Posted on 11/15/2002 8:21:09 AM PST by snopercod
SACRAMENTO -- State government is facing its worst economic crisis since the recession-plagued early 1990s, with a $21.5 billion budget deficit in the coming year that promises to grow even larger unless the economy perks up by summer, the state's nonpartisan legislative analyst said Thursday.
And politicians probably won't be able to shield Californians from painful solutions like they did last year. In fact, it was that election-year mollycoddling -- a budget that relied heavily on accounting gimmicks and short-term borrowing -- that has helped make this year as bad as it is, said Elizabeth Hill, the Legislature's independent fiscal analyst.
"It really depends on what the Legislature and the governor do to resolve the problem," Hill said. "But given the magnitude, it really would be hard for every Californian not to feel it in some fashion."
Hill said the first half of the current deficit is the result of last year's spending plan. In that budget, which was delayed two months past deadline as Assembly Democrats and Republicans squared off over tax-increase proposals, lawmakers relied on a number of one-time fixes that allowed the ongoing imbalance between income and spending to flow into this year.
Lawmakers avoided highly unpopular actions of drastic tax increases or severe service cuts, both of which will have to be on the table this year.
"The current predicament will be very hard to get out of," Hill said. "To me, it very reminiscent of the early 1990s recession."
As was the case then, lawmakers faced two crippling budget shortfalls in a row, and solving it the second time proved much harder than the first. The shortfall for the 2003-04 budget amounts to a 20-cent reduction on every dollar spent.
"To have two of these in a row is very difficult," she said.
To illustrate that, she pointed out that closing every campus in both the CSU and UC system would only shave $6 billion from the state budget. Eliminating all Medi-Cal benefits would save $11 billion. Shuttering every state office building would cut about $17 billion.
Solving the crisis without a tax increase, she said, would require severe spending reductions.
The second half of the problem is the sluggish economy and a half-hearted recovery that seems to have California lagging behind the rest of the nation in personal-income growth.
And things still could get worse. The $21.5 billion deficit is a sort of best-case scenario, and the analyst said it could be "several billion dollars" larger unless businesses begin creating jobs and buying equipment by mid-2003.
The stock market collapse is a key factor in the ongoing mismatch between state income and spending, since tax revenue from capital gains was a major source of the multibillion-dollar surpluses at the end of the past decade.
Without substantial change to current law, the economic outlook remains bleak for the much of the coming decade, with about a $65 billion shortfall looming in the next five years.
To remedy the problem, Davis on Thursday called for a meeting next week with the Legislature's four top leaders -- the highest-ranking Democrat and Republican from each chamber -- to discuss the budget.
Davis' financial team is ''considering all the options'' and knows ''we can't do that without reducing or eliminating programs,'' said Anita Gore, a spokeswoman for the governor's Department of Finance.
Davis will present his budget plan in January, although he may propose midyear cuts earlier, Gore said. She did not rule out tax increases but said Davis will first focus on cutting programs.
Republicans, though, swiftly seized on the numbers as proof that state spending needs an overhaul.
"Today's report is another ominous sign that four years of Democrat leadership in state government has rendered California's economy hemorrhaging toward bankruptcy," said Assemblyman John Campbell, R-Irvine, the GOP's chief budget negotiator in the lower house.
Campbell noted that the analyst's deficit predictions last year more than doubled over the course of the year as the economy continued to slide and tax revenue didn't meet expectations.
"Californians should be deeply concerned," Campbell said. "This could easily get worse before it gets any better."
Campbell, like other Republican leaders, made it clear that GOP lawmakers would reject tax increases as part of the solution.
Democrats have said they doubt Republican lawmakers will have the gumption to suggest the kinds of draconian cuts that would be necessary to balance the budget without tax increases of some kind.
In fact, the foundation was already laid near the end of the legislative session to allow an increase in vehicle-registration fees with a simple majority vote, a move that minority Republicans could not block. That move, however, would close roughly a fifth of the gap.
"It's horrendous," said Alan Nakanishi, a Lodi Republican, who will be sworn in as an Assembly member Dec. 2. "The reason we have this is because of past bad decisions. It's because Democrats overspent.
"We have a lot of work to do, and we're looking forward to being part of the solution."
Greg Aghazarian, a Stockton Republican who also will begin his first term in the Assembly next month, called the situation "a financial train wreck."
"All the shell games and the tricks were done last year," he said. "This is the year where the rubber meets the road."
"It's going to be an ugly year," said Senate President Pro Tem John Burton, D-San Francisco, who last year suggested raising the income-tax rate on California's wealthiest residents.
The Associated Press contributed to this report.
* To reach Capitol Bureau Chief Will Shuck, phone (916) 441-4078 or
e-mail sacto@recordnet.com
So how do you expect to ever have a balanced budget?
Don't you see what happens when you have too many leeches (illegal aliens,for example)sucking up every public resource available?(hospitals,public housing, schooling,jails,welfare). The money that is gotten here by them is sent back to "Mother Mexico" to beckon more of them to come to "The Land of Milk & Honey".
P.S.... Keep votin'for Gray Davis and Democrats!
Some voters in Calif. will never learn>
Every family should count the number of members it has, including relatives in nursing homes, etc., and send in a check for the total amount. A special assessment should be tacked onto Republican households to cover the homeless and California residents who happen to be in prison.
For example, if you are a family of four, with Grandma in a nursing home, you owe Gray Davis $3,500. If you are a registered Republican you also have to pay the $700 for a bum in San Francisco. Total amount due EXTRA this year is $4,200.
See how easy that was?
See the map HERE
The Democrats are already talking tax increases. The Republicans -- thank God -- gained two more seats in the Assembly, and the Democrats need 6 Republican votes to pass the budget. We gained one seat in the Senate and they need two votes there. I don't know how they are going to do it ... while there are some more liberal Republicans, the overwhelming majority of the caucus is conservative, and some of the liberals come from conservative districts and couldn't risk voting for any tax increases for fear of a recall or losing their seat in the next election.
This is going to be a very interesting year.
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