Budget crisis averted yet again as California suddenly finds more money

By Bob Morris, on Dec 21, 2011, 9:30 am

greatergood.berkeley.edu

Pardon my cynicism, but California has been here before. Balancing the budget seems insoluble. Then, seemingly out of nowhere, money drops from the heavens. Entire new sources of revenue are discovered! Sacramento rejoices. The budget will be balanced after all and there is much festivity. But then the Grinch sneaks in. The expected revenue vanishes or is way under expectations. Lamentations are heard among the land. The budget crisis yet again seems insoluble.

The coming $1 billion in mandated budgets cuts are due to precisely this phenomenon. Earlier this year, Sacramento predicted that $4 billion in new revenue would be arriving. It didn?t. This means deeply unpleasant mandated cuts will occur. Last month, the Legislative Analyst?s Office (LAO) said most of the $4 billion looks to be a phantom that never existed. But even in such dark times, Sacramento had an ace in the hole. Under the terms of the mandated cuts, California could take the cheeriest and most optimistic revenue estimate from either the LAO or the Department of Finance.

Hold on for this stunner. The Department of Finance released a much rosier estimate than the LAO. Apparently, unexpected new sources of revenue have been found and thus things are better than predicted. Who could have predicted such a miracle? Well, maybe it?s not so much a miracle as it is staving off a truly calamitous crisis. After all, the state is still $2.2 billion short. The governor says maybe $6 billion in further cuts are coming on top on the mandated cuts. He also wants voters to approve $7 billion in tax increases in November 2012. This will be tricky if he keeps insisting that the California economy is recovering. I?m guessing voters will be in such a foul mood they will vote down most everything, which will certainly complicate budget matters.

The $1 billion in cuts start Jan. 1 and will impact higher education, social services, home care for the infirm and elder care, local libraries, and even prisons. Rather astonishingly, $248 million of the $980 million in cuts are for K-12 bus service. That?s over 25% of the total. Worse, the bus service is federally mandated. School districts will have to find the money elsewhere rather than telling the kids to hitchhike or asking Mom to drive them. Their budgets are already beyond lean. John Deasy, Superintendent of Los Angeles Unified School District, says they have no money for transportation and will sue to block the cuts.

Home care for the sick and elderly will take a $100 million hit. A federal judge has already filed a temporary order blocking this. Doubtless many other lawsuits will be filed too.

This bipolar lurching from giddy expectations of higher revenue to depression when the revenue doesn?t appear is no way to run the financial affairs of the most populous state. The budget needs to be done based on solid and sane estimates of revenue. I propose that each year a team of outside, independent auditors, economists, and other such experts make the estimates. Further, they should be paid by an outside entity and not work for the State of California in any capacity. Businesses routinely have outside audits. California needs the same. It has shown it cannot come up with credible numbers on its own.

(crossposted from IVN)

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