If you like good news, it doesn’t look like California is going to have to call a special session on the budget before Jan. 10.
Come Jan. 11, though …
While the state’s current budget was balanced earlier this year with little more than boundless optimism and finger-crossed dreams of a better financial future, fiscal reality is about to strike, big time.
Gov. Arnold Schwarzenegger and his money team have been putting out the word that this year’s budget already looks to be $5 billion to $7 billion short of estimates. And that doesn’t include the $7.4 billion shortfall already predicted for the 2010-11 budget for the fiscal year beginning July 1.
And how accurate are these new estimates?
“As things stand right now, the numbers are realistic,” said H.D. Palmer, a spokesman for the state Department of Finance.
Of course, as things stood last June 30, those original estimates were considered pretty realistic, too.
But time, and political reality, has played havoc with many of the dubious assumptions behind that spending plan.
The Assembly never did come through with the extra $200 million in promised prison spending cuts and the courts won’t let California slash $200 million from in-home services for the disabled poor.
The $1 billion California was going to get from selling part of the State Compensation Insurance Fund? Blocked by a lawsuit. Federal flexibility for Medi-Cal, another $1 billion in budget savings? Hasn’t happened yet.
To add to the fun, state courts have said that California’s budget-balancing raids on money earmarked for local transit projects were illegal, which could force the state to repay up to $3.6 billion to local cities and counties.
The lone good news this week came from Controller John Chiang, who said that state receipts were up $285 million in October, dropping the year-to-date revenue shortfall to $854 million.
But Chiang isn’t ready to break out the balloons and the party hats just yet. While the October figures are “a welcome break” from months of uninterrupted bad financial news, he wrote Tuesday, “high unemployment, excessive borrowing, an ailing construction industry and legal challenges to the budget remain real threats to the state’s cash outlook.”
Some serious number crunching will be going on in the next few weeks as the green-eyeshade crowd starts to put together the last round of estimates for next year’s budget. While the budget deadline is Jan. 10, the final decisions will be set in stone by the middle of December.
It doesn’t take an economic guru to predict that it’s going to be a lean and ugly budget year. State department heads already have been told that budget increases will be minimal at best, which means Chancellor Charles Reed’s call this week for an $884 million budget boost for the state college system is likely dead on arrival.
But that’s next year. If this year’s budget looks to be $7 billion out of balance in January, those red numbers will have to fixed and fast, since California’s bills still need to be paid – or not, as this year’s state warrant fiasco proved. That likely means another special session for the Legislature and another round of partisan shouting matches about budget cuts versus tax hikes.
Here’s a clue: In an editorial board meeting at the Fresno Bee Monday, Schwarzenegger talked about taking another deep whack to state spending but didn’t even bring up the possibility of raising taxes.
The budget battle is likely to be even nastier than before, since the last round of cuts left even fewer places to trim. Even the best one-time gimmicks are gone, since no one’s going to want to push the May state payroll into the next fiscal year, where the June checks already reside.
The cherry on top of all this is the giant $11.1 billion water bond measure that will be on the ballot next November. A long, rancorous battle focusing on just how broke the state is won’t do much to convince voters to put California even deeper in debt.
John Wildermuth is a longtime writer on California politics.