A Fiscal Trap Is Closing

Oooops. Another $1 billion of the state’s dwindling cash reserves is headed out the door as California sleepwalks into insolvency.

The Legislature has only until May 5 to approve the sale of bonds to finance the state’s pension fund contributions for the next year. Otherwise, there goes $656 million in cash on hand. And May 14 is the paperwork deadline for achieving at least $300 million in savings in health and human services programs. Otherwise, another fistful from the treasury. The Legislature’s inability to act is pushing the state down a hill that, deadline by deadline, will leave California without cash and paying usurious loan rates to cover paychecks.

In fact, Assembly Speaker Herb Wesson (D-Culver City) this week produced a reasonable interim package of $6 billion in combined spending cuts and new pension bonds. Wesson offered it to Assembly Republican leaders after they informally indicated they would agree to the bonds if substantial cuts were accepted.

Wesson took a risk in that many Democrats strongly oppose cuts in health care and other programs on his list. It took three hours of cajoling in a closed Democratic caucus to get them to agree, especially since the cuts were not offset with new taxes.

Then the GOP pulled the rug out from under Wesson. Assemblyman John Campbell of Irvine, the Republican point man on the budget, said Thursday that the cuts had to be part of an “overall budget package without tax increases.” Translation: We want all the cuts at once to prove that you won’t try later to pass any tax increases.

Democrats hold a 48-32 majority in the Assembly, but the state Constitution requires a two-thirds vote to pass the budget. This allows the minority party to hold up anything it doesn’t like, something it has done with vigor this year while blaming the Democrats for the budget crisis.

Asked about the $656-million pension contribution deadline, Campbell shrugged it off: “If we miss the deadline, we miss it.” A legislator who cared about the state’s fiscal health would be scrambling for compromise, not scorched earth.

A shortfall estimated at $35 billion over the next 15 months -- perhaps more, if revenue keeps sinking -- can be closed only by a combination of unpleasant choices, including painful cuts and temporary higher taxes, much as Democrats and Republicans did in the last big fiscal crisis a decade ago. In 1992, the Legislature was months late with a budget but was able to paper the gap with IOUs that California banks essentially regarded as cash. The gap may be too big for that to work again, and there are no more major California banks to prevail on.

Wesson is right in saying the problem is so huge it must be solved in steps and not all in one gulp. His package is a good step. It’s still on the table. Responsible lawmakers should pick it up.