Here in Sacramento, we’re used to the budget being late, as it has been for 13 out of the past 16 years. This year, however, we entered legislative logjam season nervously, watching our dwindling portfolios and 401(k)s. The bubble had burst, and no less an authority than Gov. Gray Davis himself had explained the gravity of the situation to us, in plain language right up front in the proposed budget he submitted to the Legislature in January:
“The volatility of stock market-related income is the most significant financial factor influencing California’s budget in 2002-03. Over the last three years, the stock market and, in particular, the technology-driven NASDAQ index soared to unprecedented levels, rewarding investors and employees with huge profits. The resulting capital gains and stock option income created an unprecedented surge in state-tax revenues. But, in 2001, the reverse happened, and the steep decline in the stock market, capital gains and stock-option income, coupled with the impact of September 11, produced the most precipitous decline in revenues since World War II.”
Translation? Thanks to the flagging stock market, the state was, oh, $20 billion or so short of balancing its $100 billion budget. Like crazed day traders, legislators had assumed the bubble would infinitely expand, but now it had blown up in their faces.
Taxes would have to be raised, said the Senate Democrats led by Sen. John Burton, who managed to sway one Republican to their side and beat the budget deadline. Over our dead bodies, said Assembly Republicans, led by Assemblyman Dave Cox of Fair Oaks. So Assembly members from both parties huffed and puffed and, more than two months later, covered most of the shortfall by pretending the bubble hadn’t burst at all.
It just wasn’t expanding as rapidly anymore, they said.
They’ve gone home now, these legislators, these bubble boys and girls, but the governor’s office is already warning some state departments to prepare for 20 percent cuts in their fiscal 2003-2004 budgets. Like the collapse of that infinitely expanding bubble, the financial pain inflicted by an economic downturn can be postponed, at least until after the election.