Budget Crisis--Here We Go Again : State forecast sparks sense of new dilemma

More bad news from Sacramento: The state budget--balanced only weeks ago after a knock-down, drag-out fight between Gov. Pete Wilson and the Legislature--may be $2.7 billion short by next June, the end of the fiscal year.

By the close of the following fiscal year, unless there are new taxes and/or cutbacks in state programs, the shortfall could grow to $7.5 billion, according to a new report from the nonpartisan legislative analyst’s office.

Obviously, Wilson and the legislators--still bleeding from last summer’s budget battle--must start immediately to find ways to cut spending and increase revenues.

It should help that there will be 27 new faces in the 120-member Legislature next year. The large turnover will bring a fresh perspective on the state’s problems.

However, the veterans, starting with Wilson and Assembly Speaker Willie Brown (D-San Francisco), must also cut out the partisan squabbling that went on last summer. It made a difficult job nearly impossible.

In her sobering update on the state budget situation, Legislative Analyst Elizabeth G. Hill was right in suggesting that everything be put on the table, including tax increase proposals, in an effort to see the state through this recession.

One measure that ought to be considered is an extension of the half-cent sales tax that was imposed as part of the budget-balancing package agreed to by Wilson and the Legislature in 1991, when the state was facing a $14.3-billion shortfall.

The sales tax is due to expire next July--a time chosen because it was assumed the recession would be over by then. Now that it’s clear that the state isn’t recovering as quickly as forecast--partly due to other fiscal blows, such as voter repeal of the tax on snack foods--the sales tax probably ought to be continued for at least a year. That one step would ease the budget problem by $1.5 billion.

At the same time, attention must be paid to the business climate. One thing that can wait no longer is reform of the state’s fraud-ridden workers’ compensation system. Bringing some common sense to that system would go a long way toward helping businesses view California as a place in which to invest for the future.

That the budget is back on the front burner so quickly is discouraging. Everyone had hoped that last summer’s budget agreement, which closed a $10.7-billion gap, would carry the state through next June. But it hasn’t. The sooner Wilson and the Legislature face up to that unhappy fact, the sooner they can begin to find ways to see California through this recession and position it for recovery.