxes are being raised on millionaires. Democratic lawmakers, on the other hand, do not want to cut programs. Interestingly, much of the public agrees with this position, according to polling data.

When the governor and the Legislature were negotiating the current budget this spring, we urged structural reforms. At that time, we reluctantly supported the massive borrowing because it was the only politically realistic (if temporary) route to a budget resolution. This year, even with growing revenues, the governor and legislators must take a longer-term approach and impose serious budget cuts if California is ever to resolve its fiscal problems.

2 posted on 11/19/2004 7:50:04 AM PST by Carry_Okie (There are people in power who are truly evil.)

A) The governor has said...that he does not intend to raise taxes. It is clear...that voters feel the same way.
B) Democratic lawmakers do not want to cut programs [and] much of the public agrees with this position.

Gee could this be a BLUE STATE?!?

Evidently the first step towards cutting spending, at least in the minds of California voters, is to approve an additional $3 billion bond to pay for stem cell research.

There's a reason I left that state.

Seems that the voters don't make the connection between spending, taxes and bonds. At least one of the ads for a bond proposition this year stated "Doesn't raise taxes!"

Well, alrighty then! Free money! Yippee!

I am breathlessly waiting for that long itemized list that is State spending to identify where the cuts will be made. Also have a blank piece of paper for the list of brainless State politicians who start suggesting which essential and legitimate state functions and services will be the first to be eliminated. All ten of them.

The other 99,990 fraudulent and corrupt spending items passed by the bunch of crooks are fair game, as far as I'm concerned.

8 posted on 11/19/2004 8:15:32 AM PST by Publius6961 (The most abundant things in the universe are hydrogen and stupidity.)

Of course. If its free money, why wouldn't you vote for it? You'd have be out of your mind not to grab your share.

9 posted on 11/19/2004 8:16:59 AM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives On In My Heart Forever)

After the debacle in 2002 when the voters approved every single bond issue on the ballot despite the reports that the budget was short 15 billion dollars, my family bailed out of CA.

Moved to Idaho and absolutely love it. Started my own business 6 months ago and expect to double my income next year. Because life moves slower, the kids have time to enjoy more aspects of the community and we don't have the fear of a random gang war erupting.

People are forgetting the reason why electoral votes are increasing in Red States. It’s cuz businesses are moving there and their economies are growing because Conservative economic policies work! As an example, this is what liberalism did to California:

Liberalism in a nutshell!

11 posted on 11/19/2004 9:05:50 AM PST by traviskicks (http://www.neoperspectives.com/summary.htm)

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