California Budget: Balanced in Name Only

Once again, state leaders rob Peter to pay Paul

It’s becoming something of a ritual. Virtually every year, the state legislature and governor “balance” the budget with gimmicks. This year they’ve outdone themselves, and when you understand the rules, you begin to see why.

Staring at a $26 billion gap in what should have been a $100 billion general-fund budget, the legislature was told by Governor Arnold Schwarzenegger that he would veto any new taxes or fees as part of the balancing effort. That meant cutting out about one-quarter of the state’s programs and services. The legislature carved out about $15 billion worth of reductions—these on top of $15 billion in program reductions last February. The other $11 billion was saved through “creative” finances. Some examples:

  • $3.7 billion was borrowed from the funds owed to local governments. The money must be paid back within three years.
  • $2 billion was transferred from the state transportation fund, also to be paid back with interest.
  • $1.2 billion was suddenly made available through moving back the last pay day of the fiscal year for state employees from June 30 to July 1.

These figures alone amount to almost $8 billion, but they don’t amount to any savings. Worse yet, they guarantee that California will begin Fiscal Year 2010-11 at least $11 billion in the hole because we’ve borrowed heavily from the future to pay for the present.

 Why did the legislature resort to these accounting tricks? Because neither they nor the governor wanted to deal with the real world. They didn’t have the stomach to cut any more from public education, the elderly, shut-ins, and welfare families. And they didn’t have the nerve to raise taxes over Republican objections.

The bottom line—a budget balanced in name only and the guarantee that we will endure more pain next year.

Larry Gerston, a political science professor at San Jose State University, appears regularly on NBC Bay Area as a political analyst.

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