Oops, Sacramento did it again as budget crisis returns


On November 8, Gov. Brown estimated that the coming California budget deficit would be $3.1 billion, while a leaked legislative memo set it at $5-8 billion. Yet, just a few days later on Nov. 17, the non-partisan Legislative Analyst’s Office said (PDF) the actual number would be $13 billion. I must confess that this Keystone Cops approach to governing and budgeting seems more than just a tad dysfunctional to me. Yet the same pattern happens year after year. After protracted budget negotiations, new sources of revenue are magically found which somehow (sort of) balance the budget. But then those new revenue estimates are found to be faulty, triggering yet another budget crisis, which is estimated to be small at first, but which then metastasizes into the fearsome Deficit Monster which must be appeased.

The difference this time is that all the easy cuts have already been made. For that matter, most of the hard ones have been made too. Plus, the deficit has ballooned so much that a devastating $2 billion in trigger cuts will likely be made in December. These are mandated by the previous budget agreement and will bludgeon spending for education, public safety, and other services. But education will bear the brunt, and will account for a staggering 85% of total trigger cuts. Conservatives say Democrats targeted education for the cuts so as to protect social welfare, but many of those programs have taken big hits too.

Senate President pro Tem Darryl Steinberg said there must be ballot measures to raise revenue, but such measures will be 12 months in the future and won’t help the budget now.

The report is disturbing:

  • Economic recovery is even slower than expected
  • LAO revenue forecast translates into $2 billion of “trigger cuts”
  • Estimated 2012-13 budget shortfall will be $13 billion, which includes a $3 billion deficit at end of 2011-12 and a $10 billion operating shortfall for 2012-13.
  • The estimate assumes no inflation (which is doubtful) and that existing trigger cuts and reduction remain.
  • Billions of state budgetary and retirement obligations will remain unpaid through at least 2017.

State worker pensions are handled by public pension funds; thus, those obligations aren’t generally factored into the state budget, even though the pensions can legally demand that the state make up any shortfalls. In other words, many state obligations may be off the books, but the state is still responsible for them anyway.

The projected deficit is smaller than last year, which is encouraging, but it is still immense. The coming trigger cuts will be proof of that.

(crossposted from IVN)