Saturday, December 11, 2010

Oops, They Did It Again

This piece originally appeared on the Huffington Post. 
Happy 100 day anniversary California budget negotiations!
California's budget deal is anything but cause for celebration. True, the state has now ended the most protracted budget negotiations in its history. The state will also be able to start issuing debt, which is needed to pay for a myriad of things, such as public works projects. In addition, localities will get some much anticipated state funds. However, the legislature closed the state's $19 billion budget gap with unduly optimistic predictions and accounting gimmicks.
The rosy predictions contained in the budget deal:
First, California has balanced its budget in part based on the assumption that the state will get $5.4 billion in federal funds. The problem is that the federal government has indicated that it will give something closer to $1.3 billion. So there is about $4 billion that we can fairly safely assume the state will be short next year.
Second, the budget assumes that California will have higher than expected tax receipts. Why? A cynic would say because the state needs to balance the budget, and utilizing unreasonably optimistic predictions is the way to do it.
Where will the remainder of the revenue come from?
The state expects to receive $1.2 billion in revenue from the delay of a corporate tax break. California is also getting approximately $2-3 billion from a transfer of state funds, which eventually will have to be paid back.

Next, on deck, the spending cuts:
40 percent of the $19 billion budget gap is made up in spending cuts. These cuts include:
  1. A roll back of benefits to state workers, including a higher retirement age and a requirement for larger employee contributions to pension programs.

  2. Reductions in medical care to inmates

  3. Reductions in pay to state in-home care workers

  4. A reduction in approximately3 billion in funding to schools, funding which is in fact voter mandated, and will have to be paid back in the future.
Agree or disagree with Republicans, but it's a testament to the power of the state's minority party that the new budget includes no new taxes. In California, because there is a two-thirds vote required to pass a budget, the minority party holds a great deal of power.
On November 2, Californians will vote on whether to retain the two-thirds vote requirement. I urge the voters to weigh in. Whatever their decision on the two-thirds requirement, the voters should tell their public officials that the time for accounting gimmicks and unrealistic expectations is gone.

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