Delaying the Fiscal Pain

If Californians want to know what a real budget crisis is, they need only look to Oregon. The school year was cut by as many as 17 days because of state aid reduction. In February, after voters rejected a temporary income tax surcharge, 286 state police were laid off. The courts close on Fridays. Some criminal arraignments are put off for months. Higher-education tuition has jumped as much as 35% over the last two years. Health care for 4,100 “frail” Oregonians was terminated, but later restored. The state had to borrow $500 million to balance its two-year budget of about $11 billion.

Even so, Oregon faces a deficit of $2 billion in the coming two-year budget. One lawmaker said “we’re looking under every rock” for more savings. The Portland Oregonian newspaper declared with dismay that the state had plumbed “rock bottom” because politicians failed to come to grips with reality sooner. Sound familiar?

California faces a problem of vastly greater scale unless Gov. Gray Davis and the Legislature take bold and creative action in the next 29 days to close the state’s estimated funding shortfall of $29 billion to $38 billion in a general fund budget of $80 billion. Lawmakers have made the barest down payment so far, about $3 billion in cuts.

Even with $11 billion in costly borrowing to paper over the deficit, the state needs to eliminate the current losses and a continuing shortfall in coming years. Without structural reform, revenues will fall $5 billion to $8 billion short of spending for the foreseeable future. The picture is clear. So what is the reaction in the state Capitol, with only a month to go until the June 30 budget deadline?

Special interests are pounding daily on the Capitol doors to save their projects. Fist-shaking Republicans are demanding more cuts, but some still refuse to vote for bills that would reduce school aid or health care. Other lawmakers seem like deer in the headlights, choosing not to see the deficit truck, many times the size of Oregon’s, bearing down on them.

Give credit to Darrell Steinberg (D-Sacramento), chairman of the Assembly Appropriations Committee, for delivering a rare jolt of reality in declaring that no more bond issues will be considered for the 2004 state ballot. Until then, bills proposing $18 billion in bond spending were rolling merrily along the legislative path. But the larger deadlock persists. Republicans still demand more spending cuts and vow not to raise taxes. Democrats approved $8 billion in new taxes but won’t go along with all the cuts Davis wants. Instead of using $2.4 billion in new federal aid to close the gap, they pumped it into spending.

No sitting Assembly member was in the state Legislature during the early-1990s budget crisis, thanks to term limits. Most of them, lacking historical memory, have no idea what rock bottom feels like. The few existing signs of serious negotiation are hopeful but not sufficient. Oregon’s legislators are having to do some awful things, but at least they are acting instead of waiting around for double the pain down the road.