California budget’s going to be dreadful

Capitol Journal

The Capitol’s budget oracle projects $20.7 billion in new red ink for the next 19 months. Here’s my projection: More punting, “kicking the can down the alley” and numbers-rigging.

Hope we’re both wrong. Hope there’s an economic miracle or political heroism, which would require sacrifice to the demagogues. But, based on history and facts, that’s too much to hope for.

Here’s how nonpartisan Legislative Analyst Mac Taylor gently put it last week in calculating the latest general fund deficit: “Addressing this large shortfall will require painful choices, on top of the difficult choices the Legislature made earlier this year.”

But, he added, “It is unlikely that the Legislature can address all of the state’s massive, ongoing budget problems with permanent, ongoing solutions in the next year.”

I don’t have to be so diplomatic. I’ll just say that there’s no way these people can produce an honest budget that forces Sacramento “to live within its means,” as Gov. Arnold Schwarzenegger persistently preaches, while consistently being one of the first to sin.

But there’s no use getting upset about it. Spare yourselves. You’ll hear a lot of talk-show wailing and pundit whining. Columnists will scold, myself probably included. But these people in the Capitol can’t help themselves.

This is not being derogatory. It’s being realistic in the current climate of political and public polarization, and a system structured for paralysis. It’s in the cards and the cards are stacked.

Budgets for the foreseeable future, as they increasingly have been, will be painful patch jobs stitched with gimmickry.

Be thankful if the politicians can just keep the kids learning in school and out of their parents’ hair.

Be grateful if California can avoid defaulting on its state bonds for the first time ever. It currently is making payments on about $67 billion in general obligation bonds and is holding onto another $53 billion worth that have been approved by voters but are unsold. Default would be an economic disaster.

School financing and bond payments are the No. 1 and No. 2 spending priorities, respectively, listed in the California Constitution.

All other things -- universities, healthcare, welfare, prisons, payrolls, parks -- are fish in a barrel.

Everybody knows the long-term problems if they’re not in denial.

Proposition 13, which hasn’t been updated in 31 years, greatly reduced local control and funding of schools, and installed Sacramento as the main principal and benefactor. The state also became head banker for the local property tax.

There’s a long litany of ailments: California’s unique requirement of a two-thirds legislative vote for virtually all money bills, term limits, gerrymandering (reform’s on the way), ballot-box budgeting, lack of a meaningful spending cap and rainy-day fund for good times and a volatile tax structure that chokes off revenue in bad times. Plus influence of all the special interests -- labor unions on Democrats, big business on Republicans (along with broadcast talk showmen).

None of that is going to change before the next budget is due July 1.

Complicating those plagues are some short-term conundrums.

The governor and Legislature already have cut into the bone of state services -- $31 billion during the current calendar year, or so they thought. The cuts have fallen about $5 billion short.

A court has blocked reductions in home care for the disabled. Prisons are spending $1.4 billion more than budgeted, largely because of a federal court edict. Medi-Cal spending is up $900 million because the state struck out reaching for federal funds. A court also ruled that the state couldn’t grab $800 million in gas tax money and shift it from the transportation fund to the general fund.

Turns out, kindergartens through community colleges were legally owed $1 billion more than they got. What’s more, the state can’t cut schools much more because it accepted federal stimulus money and that came with a requirement to maintain a certain spending level.

There’s a suit challenging the governor’s ability to furlough employees, which saves 14% on their pay but shuts down many state offices three Fridays a month. Bad idea. Shortchanges the taxpayers. Put the employees back to work full time and cut their pay, say, 5%.

The state also could save big bucks by obeying an expected federal court’s order to release inmates to relieve prison overcrowding. Not just Republicans, but some skittish Assembly Democrats running for higher office object to letting felons loose.

It’s a painful time.

The legislative analyst suggests closing business tax loopholes that really don’t benefit the economy.

I’d suggest, again, that Schwarzenegger correct the biggest fiscal error of his regime by raising the vehicle license fee back to its historical level, 2% of a car’s value. He lowered it to 0.65%. That has cost the state roughly $4.5 billion annually. The Legislature in February temporarily raised the fee to 1.15%, where it’s still costing the general fund $2.8 billion.

There are other things to tax, such as oil extraction. But in a recession? In an election year?

I asked Senate leader Darrell Steinberg (D-Sacramento) whether there’s any Democratic interest in pushing for tax increases.

“It’s always a dangerous thing for a Democratic leader to lead on taxes,” he said. “But if the choice is an oil depletion tax or cutting K-12 or higher education further, it’s a no-brainer.

“I have a little different mind-set, having gone around the track one time. My first question is not going to be, ‘How do we cut across the board?’ My first question is how do we deal with this problem in a way that does not eliminate economic opportunity for hundreds of thousands if not millions of people?”

He’s especially talking about young people being educated to compete in the 21st century workforce.

In the end, the budget’s going to be very ugly -- in form and in impact. The Legislature and governor should just get it over with quickly, without the usual scapegoating, spatting and stubbornness that sicken voters.

Although many things could be forgiven, another dillydallying summer would not be.