Broke, broker, brokest: California budget woes deepen

SACRAMENTO
November 19, 2009 12:03am

The number is staggering: $20.7 billion. That’s how far into a deficit the state of California is sinking unless something is done, says the Legislative Analyst’s Office in a new report.

(Download a copy by clicking on the link at the end of this story.)

“The vast majority of the new budget problem we have identified for 2009‑10 can be attributed to the state’s inability to implement several major solutions in the July 2009 budget plan, such as:

• The expected inability of several programs -- in particular, the prison system and Medi-Cal -- to collectively achieve billions of dollars of spending reductions assumed in the 2009‑10 budget.

• The expected inability of the state to sell the State Compensation Insurance Fund (SCIF), a quasi-public workers’ compensation insurer, for the budgeted amount of $1 billion in 2009‑10.

• The state’s loss of a court case that makes the General Fund unable to benefit from over $800 million in transportation funds in 2009‑10.

• A nearly $1 billion increase in the Proposition 98 funding guarantee for K-14 education in

2009‑10,” says Mac Taylor, the head of the LAO.

The state will need a renewal of the federal stimulus bill if it is to squeak through the oncoming crisis, says Jean Ross, executive director of the California Budget Project, a nonpartisan public policy research group.

But it also must do its own shoveling, she says.

“Today's forecast also increases the urgency for true prison reform,” says Ms. Ross. “Earlier this year, the Legislature failed to enact sufficient policy changes to enable California to significantly reduce growth in corrections and meet a $1.2 billion savings target specified in the July budget agreement. California must significantly rein in its out-of-control prison spending.”

Mr. Taylor is also blunt about the state’s prison system adding red ink to the budget, attributing a $1.4 billion “problem” as “largely the result of higher-than-budgeted spending by the prison medical care Receiver, and policy adjustments that were insufficient to allow the prison and parole systems to meet budget reduction targets.”

Ms. Ross calls for repealing tax cuts enacted in September 2008 and February of this year. “The Legislature should repeal corporate tax cuts that were included in these budget agreements that could cost the state as much as $2.5 billion per year when fully implemented,” she says.

The warning from the LAO’s report is strong.

“The scale of the deficits is so vast that we know of no way that the Legislature, the Governor, and voters can avoid making additional, very difficult choices about state priorities. Moreover, strings attached to federal stimulus funding will result in much less spending flexibility than usual for the state in 2010‑11. In the coming years, major state spending programs will have to be significantly reduced. Policymakers will also need to add revenues to the mix,” Mr. Taylor writes.

Assembly Speaker Karen Bass, D-Los Angeles, says cuts in spending will be needed but so will some way to increase revenue.

“We look forward to receiving the Governor's new budget proposal in January and will immediately begin work on crafting budget solutions that will once again require both difficult spending reductions and additional revenues,” she says.

Any tax increases would need a two-thirds supermajority vote in the Assembly and Senate, something that was blocked this year by Republicans who hold enough seats to keep the Democrats from having enough votes by themselves for the two-thirds majority.