Deficit Denial in California Budget

* The charge by Werner Z. Hirsch and Daniel J.B. Mitchell that California is running a deficit is flatly untrue (“Surplus? California Is Running a Deficit,” Commentary, Feb. 12). Both the current year’s budget and Gov. Gray Davis’ proposed 2001-02 budget limit spending to available resources as well as providing a prudent reserve. The authors ignore the fact that the governor has wisely earmarked about half of new revenues in both budgets for one-time spending ($6.7 billion in 2000-01, $3.5 billion in 2001-02). He has done this precisely to protect California’s finances from moderating revenue growth. As a result, in neither the current budget nor in the budget for 2001-02 does ongoing spending exceed general fund revenues. Nor is there any threat to drain the reserve in the future.

The authors also underestimate the strength of California’s economy. Because of our energy efficiency (47th among the states in per capita energy consumption) and the diversity of our industries, our economy continues to grow, significantly outperforming the rest of the nation. Although the governor’s budget does acknowledge that the meteoric revenue growth of the past several years has slowed, state tax revenues continue to exceed our projections during the current fiscal year.

California has a solid economy and Davis has been cautious with our new revenues. His budgets invest in California’s future and protect its fiscal integrity. California is not running a deficit.

TIM GAGE

State Director of Finance

Sacramento