Posted on 08/21/2007 3:32:56 PM PDT by goldstategop
SACRAMENTO -- California's 51-day budget impasse ended today as Republicans in the state Senate extracted enough concessions from Gov. Arnold Schwarzenegger and Democratic lawmakers to allow the $145-billion spending plan to pass.
The agreement is almost identical to the plan passed by the state Assembly on July 20. To overcome the GOP objections in the Senate, Schwarzenegger had agreed weeks ago to use his veto pen to eliminate the $700-million deficit with which the state is expected to end the fiscal year June 30, 2008.
(Excerpt) Read more at latimes.com ...
The budget package that comes before us today is at least slightly improved over what was put before the Senate the night it walked off the job and went on summer holiday on August 1st.
At least an effort has been made to balance the budget on paper. And that’s something, since we just closed the last budget year with what appears to be the biggest budget deficit in California’s history, a deficit that has reduced the $10 ½ billion budget reserve that we began the last year with to around $4 billion.
My concern is that the reality – particularly given the state’s now brittle economy – is much more troubling than these figures imply.
We can start with the fact that nearly half of the amount the governor has promised to veto doesn’t reduce spending by a single penny – it is a bookkeeping adjustment reducing the Medi-Cal reserve.
But since so much of the budget is based on Enron accounting, let’s just go with the flow and pretend the governor’s line item vetoes are real and will at least take the budget reserve to $4 billion on paper.
That’s not what we’re getting. For example, this budget simply pretends that we took in $700 million more in May, June and July than we actually did. That money doesn’t exist – it never has – but the budget pretends that it does. Property tax and tribal gaming revenues are still inflated by nearly $400 million according to the LAO and the budget still ignores the fact that the governor has already agreed to more than $300 million in salary increases for prison guards this year.
So the actual budget reserve – even pretending the line item vetoes are real -- is just $2.7 billion. And that is a paper-thin margin to cover the governor’s other risky assumptions, starting with the cheery assurance that California’s economy will produce twice the rate of revenue growth this year as it did last year.
It’s possible – I suppose. We were spared a serious budget deficit in 2005 by a sudden surge of revenues. But I think that is highly unlikely to happen this year, given the draconian regulations that have been imposed on our economy over the past year.
As a result of those regulations, we’re watching unemployment increase rapidly, our foreclosure activity is growing FOUR times faster than the nation, job creation which had ground to a halt last month is now negative –we’re actually losing jobs month over month. And yet we’re expecting revenues to grow twice as fast as they did last year.
If the economy simply doesn’t get any worse and we have the same rate of revenue growth as we had last year, the result will be a $3.3 billion shortfall – enough to completely overwhelm the remaining reserve.
And that’s just the beginning of the risky assumptions:
The Legislative Analyst warns that we have not adequately budgeted to meet our health care obligations to retired state employees – plan on a big overrun there.
Financial experts are warning that the sale of the Ed Fund could fall as much as $800 million short of the billion dollars than is budgeted – if the feds approve it at all.
The federal courts are not likely to turn a blind eye to continuing the practice of looting safe deposit boxes and retirement and college funds to the tune of $700 million a year that this budget depends on.
We’ll be very lucky if this paper-thin safety net of $2.7 billion can cover all these contingencies – and many more like them.
But because this budget also robs future budgets of revenue, while sticking them with added costs, it sets in motion a budget deficit of at least $5 ½ billion that we will be confronting just five months from now when the next budget is submitted in January.
Corrections made now could avert more difficult decisions next year -- and here’s the fine point of it: If we can’t even genuinely reduce spending by even $700 million after three weeks of impasse – how do we expect to confront the $5 ½ billion budget deficit looming just over the horizon?
That’s an important question, because today we set in motion events that will require far more difficult and painful decisions starting just five months from now in what is likely to be a much worse economy.
I am afraid that with this vote, for the second time in a decade, this state is being driven to another Gray Davis-sized fiscal crisis that this vote makes inevitable for exactly the same reasons: Lack of restraint in good times combined with a lack of discipline in bad times.
California passed a budget - balanced only on paper. If the rosy economic forecasts and Enron accounting tricks don't tide the state over, California could well be looking at a multi-billion dollar deficit next year. NOTHING has been reformed and the state is merely postponing the day of fiscal reckoning. Kudos to Tom for laying it down straight today.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
$145B?.......You better get back to work. The STATE needs your money..................
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Hey, don’t forget, the legislature and Gov. want to pass
AB-8 health insurance reform next, along with a new, totally illegal 7.5% payroll tax. That bill promised to triple health insurance rates as well.
The fun never ends. /s
Good luck and God bless you California folk. You all are going to need it the next 18-24 months with this and the housing bubble.
I grew up in California, but moved away long ago. I wouldn’t live there for anything now.
I like McClintock. Why couldn’t Arnold have turned out to be more like him?
OH how I wish! As a native Los Angeleno, I long to move. Actually though, it's only a matter of time and this will hit all states!
OH how I wish! As a native Los Angeleno, I long to move. Actually though, it's only a matter of time and this will hit all states!
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Arnold was supposed to cut back government spending. He criticized Gray Davis for wasteful state spending that bloated the budget.
Because that’s all they are doing.
I’m out of here when I retire. Most likely back to Iowa where I grew up.
He ran against Arnold in the recall. The short-sighted nimrods who run this state thought a RINO actor married to a Kennedy would make a swell governor. Those of us who are fiscal conservatives voted for McClintock. Unfortunately, there weren’t enough of us.
Gray Davis was also criticized, if I recall correctly, for giving HUGE bennies and salary to the prison guards. $300,000,000? And drivers’ licenses to illegals, both of which Ah-nold now seems in favor of.
What is preventing you? Perhaps you're like my sister and her husband, who can't leave until he retires from the (Santa Clara) country sheriff's department. If they moved now, he'd lose all of his seniority.
“Actually though, it’s only a matter of time and this will hit all states!”
Right you are! Also to include school districts, higher education districts, hospital/emergency districts, cities, counties and other taxing entities. But, they keep growing faster than any private companies around!!
You know what they hammered to death about him in the election? He’s against abortion. He never said anything about repealing the laws, he just said that no, he doesn’t like abortion.
I can only dream about the economic condition this state would be in had the urban j@ckA$$e$ had a cogent thought for once.
What housing bubble? There is no "housing bubble." The Internet Bubble was a cute name for wildly overvalued internet stocks, many that ceased to exist in only a few short years. When they disappeared, 95% or more of their value vanished, like a bubble popping.
It was created by the media, the same way Watergate was used to describe Nixon's political scandal, and now forever anytime a politician has a problem, it will be a gate. Plamegate, Whitewatergate, Fostergate, and on and on. The media is creating a fear in order to get you to read MSN.com and to watch ABC or CBS news.
Real estate will not simply cease to exist. It will still be there, and people will still need it, basically to live in. When the so-called bubble pops, it may lose 15% or 20%, but that really doesn't constitute a bubble. In fact, most people realize this, and have stopped talking about it.
If you want something to feel sorry for us poor Californians for, I can think of lots of things, like Feinstein and Boxer and San Francisco. But a real estate bubble is not one of them.
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