California budget's going to be dreadful
Until long-term structural issues are fixed, there is no way legislators can produce an honest spending plan so the state lives within its means.
From Sacramento
The Capitol's budget oracle projects $20.7 billion in new red ink for the next 19 months. Here's my projection: More punting, "kicking the can down the alley" and numbers-rigging.
Hope we're both wrong. Hope there's an economic miracle or political heroism, which would require sacrifice to the demagogues. But, based on history and facts, that's too much to hope for.
Here's how nonpartisan Legislative Analyst Mac Taylor gently put it last week in calculating the latest general fund deficit: "Addressing this large shortfall will require painful choices, on top of the difficult choices the Legislature made earlier this year."
But, he added, "It is unlikely that the Legislature can address all of the state's massive, ongoing budget problems with permanent, ongoing solutions in the next year."
I don't have to be so diplomatic. I'll just say that there's no way these people can produce an honest budget that forces Sacramento "to live within its means," as Gov. Arnold Schwarzenegger persistently preaches, while consistently being one of the first to sin.
But there's no use getting upset about it. Spare yourselves. You'll hear a lot of talk-show wailing and pundit whining. Columnists will scold, myself probably included. But these people in the Capitol can't help themselves.
This is not being derogatory. It's being realistic in the current climate of political and public polarization, and a system structured for paralysis. It's in the cards and the cards are stacked.
Budgets for the foreseeable future, as they increasingly have been, will be painful patch jobs stitched with gimmickry.
Be thankful if the politicians can just keep the kids learning in school and out of their parents' hair.
Be grateful if California can avoid defaulting on its state bonds for the first time ever. It currently is making payments on about $67 billion in general obligation bonds and is holding onto another $53 billion worth that have been approved by voters but are unsold. Default would be an economic disaster.
School financing and bond payments are the No. 1 and No. 2 spending priorities, respectively, listed in the California Constitution.
All other things -- universities, healthcare, welfare, prisons, payrolls, parks -- are fish in a barrel.
Everybody knows the long-term problems if they're not in denial.
Proposition 13, which hasn't been updated in 31 years, greatly reduced local control and funding of schools, and installed Sacramento as the main principal and benefactor. The state also became head banker for the local property tax.
There's a long litany of ailments: California's unique requirement of a two-thirds legislative vote for virtually all money bills, term limits, gerrymandering (reform's on the way), ballot-box budgeting, lack of a meaningful spending cap and rainy-day fund for good times and a volatile tax structure that chokes off revenue in bad times. Plus influence of all the special interests -- labor unions on Democrats, big business on Republicans (along with broadcast talk showmen).
None of that is going to change before the next budget is due July 1.
Complicating those plagues are some short-term conundrums.
The governor and Legislature already have cut into the bone of state services -- $31 billion during the current calendar year, or so they thought. The cuts have fallen about $5 billion short.
A court has blocked reductions in home care for the disabled. Prisons are spending $1.4 billion more than budgeted, largely because of a federal court edict. Medi-Cal spending is up $900 million because the state struck out reaching for federal funds. A court also ruled that the state couldn't grab $800 million in gas tax money and shift it from the transportation fund to the general fund.
Turns out, kindergartens through community colleges were legally owed $1 billion more than they got. What's more, the state can't cut schools much more because it accepted federal stimulus money and that came with a requirement to maintain a certain spending level.
There's a suit challenging the governor's ability to furlough employees, which saves 14% on their pay but shuts down many state offices three Fridays a month. Bad idea. Shortchanges the taxpayers. Put the employees back to work full time and cut their pay, say, 5%.
The state also could save big bucks by obeying an expected federal court's order to release inmates to relieve prison overcrowding. Not just Republicans, but some skittish Assembly Democrats running for higher office object to letting felons loose.
It's a painful time.
The legislative analyst suggests closing business tax loopholes that really don't benefit the economy.
I'd suggest, again, that Schwarzenegger correct the biggest fiscal error of his regime by raising the vehicle license fee back to its historical level, 2% of a car's value. He lowered it to 0.65%. That has cost the state roughly $4.5 billion annually. The Legislature in February temporarily raised the fee to 1.15%, where it's still costing the general fund $2.8 billion.
There are other things to tax, such as oil extraction. But in a recession? In an election year?
I asked Senate leader Darrell Steinberg (D-Sacramento) whether there's any Democratic interest in pushing for tax increases.
"It's always a dangerous thing for a Democratic leader to lead on taxes," he said. "But if the choice is an oil depletion tax or cutting K-12 or higher education further, it's a no-brainer.
"I have a little different mind-set, having gone around the track one time. My first question is not going to be, 'How do we cut across the board?' My first question is how do we deal with this problem in a way that does not eliminate economic opportunity for hundreds of thousands if not millions of people?"
He's especially talking about young people being educated to compete in the 21st century workforce.
In the end, the budget's going to be very ugly -- in form and in impact. The Legislature and governor should just get it over with quickly, without the usual scapegoating, spatting and stubbornness that sicken voters.
Although many things could be forgiven, another dillydallying summer would not be.
*******************************************************************************
Hope we're both wrong. Hope there's an economic miracle or political heroism, which would require sacrifice to the demagogues. But, based on history and facts, that's too much to hope for.
Here's how nonpartisan Legislative Analyst Mac Taylor gently put it last week in calculating the latest general fund deficit: "Addressing this large shortfall will require painful choices, on top of the difficult choices the Legislature made earlier this year."
But, he added, "It is unlikely that the Legislature can address all of the state's massive, ongoing budget problems with permanent, ongoing solutions in the next year."
I don't have to be so diplomatic. I'll just say that there's no way these people can produce an honest budget that forces Sacramento "to live within its means," as Gov. Arnold Schwarzenegger persistently preaches, while consistently being one of the first to sin.
But there's no use getting upset about it. Spare yourselves. You'll hear a lot of talk-show wailing and pundit whining. Columnists will scold, myself probably included. But these people in the Capitol can't help themselves.
This is not being derogatory. It's being realistic in the current climate of political and public polarization, and a system structured for paralysis. It's in the cards and the cards are stacked.
Budgets for the foreseeable future, as they increasingly have been, will be painful patch jobs stitched with gimmickry.
Be thankful if the politicians can just keep the kids learning in school and out of their parents' hair.
Be grateful if California can avoid defaulting on its state bonds for the first time ever. It currently is making payments on about $67 billion in general obligation bonds and is holding onto another $53 billion worth that have been approved by voters but are unsold. Default would be an economic disaster.
School financing and bond payments are the No. 1 and No. 2 spending priorities, respectively, listed in the California Constitution.
All other things -- universities, healthcare, welfare, prisons, payrolls, parks -- are fish in a barrel.
Everybody knows the long-term problems if they're not in denial.
Proposition 13, which hasn't been updated in 31 years, greatly reduced local control and funding of schools, and installed Sacramento as the main principal and benefactor. The state also became head banker for the local property tax.
There's a long litany of ailments: California's unique requirement of a two-thirds legislative vote for virtually all money bills, term limits, gerrymandering (reform's on the way), ballot-box budgeting, lack of a meaningful spending cap and rainy-day fund for good times and a volatile tax structure that chokes off revenue in bad times. Plus influence of all the special interests -- labor unions on Democrats, big business on Republicans (along with broadcast talk showmen).
None of that is going to change before the next budget is due July 1.
Complicating those plagues are some short-term conundrums.
The governor and Legislature already have cut into the bone of state services -- $31 billion during the current calendar year, or so they thought. The cuts have fallen about $5 billion short.
A court has blocked reductions in home care for the disabled. Prisons are spending $1.4 billion more than budgeted, largely because of a federal court edict. Medi-Cal spending is up $900 million because the state struck out reaching for federal funds. A court also ruled that the state couldn't grab $800 million in gas tax money and shift it from the transportation fund to the general fund.
Turns out, kindergartens through community colleges were legally owed $1 billion more than they got. What's more, the state can't cut schools much more because it accepted federal stimulus money and that came with a requirement to maintain a certain spending level.
There's a suit challenging the governor's ability to furlough employees, which saves 14% on their pay but shuts down many state offices three Fridays a month. Bad idea. Shortchanges the taxpayers. Put the employees back to work full time and cut their pay, say, 5%.
The state also could save big bucks by obeying an expected federal court's order to release inmates to relieve prison overcrowding. Not just Republicans, but some skittish Assembly Democrats running for higher office object to letting felons loose.
It's a painful time.
The legislative analyst suggests closing business tax loopholes that really don't benefit the economy.
I'd suggest, again, that Schwarzenegger correct the biggest fiscal error of his regime by raising the vehicle license fee back to its historical level, 2% of a car's value. He lowered it to 0.65%. That has cost the state roughly $4.5 billion annually. The Legislature in February temporarily raised the fee to 1.15%, where it's still costing the general fund $2.8 billion.
There are other things to tax, such as oil extraction. But in a recession? In an election year?
I asked Senate leader Darrell Steinberg (D-Sacramento) whether there's any Democratic interest in pushing for tax increases.
"It's always a dangerous thing for a Democratic leader to lead on taxes," he said. "But if the choice is an oil depletion tax or cutting K-12 or higher education further, it's a no-brainer.
"I have a little different mind-set, having gone around the track one time. My first question is not going to be, 'How do we cut across the board?' My first question is how do we deal with this problem in a way that does not eliminate economic opportunity for hundreds of thousands if not millions of people?"
He's especially talking about young people being educated to compete in the 21st century workforce.
In the end, the budget's going to be very ugly -- in form and in impact. The Legislature and governor should just get it over with quickly, without the usual scapegoating, spatting and stubbornness that sicken voters.
Although many things could be forgiven, another dillydallying summer would not be.
*******************************************************************************
California's budget woes will continue for years, report says
Tax receipts have leveled off, but revenue won't bounce back until the 2014-15 budget year, according to the chief budget analyst. Near term, the state faces a nearly $21-billion deficit.
By Shane Goldmacher
Reporting from Sacramento - Despite an economy on the mend, California's budget woes will drag deep into the next decade, according to a report released Wednesday by the state's chief budget analyst.
Tax collections have leveled off after one of the most precipitous drops since the Great Depression. But revenue is not expected to fully bounce back until the 2014-15 budget year.
State government faces a nearly $21-billion deficit over the next year and half, according to the report by nonpartisan Legislative Analyst Mac Taylor. Sacramento will be forced to muddle along, he says, unable to reverse the deep cuts that officials have made to K-12, universities, healthcare and social services.
A major reason the recovery will take so long, say many experts, is California's place at the epicenter of the real estate slide and the resulting foreclosure wave. Moreover, "the mess in Sacramento is going to affect the California economy," said Jerry Nickelsburg, senior economist at UCLA Anderson Forecast, "and not in a good way."
Californians must get used to a state that offers fewer services -- and has higher taxes -- than before the real estate boom, Taylor's report suggests. But it remains to be seen how much residents will accept.
On Wednesday, at least 14 people were arrested in a raucous protest as a University of California regents panel approved a 32% student fee hike. A day earlier, the president of the California Teachers Assn. had likened further K-12 cuts to "amputation."
"We cannot afford now what we're spending," said Taylor, whom both Democrats and Republicans look to for fiscal advice. More cuts and more taxes will be necessary to balance the books, he said, calling all the options "painful choices."
Budget shortfalls have reemerged less than four months after lawmakers and Gov. Arnold Schwarzenegger struck a summer deal, which contained accounting gimmicks and rosy assumptions that have failed to pan out.
"The thing about smoke and mirrors is they are usually short-term solutions, and they come back to bite you the next year," said John Ellwood, a professor of public policy at UC Berkeley.
Schwarzenegger, who last week predicted more across-the-board budget cuts, must unveil his plan to address the projected $20.7-billion deficit in January. Taylor urged that officials begin tackling the red ink "as soon as possible."
The deficit is expected to be worse in the years beyond 2011, as temporary taxes expire and raids on local government funds must be repaid by Sacramento. Taylor projected a $21.3-billion deficit in fiscal 2011-12 and a $23-billion shortfall in fiscal 2012-13.
Even those numbers could be conservative. They assume no raises for state workers and no cost-of-living adjustments for government programs. They also assume that California will win all pending court cases in which billions of dollars in service cuts are being challenged.
Republican lawmakers have vowed to block new taxes, which many Democrats advocate to balance California's books. Assembly GOP leader Sam Blakeslee (R-San Luis Obispo) issued a statement Wednesday calling on the Democratic-dominated Legislature to instead change the state's "punitive regulatory and tax climate that is driving jobs away."
The bleak numbers have also spurred calls to Washington, D.C., for help, as much of the federal stimulus package that somewhat blunted this year's state cuts is set to expire. Jean Ross, executive director of the California Budget Project, which advocates for low-income residents, said the state "needs a second round of federal aid as we face record unemployment and continuing economic weakness."
That may be a hard sell in the nation's capital, where conservatives have questioned the success of the first package.
"California clearly has mismanaged its fiscal house," Nickelsburg said. "It seems to me it would be very difficult to convince states that have not mismanaged their own fiscal house to come to the aid of California."
Tax collections have leveled off after one of the most precipitous drops since the Great Depression. But revenue is not expected to fully bounce back until the 2014-15 budget year.
State government faces a nearly $21-billion deficit over the next year and half, according to the report by nonpartisan Legislative Analyst Mac Taylor. Sacramento will be forced to muddle along, he says, unable to reverse the deep cuts that officials have made to K-12, universities, healthcare and social services.
A major reason the recovery will take so long, say many experts, is California's place at the epicenter of the real estate slide and the resulting foreclosure wave. Moreover, "the mess in Sacramento is going to affect the California economy," said Jerry Nickelsburg, senior economist at UCLA Anderson Forecast, "and not in a good way."
Californians must get used to a state that offers fewer services -- and has higher taxes -- than before the real estate boom, Taylor's report suggests. But it remains to be seen how much residents will accept.
On Wednesday, at least 14 people were arrested in a raucous protest as a University of California regents panel approved a 32% student fee hike. A day earlier, the president of the California Teachers Assn. had likened further K-12 cuts to "amputation."
"We cannot afford now what we're spending," said Taylor, whom both Democrats and Republicans look to for fiscal advice. More cuts and more taxes will be necessary to balance the books, he said, calling all the options "painful choices."
Budget shortfalls have reemerged less than four months after lawmakers and Gov. Arnold Schwarzenegger struck a summer deal, which contained accounting gimmicks and rosy assumptions that have failed to pan out.
"The thing about smoke and mirrors is they are usually short-term solutions, and they come back to bite you the next year," said John Ellwood, a professor of public policy at UC Berkeley.
Schwarzenegger, who last week predicted more across-the-board budget cuts, must unveil his plan to address the projected $20.7-billion deficit in January. Taylor urged that officials begin tackling the red ink "as soon as possible."
The deficit is expected to be worse in the years beyond 2011, as temporary taxes expire and raids on local government funds must be repaid by Sacramento. Taylor projected a $21.3-billion deficit in fiscal 2011-12 and a $23-billion shortfall in fiscal 2012-13.
Even those numbers could be conservative. They assume no raises for state workers and no cost-of-living adjustments for government programs. They also assume that California will win all pending court cases in which billions of dollars in service cuts are being challenged.
Republican lawmakers have vowed to block new taxes, which many Democrats advocate to balance California's books. Assembly GOP leader Sam Blakeslee (R-San Luis Obispo) issued a statement Wednesday calling on the Democratic-dominated Legislature to instead change the state's "punitive regulatory and tax climate that is driving jobs away."
The bleak numbers have also spurred calls to Washington, D.C., for help, as much of the federal stimulus package that somewhat blunted this year's state cuts is set to expire. Jean Ross, executive director of the California Budget Project, which advocates for low-income residents, said the state "needs a second round of federal aid as we face record unemployment and continuing economic weakness."
That may be a hard sell in the nation's capital, where conservatives have questioned the success of the first package.
"California clearly has mismanaged its fiscal house," Nickelsburg said. "It seems to me it would be very difficult to convince states that have not mismanaged their own fiscal house to come to the aid of California."
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