State Budget Debacle: California Descending
Last week, the California governor, speaker of the State Assembly and the president pro tem of the State Senate announced a budget deal that slashes many state-government programs and departments to 2005 levels and forcibly “borrows” $2 billion from fiscally wrecked cities and counties.
The deal, designed to address a roughly $24 billion to $26-plus billion deficit, drew criticism for its severe cuts and praise for its belt-tightening, but along with it, lawsuit threats, cries of unconstitutionality, and big headlines when the Los Angeles Times suggested that 27,000 of California’s 168,000 prisoners might get released to save $1.2 billion.
The prisoner-release report set off a caterwaul by Republican legislators, who decried it as a double-cross by Democrats — except that the idea being discussed by Democrats and Gov. Arnold Schwarzenegger was not a done deal. Some political analysts say a prisoner-release plan is iffy, especially after the tragic carjacking and murder of popular high school student Lily Burk in broad daylight in Los Angeles last Friday, allegedly committed by a violent ex-con released on parole in February. (See next page for story.) The union representing Los Angeles cops called suspect Charlie Samuel “precisely the type of ‘low-level’ parolee the state no longer wants to take responsibility for” and would release from prison to cut its deficit.
Some experts predict the budget will quickly become unbalanced again, thanks to a persistently bad economy. That didn’t stop self-congratulations and posturing by Schwarzenegger, Democratic majority leaders Karen Bass and Darrell Steinberg, and Republican minority leaders Dennis Hollingsworth and Sam Blakeslee, the so-called “big five” who worked out this latest budget.
Tim Hodson, executive director of the Sacramento State Center for California Studies, says that if the national economy “continues to sputter, and the California economy sputters, they may have to revisit this budget even before the end of the year — and with the same melodrama. And in the end, there will be cuts.”
Hodson hopes that the crisis yet to come will force the Legislature and business community to work together on a blend of permanent reforms that would increase some taxes while also producing spending discipline — a combination that has utterly eluded Schwarzenegger, Bass, Steinberg, Hollingsworth and Blakeslee.
Cities and counties attacked the $2 billion forcible “borrowing” of local property taxes, but an even more damaging plan to simply take $1 billion in local gas taxes was rejected at the last minute by the Legislature.
That left Schwarzenegger, veto pen in hand, looking all day on July 27 for eleventh-hour ways to close the deficit. On Tuesday, July 28, he signed a budget from which he personally cut $500 million out of programs that had escaped deeper cuts earlier. Among other areas, the new cuts reduced the funds to pay for investigators of child abuse and neglect, salaries for Medi-Cal eligibility workers, and key positions at the state’s AIDS prevention office.
Joel Bellman, spokesman for Los Angeles County Supervisor Zev Yaroslavsky, said the almost desperate mishmash of budget cuts, borrowing and tricks suggests that the Sacramento press corps is failing to keep a close eye on the politicians who have left Sacramento gridlocked.
“If it hadn’t been such a depleted, exhausted and gutted press corps, they would not be able to get away with half this shit,” Bellman, a former newsman, said. “I don’t want to slight The Sacramento Bee and others, but there is far, far too little coverage of what is going on. To some extent the Sacramento media have Stockholm Syndrome. This budget isn’t just caused by the recession. We have had years and years of misalignment between spending and income.”
Bellman likened the $2 billion borrowing from local treasuries — coming after deep cuts already made by the Los Angeles County Board of Supervisors and local governments — to watching “a ‘Saw’ movie, where if you try anything to escape the problem, you get into an even worse situation.”
The grinning photos of Schwarzenegger and Bass — two leaders who have helped drive Sacramento’s current public-approval ratings into the ground — set off thousands of e-mails and comments on Web sites statewide. Bill Fujioka, chief executive officer for Los Angeles County, speaking to L.A. Weekly, said of the budget plan, “Can you make sense of all the bullshit?”
Schwarzenegger posted a video of himself via Twitter in which he’s seen fiddling around with a big knife, clearly making light of roughly $15 billion in cuts to education, welfare, health care and other services that will fall heavily on those who can least afford them. Schwarzenegger bragged that he could autograph state vehicles set to be auctioned to raise funds, and critics immediately chortled that his autograph isn’t worth much these days.
Bass’ behavior came off as equally odd. Earlier this year, Bass, who has struggled as speaker, backed a plan to give big raises to scores of legislative staffers in Sacramento. Her plan drew tremendous public outrage and she dumped the idea, but the episode left her politically scarred.
Last week, Bass was touting how she and the Democrats deserved credit for preserving the “safety net” in the budget. In fact, the budget, with its mix of big cuts, no taxes and weird accounting tricks, was essentially the one sought by Schwarzenegger.
This “revised” budget is the final version of an ill-fated February budget hammered out by legislative leaders and signed by Schwarzenegger that boosted taxes by $12 billion for the next few years and forced government workers to take furloughs — yet allowed some big state programs to continue growing as revenues dropped. Against that ugly backdrop, the governor and Legislature in May asked voters to help close the deficit — and voters said no thanks.
The Sacramento Bee appeared to blame voters, reporting last week that “State voters deepened the deficit in May when they rejected $5.8 billion” in borrowing from the lottery, raids on preschool funds and other raids. But polls show that Californians not only oppose more borrowing and more taxes, but residents want Schwarzenegger, Bass, Steinberg and the others to knuckle down and do their jobs.
Instead, the Legislature repeatedly punted during 2008 on devising a long-term solution. Yet last week, its leaders claimed they’d had “no time” to craft a real solution. This week’s patchwork effort includes billions raised by borrowing, raiding local governments and performing bookkeeping tricks. One trick: charging a bunch of state employee salaries to the next fiscal year so that the spending doesn’t get counted this year.
The state’s general fund — the huge pot of cash used to run state parks, tax collections, public schools, prisons, and health and welfare programs — will stand at about $84 billion, 18 percent below where it was two years ago.
Some economists saw hope, in that the budget is apparently an admission by the California Legislature that state spending should be aligned with falling income. Perry Wong, senior managing economist at the Milken Institute, says, “Priority No. 1 is to accept that we need cuts, and priority number two, I think even with cutting, is that we still need to look at how to expand our tax base.”
Longtime statehouse-watchers like The Sacramento Bee’s Dan Walters pointed out that many other U.S. states are also in a fiscal free-fall. But in fact, no legislature and no governor in the nation has allowed a state budget to reel as far out of control as California’s.
Texas is probably the most stark example of a state doing almost the opposite. In a bipartisan series of agreements, Texas created a budget surplus of about $9 billion. In a recent comparison of Texas versus California by The Economist magazine, Texas’ public and private sectors are touted as having eclipsed California as economic heavyweights, with Texas increasing its funding for schools even while cutting taxes on 40,000 small businesses. Texas is attracting more Fortune 500 companies (Texas has 64, California has 51) and it unemployment is low (7.1 percent in Texas versus 11.5 percent in California).
California, meanwhile, is closing up a deficit that ranged from $24 billion to nearly $27 billion. As of press time, nobody knew for sure.
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