The phony budget deal
With all the self-congratulatory back-patting that legislators and Gov. Arnold Schwarzenegger enjoyed following his signing of a budget agreement last week, Californians might be inclined to think that the state is over the fiscal hump. Think again.
The agreement is a positive thing in one respect: It shows that compromise is possible in Sacramento after all. Otherwise, though, it does little to solve the state’s multibillion-dollar budget shortfall.
Legislators adjourned for the holidays without taking action on $2 billion in cuts the governor had proposed and without doing anything to “backfill” the more than $3 billion local governments have lost this year because of his rescission of the car tax hike. On top of that, the ongoing budget gap—somewhere on the far side of $10 billion—remains.
Next March 2, voters will be asked to approve a $15 billion bond measure to cover this year’s shortfall between spending and income. If they do so—a big if—the state will have to pay off the bond, with interest, out of following years’ budgets, and the budget shortfall will still be there next year.
The agreement also calls for future budgets to be balanced and creation of a reserve fund for emergencies. Neither will solve the shortfall problem. Only drastic cuts in services or tax hikes or a combination of the two will do that. The budget agreement merely postpones the reckoning.