Manic delusions of new revenue followed by the wet, cold fish of revenue shortfall. The California budget tragi-comedy continues. I could write articles about the ongoing California budget crisis by using cut-and-paste from previous articles because the same thing happens every year.
Here’s the scenario.
1) California faces an imminent budget crisis because, by law, a balanced budget must pass. But the money isn’t there. There is much gnashing of teeth.
2) The California State Legislature calls upon soothsayers, oracles, and other prognosticators who predict great new revenue streams coming into the state from heretofore unknown sources. There is great rejoicing in Sacramento as these new numbers show that the budget will indeed be balanced. The budget passes using the new revenue estimates.
3) The unthinkable happens. The pixie dust revenue fairy did not swoop in, sprinkling billions of dollars upon the state. Revenue estimates were not only way too high, instead there is – and no one could have predicted this – a gaping revenue shortfall and a new California budget crisis.
4) Repeat 1)-3) endlessly.
California State Controller John Chiang just announced that total State revenue for the month of November 2012 fell $806.8 million, or 10.8%, below budget. Democrats thought they could hammer “the rich” by convincing voters to pass Proposition 30 to create the highest state income tax in the nation. But it now appears that high income earners have already “voted-with-their-feet” by moving themselves and their businesses out of state, resulting in over $1 billion shortfall in corporate and income taxes last month and the beginning of a new financial crisis.
When Jerry Brown became governor of California in 2011 he disappeared from public view for six months, spending much time talking to Republicans, crossing party lines in an attempt to work out a grand deal on the California budget. It didn’t work.
The chasm is too great and the two sides are still very far apart. Meanwhile, the budget crisis worsens. California is billions short of what it needs to balance its budget.
The California budget is 5.6% larger this year than last year. This no doubt comes as a surprise to most Californians who foolishly assumed that dire predictions of future financial problems coupled with already bludgeon-like spending cuts would mean Sacramento would be hard at work at making the budget smaller. But instead, it’s larger. Welcome to the Looking Glass World of the California Budget, where little is actually as it seems to be, and most everything is distorted too.
California legislators did pass a budget on time this year (so they will continue to be paid.)Â Except, it’s not really a budget, it’s a $92.1 billion ‘spending plan,’ whatever that is. Governor Brown may veto it and more than two dozen additional bills remain to be passed. These bills will contain the details as to how the balanced budget mandated under California law will be enacted. Gosh, I’m guessing that most California families when making a budget would endeavor to work out the details before announcing they have a budget. But Sacramento is taking the high road, apparently wishing to avoid dealing with such bothersome details.
How much longer will California’s pretend-and-extend on the budget continue? Every year it’s the same tiresome fiscal train wreck, but nothing changes. The legislature continues its sleepwalking. No lasting solutions are found. The rot and dysfunction continues and worsens.
Californians may be startled to hear that those in other states increasingly view California as a laughingstock and the poster child for government dysfunction. Yes, things are that bad”¦and they just got much worse.
California Governor Jerry Brown announced huge spending cuts on Monday. California’s budget deficit is now $7 billion more than estimated and totals $16 billion. For some reason this huge increase, released as the “May Revise”, was deemed to be unexpected. Just like it is every year, Sacramento haphazardly attempted to balance the budget by making fictional estimates of projected income. But the projected income is a phantom, it doesn’t exist and never did. Now here we are a few months later, with the wet sandbag of reality whacking lawmakers upside the head. Sacramento is realizing it has yet another monumental deficit and no clue what to do.
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.