In the course of explaining how and why California still has a daunting budget deficit – $25.4 billion for the current and next fiscal years – Legislative Analyst Mac Taylor delivered some numbers-free straight talk:
On patching over deficits:
“Too often, discussions of California’s budget situation are framed in extreme terms: the state about to go “bankrupt,” debt-service payments hypothetically poised to default, the state government on the verge of collapse. None of these scenarios is remotely likely to occur. History tells us that the state can find ways to temporarily “patch over” its annual budget problems in ways that prove sufficiently palatable to policy makers of both major parties. Periodically, large influxes of capital gains allow for temporary relief, and this too aids in patching over the state’s now-recurrent budget challenges. The Legislature and the new Governor will be tempted in the next few years to continue patching over the budget problems with temporary fixes. Unless plans are put in place to begin tackling the ongoing budget problem, it will continue to be difficult for the state to address fundamental public sector goals—such as rebuilding aging infrastructure, addressing massive retirement liabilities, maintaining service levels of high-priority government programs, and improving the state’s tax system. Accordingly, the state faces a basic choice: begin to address today’s huge, frustrating budget problems now…or defer the state’s budgetary and policy problems to future Californians.”
On a multi-year approach to fixing the budget:
“We continue to recommend that the Legislature initiate a multiyear approach to solving California’s recurring structural budget deficit. In 2011?12, such an approach might involve $10 billion of permanent revenue and expenditure actions and $15 billion of temporary budget solutions. In 2012?13, 2013?14, and 2014?15, another few billion of permanent actions each year could be initiated, along with other temporary budget solutions, and so on until the structural deficit was eliminated. Barring another sharp economic decline, such an approach could fix California’s near-term budget problems by the end of our forecast period in 2015?16 and give the state flexibility to begin (1) building reserves needed to address the next economic downturn and (2) addressing long-term fiscal liabilities.
“The solutions needed to balance the budget will mean unavoidably painful sacrifice by today’s Californians. The benefit of this sacrifice would be putting the state on a sound fiscal footing. That sound footing may allow future Californians to live in a place where the annual state budget process is a chance to improve government’s ability to serve its residents.”