Bad as California’s budget numbers are, they’re likely to get worse.
Along with the continuing commotion over whether California will get the $6.9 billion it needs from the federal government to help close the budget deficit (Note to gamblers: take the under, the way under), state Legislative Analyst Mac Taylor warned Tuesday that Gov. Arnold Schwarzenegger might have been a teensy bit optimistic when his budget folk estimated next year’s revenues. About $3.1 billion optimistic, that is.
In Taylor’s words, the governor’s budget is realistic, but “there’s a downside risk on revenues.” Taylor’s main concern is that the governor’s financial team is counting on a faster, more robust economic recovery than he sees as likely.
It’s important to remember that both Taylor and the governor are dealing with best guess estimates of what the upcoming year will bring and there’s a lot of “potato/po-tah-to” arguing that goes on among the green-eyeshade crowd.
But if there’s one thing the past couple of years should have taught the crowd in Sacramento it’s that until proven otherwise, optimism is the wrong way to go when predicting future state revenues.
The new budget, for example, revises the revenue figures used in last year’s spending plan, chopping $1.3 billion from 2008-09 and $1.5 billion from the current fiscal year, recognizing that California’s financial woes were and are even worse than expected.
The job of the Legislative Analyst’s Office is to be the non-partisan adult in the state’s highly politicized budget battles. That usually means having to tell hard truths that neither the governor nor the Legislature want to hear.
The LAO’s overview of the new budget does just that, chiding Schwarzenegger for some suspect fiscal assumptions, but also warning the Legislature that there’s no way to duck the desperately hard choices this year’s budget presents.
“The Legislature will have to make very painful cuts to programs in order to balance this year’s budget,” the report concluded.
Aside from the federal aid, which Taylor suggests will be closer to $3 billion than the much-longed-for $6.9 billion, there are other concerns with Schwarzenegger’s plan.
A number of the governor’s proposals are guaranteed magnets for lawsuits and there’s no guarantee the state will win those court battles, the LAO report said.
There are questions, for example, about whether the governor can legally force state employees to pay an extra 5 percent toward their pension plan without negotiating with their unions. Dramatic changes in the gas tax and transportation funding could bring legal complaints from cities and counties while there’s likely another fight brewing over whether the budget plan meets the Prop. 98 guarantee for minimum school funding.
The LAO report did give the legislators – especially Democratic legislators – one small escape hatch when it suggested that the “governor’s trigger proposals on revenues are worth considering.”
Those proposals provide about $2.4 billion in extra cash by delaying some pro-business tax breaks and extending the current two-thirds cut in the dependent deduction on the state tax form. While the new revenue is only supposed to be “triggered” if the feds come up short, expect to see that money as a floor, not a ceiling, in any budget talks.
But whatever gets done needs to be done quickly if the state is going to get the full benefit of any program cuts.
“Many of the major expenditure reductions in this budget will require significant lead-time for departments to implement,” the report state, which means most of the cuts – and the fights they will inevitably spark – need to be done by the end of March, just two-and-a-half months away.
The governor is suggesting an even tighter deadline. The special session he called gives the Legislature 45 days to come up with $8.9 billion in budget solutions, which means having a bill by around March 1.
That new deadline means some of the toughest, most controversial – and most political — budget decisions need to be made within weeks, not the usual months. That condensed schedule also means that Sacramento is looking at a faster-paced rerun of last year’s all budget, all the time, legislative session.
John Wildermuth is a longtime writer on California politics.