Despite an economy on the mend, California’s budget woes will drag deep into the next decade, according to a report released Wednesday by the state’s chief budget analyst.
Tax collections have leveled off after one of the most precipitous drops since the Great Depression. But revenue is not expected to fully bounce back until the 2014-15 budget year.
State government faces a nearly $21-billion deficit over the next year and half, according to the report by nonpartisan Legislative Analyst Mac Taylor. Sacramento will be forced to muddle along, he says, unable to reverse the deep cuts that officials have made to K-12, universities, healthcare and social services.
A major reason the recovery will take so long, say many experts, is California’s place at the epicenter of the real estate slide and the resulting foreclosure wave. Moreover, “the mess in Sacramento is going to affect the California economy,” said Jerry Nickelsburg, senior economist at UCLA Anderson Forecast, “and not in a good way.”
Californians must get used to a state that offers fewer services -- and has higher taxes -- than before the real estate boom, Taylor’s report suggests. But it remains to be seen how much residents will accept.
On Wednesday, at least 14 people were arrested in a raucous protest as a University of California regents panel approved a 32% student fee hike. A day earlier, the president of the California Teachers Assn. had likened further K-12 cuts to “amputation.”
“We cannot afford now what we’re spending,” said Taylor, whom both Democrats and Republicans look to for fiscal advice. More cuts and more taxes will be necessary to balance the books, he said, calling all the options “painful choices.”
Budget shortfalls have reemerged less than four months after lawmakers and Gov. Arnold Schwarzenegger struck a summer deal, which contained accounting gimmicks and rosy assumptions that have failed to pan out.
“The thing about smoke and mirrors is they are usually short-term solutions, and they come back to bite you the next year,” said John Ellwood, a professor of public policy at UC Berkeley.
Schwarzenegger, who last week predicted more across-the-board budget cuts, must unveil his plan to address the projected $20.7-billion deficit in January. Taylor urged that officials begin tackling the red ink “as soon as possible.”
The deficit is expected to be worse in the years beyond 2011, as temporary taxes expire and raids on local government funds must be repaid by Sacramento. Taylor projected a $21.3-billion deficit in fiscal 2011-12 and a $23-billion shortfall in fiscal 2012-13.
Even those numbers could be conservative. They assume no raises for state workers and no cost-of-living adjustments for government programs. They also assume that California will win all pending court cases in which billions of dollars in service cuts are being challenged.
Republican lawmakers have vowed to block new taxes, which many Democrats advocate to balance California’s books. Assembly GOP leader Sam Blakeslee (R-San Luis Obispo) issued a statement Wednesday calling on the Democratic-dominated Legislature to instead change the state’s “punitive regulatory and tax climate that is driving jobs away.”
The bleak numbers have also spurred calls to Washington, D.C., for help, as much of the federal stimulus package that somewhat blunted this year’s state cuts is set to expire. Jean Ross, executive director of the California Budget Project, which advocates for low-income residents, said the state “needs a second round of federal aid as we face record unemployment and continuing economic weakness.”
That may be a hard sell in the nation’s capital, where conservatives have questioned the success of the first package.
“California clearly has mismanaged its fiscal house,” Nickelsburg said. “It seems to me it would be very difficult to convince states that have not mismanaged their own fiscal house to come to the aid of California.”