What Budget Deficit? We’ve Got a Reserve!


If you are a sentient being, you may have heard that California has been running budget deficits for most of the past decade. You also may have heard that the state faces a big deficit that Gov. Jerry Brown is desperately trying to close.

So it's a bit strange, if not funny, that Gov. Brown's revised budget proposal includes a reserve of $1.2 billion. This is aspirational, of course, since right now the state hasn't grabbed the revenues or made the cuts to balance the budget. It's almost certainly not real, any more than the small reserves that appeared year after year in Gov. Schwarzenegger's budget proposal.

So why bother with a reserve? The answer is always that a reserve is prudent, in case some budget estimates are overly optimistic. And it's a good goal, like a fat man setting a goal of what weight he wants to be. Of course, a reserve of that size, less than 2 percent of a general fund of roughly $90 billion isn't all that worthwhile. A real reserve would have real cash in it -- and would approach 15 percent of the size of the overall budget. But California, facing deficits (and accumulated debt), can't get there under its current budget system. Which is why it might be wiser to stop pretending and ditch the fictional budget reserve.

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