When Is a State Budget ‘Crisis’ a Crisis?

It’s a familiar theme for Californians who went through budget deficits a decade ago in the last national and state recession.

The economy is in the tank. “Shortfall” has replaced “surplus” as the word most likely to follow “revenue.”

The governor and the Legislature are painting grim pictures of where the budget ax will fall.

But is the “crisis” truly a crisis? Is it as bad as what we experienced 10 years ago?

Not to turn a deaf ear to Californians victimized by corporate downsizing, gridlock or underperforming 401(k) plans, but there are reasons to believe that as tough as current times are, we’ve had it worse.

Consider:

* California is not the nation’s poster child for misery as it was a decade ago with riots and natural disasters. That distinction has moved north to Washington state, home of higher unemployment, World Trade Organization riots and an economy that has been ravaged by declines in the aerospace and high-tech industries and in tourism.

California’s recession of the ‘90s lasted about 3those years, nearly four times longer than the national recession. It took that long to harvest a “new” economy of trade and high tech. And financial analysts already are forecasting that recovery could begin by next summer.

* At last report, 996,000 Californians were unemployed, 5.7% of the population. A decade ago, California lost more than 750,000 jobs in less than two years; the unemployment rates soared to double digits.

The state’s current revenue loss has more to do with the bear market than an idle work force.

* The current budget squeeze is an estimated $12-billion hole in a $79-billion general fund. A decade ago, it was a $14.3-billion deficit and a budget of only $43 billion. There will be budget cuts, but they won’t be as deep.

Besides, shouldn’t it be easier with a Democratic governor and a Democratic Legislature?

There is one other difference, and it’s a big one. Next year is an election year, and that’s trouble. It remains to be seen if California state government can be greater than the sum of its parts and rise beyond petty politics to make the sacrifices that are needed.

In good times, Democrats and Republicans spent like no tomorrow; the state budget today is 40% larger than when Gov. Gray Davis took office. Now, Sacramento has to face up to its excesses.

It isn’t exactly rocket science; you reduce education (currently $4 billion over the Proposition 98 requirement), health services, public safety or a combination of the three.

Or, if the services are too precious to cut, you raise taxes, which is what happened the last time Sacramento confronted an 11-figure deficit.

So, until someone in charge utters the “t” word, don’t buy into “crisis” mode.

In an election year, all we have to fear is fear-mongering itself.

*

Bill Whalen, a research fellow at Stanford’s Hoover Institution, was a speech writer for former Gov. Pete Wilson.