Long term, budget deal could fall short
California’s newly minted budget compromise is a step toward resolving the current gridlock, but it may not fix problems for the longer haul, warned Sacramento Bee columnist Dan Walters.
Speaking at the University of California, Santa Barbara, Economic Forecast Project’s Ventura County forecast in Thousand Oaks on Feb. 19, Walters said that when the full impact of the current recession hits, the budget gap may be $5 billion to $10 billion higher than the projected $40 billion.
“We don’t know where the bottom really is,” he said.
Walters also said the budget compromise only hints at a solution to the “fiscal roller coaster” that provides revenue spikes in good times and massive deficits in bad years. “California has a crisis of governance,” he said.
The biggest glimmer of hope is a part of the plan that would put before voters some spending limits that could curb excess spending as the economy recovers and create a rainy day fund to buffer future recessions.
“That is a step in the right direction,” Walters said.
Early on Feb. 19, state legislature approved a budget compromise. The deal involved big concessions to state Sen. Abel Maldonado, R-Santa Maria, who was the final vote required for the bill to gain the two-thirds majority it needed to pass.
Lawmakers conceded to Maldonado’s demands to put before voters measures that would amend the state constitution to make primaries open and ban legislative raises during deficit years. Maldonado didn’t win on his proposal to abolish lawmakers’ pay when the state budget is late.
But he claimed victory on a demand to do away with a proposed 12-cent gas tax increase and a proposed surcharge on income tax liability. A quarter-cent sales tax increase, federal stimulus money and line-item cuts will fill the money hole.
The compromise aims to plug the $40 billion budget gap with $15 billion in spending, $13 billion in temporary taxes increases, $11 billion in loans and a $1 billion reserve.
The bill is awaiting the signature of Gov. Arnold Schwarzenegger.
Are you a subscriber? If not, sign up today and get four free issues of the Pacific Coast Business Times!