Fix Broken Budget Process

It is better to have a wretched budget than no budget at all. That is the depth to which California has fallen. The state’s credit hovers on the edge of junk-bond status. The bankers who have propped up the state with loans are out of patience. The people are sick of deadlock, which has helped fuel the effort to recall Gov. Gray Davis in a special election set for Oct. 7.

Wretched is certainly the word for the budget, which was passed Sunday by the Senate and was before the Assembly for debate late Monday. It would cut spending on state government nearly 10%; local governments, already strapped, would lose $1 billion. It would pay doctors 5% less for treating Medi-Cal patients, if they treated them at all for a lower reimbursement rate. It would put the state in hock to Wall Street for years.

The entire catalog of cuts runs 25 pages. And despite heavy use of spending deferrals and loans, the state still would be saddled with a new $7.9-billion budget shortfall by next June 30.

The best that can be said is that this budget would put the state back in business, if feebly, and maintain basic support for schools, public safety and assistance to the needy. It also would get rid of the ineffective and misnamed manufacturers’ investment tax credit, which did little or nothing to increase business investment. Even a sow’s ear has some good points.

Many Democrats and Republicans in the fractured Assembly denounced this budget. But the Assembly, torn by political intransigence and lack of experience, was incapable of coming up with any alternative. Assembly members had little choice but to pass it and send it on to Davis, who would certainly sign it but may veto individual items.

What the passage of a budget -- any budget -- does allow is breathing room to debate and pass structural reforms that could prevent a repeat of the current disaster.

Davis listed a number of useful reforms in his original budget: creating a budget reserve fund, devising a more balanced mix of revenue sources, using windfalls from volatile sources such as capital gains only on one-time items and requiring periodic reviews of all continuing spending and tax breaks, among other ideas. But he failed to insist on any restructuring, and term-limited legislators see little point in wasting political capital on long-term reforms.

Neither the governor nor the Legislature, having avoided real solutions to the budget crisis, can ignore such reforms any longer.

Those who lay all the blame for California’s current low state on Davis should recall that although he fatally delayed attacking the deficit, he proposed a workable budget in January and another one in May. Both were rejected by a combination of adamantly anti-tax Republicans and Democrats unwilling to cut pet programs. Those who are so eager to succeed him Oct. 7 should be prepared to show exactly how they could have done it better.