Capitol Journal
State budget reality check
 Gov.-elect Jerry Brown "wants to force the Legislature and the public to really confront how bad the situation is,” says spokesman Sterling Clifford. “... The plan is to produce a budget without smoke and mirrors.” (Luis Sinco / Los Angeles Times / September 15, 2010) |
Brown to get on soapbox about painful choices that lie ahead.
Jerry Brown has reached two conclusions as he meticulously examines the chronically ailing state budget that he's about to inherit.
One, it's every bit as sick as he feared, and the cure will be extremely painful.
Two, Californians are mostly in denial about the needed treatment, and the governor-elect must try to educate them.
There can be no permanent remedy until people understand the severity of the fiscal illness, Brown realizes. So he plans to soon jump on a soap box and shout the uncomfortable truth, probably beginning at a large Sacramento forum attended by legislators, interest groups and anyone else who cares.
"He wants to force the Legislature and the public to really confront how bad the situation is," says Brown spokesman Sterling Clifford. "But he won't be talking solutions yet."
As part of the education effort, Brown intends to demonstrate exactly what living within our means without a tax increase is all about. He'll do that when he sends the Legislature his first budget proposal in early January.
"The plan is to produce a budget without smoke and mirrors," Clifford says.
Without the usual masquerade of smoke and mirrors, the document will be too glaringly ugly for most people, based on polls.
Of those who voted in the Nov. 2 election, 65% believe that the state government "wastes a lot" of tax money, according to a survey reported Wednesday by the Public Policy Institute of California. Presumably they blame the old bugaboo "waste, fraud and abuse" for the perpetual deficit.
In a postelection Los Angeles Times/USC poll, 44% of voters thought spending cuts alone would be the best deficit cure. But 44% also supported a combination of spending cuts and tax increases.
The polled voters sent mixed signals to the incoming governor. Their top priority for him was to protect education and healthcare funding. Their next highest priority was to cut spending. And generally, they opposed cutting programs paid for by 85% of the deficit-ridden general fund.
No doubt another Brown agenda before he takes office — another reason for all the educating — is to remind everyone that he didn't create this mess. He's merely assuming the cleanup job.
Never mind, as I wrote Monday, that Sacramento's fiscal affliction began with the way Proposition 13 was implemented when Brown was governor 32 years ago. The state bailed out local governments and schools for their dramatic loss in property tax revenue, and they've been on the Sacramento dole ever since.
Roughly 70% of the state general fund flows out to schools and local governments, mainly counties, for services they primarily financed themselves before Prop. 13.
But Brown has had nothing to do with the state's fiscal irresponsibility of the last dozen years.
All the borrowing, accounting gimmicks, knowingly false assumptions, the total make-believe? Blame Gov. Arnold Schwarzenegger and the Legislature. And for the overspending and excessive tax-cutting? Blame former Gov. Gray Davis and that Legislature.
And, of course, there's the devastating recession.
This is the budget disorder that Brown faces, according to the nonpartisan legislative analyst: a $6.1-billion shortfall in the $92.5-billion general fund spending for the fiscal year that ends June 30. Then, if that red ink is swept into the next fiscal year, there'll be a total $25.4-billion deficit through mid-2012.
Basically there's a $20-billion annual "structural deficit" — that much more spending obligation than projected revenue — until at least mid-2016. Those are the legislative analyst's figures, but virtually no one disputes them.
To put that $20-billion ongoing deficit in perspective, consider these numbers gleaned variously from the state Finance Department and the legislative analyst for the next fiscal year:
*You could fire all state workers paid out of the general fund — except for university employees, who are not under the governor's control — and you'd save only $9.2billion. Freezing their pay would barely make a dent.
*Eliminate all funding for the University of California and Cal State University and you'd save only $5.4billion.
*Close down all the state prisons and you'd gain $9billion.
*End the state's main welfare program, Cal-Works, and save $3billion.
*Wipe out In-Home Supportive Services for the disabled trying to stay out of nursing homes: save $1.7billion.
*Drop out of federal Medicaid — in California called Medi-Cal — and save a bunch: $17.6billion. We'd be the only state to do that. Roughly 7.5million impoverished Californians use the program: welfare recipients, their children, the aged, disabled.
End Medi-Cal, and many poor people would fall into the counties' last-resort safty net called general assistance. And that would pile a bigger burden on counties.
Or, here are other options:
*Extend a temporary increase in the vehicle license fee, scheduled to expire July 1, and pick up $1.5billion.
*Extend a sales tax hike also scheduled to expire July 1, and pull in $4.6billion.
*Extend an income tax surcharge that will expire Jan. 1 and net $2billion.
But extending tax hikes temporarily wouldn't cure the structural deficit.
More spending cuts will be required. And the entire tax structure needs to be modernized to fit a 21st century economy. That includes extending the sales tax to services.
But Brown won't be talking much about taxes, at least until he slashes services and inflicts all the pain that voters consider tolerable.
The legislative analyst — and practically every other objective numbers-cruncher — long has regarded a combination of spending cuts and tax increases as the only permanent budget cure.
But Brown has pledged not to raise taxes unless voters approve. Before they do, they'll need a lot of his educating about reality.
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