Fixing the Deficit – Where to Cut

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Like it or not, the state deficit isn't about to go away any more with Jerry Brown as governor than Arnold Schwarzenegger

We have what the experts describe as a "structural deficit."  That means that our spending obligations exceed our anticipated revenues by about $20 billion annually. Worse, the fiscal gurus say that this imbalance will continue through at least 2016 if nothing is done. That's about one-fourth of the state's current $85 billion general fund budget.

Okay, so now what? 

  1. We can reduce spending by $20 billion annually.
  2. We can increase revenues by the same amount.
  3. Or we can in a Solomon-like fashion, do some of each as long as the $20 billion gap goes away.

Of course, just about everyone would rather cut spending than add taxes, so today's column will cover that category.

In the next column, we'll look at the other side--new revenues.

So, where can we cut? 

Here are some possibilities:

  • We can become the first state to drop Medicaid, a $17.5 billion medical insurance program that serves nearly eight million Californians who are poor, children, the elderly and/or disabled. More than one-third of the state's children alone are supported by this program which receives an additional $20 billion plus from the federal government. Doing away with the program would just about solve the budget gap, but what happens to the eight million with no safety net?
  • We can cut the size of the state employee workforce, which currently costs about $10 billion annually. Reducing the workforce by 25 percent would save $2.5 billion. Of course, who goes--CHP officers?  Firefighters? Department of Transportation personnel?  By the way, California already ranks 49th in the number of state workers per capita. Then, again, if you've been to the DMV lately, you probably have sensed that.
  • We can privatize the UC and CSU systems, which currently cost the state $5.5 billion. In so doing, we can put higher education on a self-supporting basis, which would place tuition in the range of $25,000 to $30,000 per year. It's hard to know just how many of the 650,000 students would still attend, given the costs. As it is, tuition at these institutions has doubled over the past six years.
  • We could eliminate CalWORKS, California's welfare-to-work program and save $3 billion annually. With that state-paid child care for parents in training programs or looking for work would go out the window.
  • We could also end support of In-Home Support Services for the disabled who are trying to avoid even more expensive nursing homes. That would save almost $2 billion per year. The only other major spending area is state prisons, which cost about $10 billion annually. Not too many people would go for opening those gates. That's it. All the other expenditures are fairly small programs or mandated by the federal government. If you're looking to save big bucks without raising any new revenues, the menu for those savings lies in the categories cited above. Depending upon which of these we cut or eliminate, California could become a very different place than it is today.

Next time--possible new revenues.

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