It’s discouraging to know that California is looking at a $20.7 billion budget deficit next year.
It’s disheartening to realize that the deficit numbers are expected to be even higher in the following two years.
But the hands-down most depressing, sinking-feeling-in-the-pit-of-the-stomach realization from the new budget report by the Legislative Analyst’s Office is that there is absolutely no chance this will end well.
Wednesday’s report suggests eliminating most state pay hikes until at least 2014-15. Think the Democrats, with their allies in the public employee unions, are going to agree to that?
What about the report’s suggestion that the Legislature end business-friendly tax credits and extend the vehicle license fee increase? Are there a lot of GOP votes for that?
Buried in the unrelentingly grim forecast for California’s financial future was a disturbing commentary on the chances of any quick solution to the budget problem.
Despite complaints that voter-approved initiatives and court decisions have left politicians unable to deal with the state’s fiscal woes, “the Legislature generally holds a considerable degree of freedom to adjust state spending,” the report says.
But those policy decisions “are often more restricted by the lack of political consensus as opposed to any structural budgetary constraint.”
To translate the fiscal-speak, the problem is political will, not political rules.
And how have our political leaders reacted to the LAO’s challenge? Here’s a hint: It’s not likely to be a move toward a new era of cooperation and compromise.
“The Legislature must correct the punitive regulatory and tax climate that is driving jobs away and hurting state revenue,” said Assembly Minority Leader Sam Blakeslee. “Removing the barriers to economic growth … will enable California to fund our state’s priorities.”
That means eliminating those pesky business and environmental regulations that Democrats keep voting for. And don’t think the Democrats are going to be any more agreeable.
There’s not going to be anything remotely easy about the upcoming budget talks. Last year’s effort to trim about $60 billion in spending eliminated not only the low-hanging fruit, but also anything not on the absolute uppermost limbs.
“The scale of the near-term and future budget gaps is so large that the Legislature will need to make significant reductions in all major state programs,” the report says, well beyond the cuts made in this year’s budget, which Democrats despised.
But even with draconian cuts to programs already slashed to the bone, “the Legislature is unlikely to bring the budget into balance without adding revenues to the mix,” the report added in words that will set Republicans fuming.
Remember last May’s ballot measures that called for tax hikes and one-time raids on money earmarked for programs like early childhood education and mental health services? Want to do it all over again? The LAO report suggests that going back to the ballot for budget relief is an option.
Education spending is another guaranteed battle zone, especially since after the Prop. 98 tealeaves are read, the state will owe the schools about $1 billion in additional payments.
The state, the report says, can either pay the $1 billion now (but it doesn’t have the money), pay the $1 billion later (when it probably still won’t have the money) or suspend the Prop. 98 guarantee and ignore the $1 billion (which is guaranteed to enrage the entire education community).
Then there’s the $610 million in college and university funding that Gov. Arnold Schwarzenegger cut from last year’s budget, confident that federal stimulus money could be used to cover the reductions.
Well, that one-time stimulus money is gone and the UC and Cal State systems will be looking for that money again. Good luck finding it in next year’s state budget.
And time matters when it comes to California’s cash flow, since “every month of delayed action in addressing the budget gap means that the opportunity for various savings is lost.”
The challenge is clear, according to the LAO report:
“The scale of the deficits is so vast that we know of no way that the Legislature, the governor and voters can avoid making additional, very difficult choices about state priorities.”
Avoiding hard choices is a specialty of the state Legislature. But dealing with the state’s devastating financial challenges is going to require less of the usual partisan bloviating and more– and faster – unified action.
John Wildermuth is a longtime writer on California politics.