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By Steve Levy

The Very Temporary State Budget "Solution"

Uploaded: Aug 3, 2009

The budget adopted by the California legislature last month provides a very temporary solution to the state's continuing budget shortfalls and policy gridlock. The temporary nature of the solution is seen by the frequent use of the terms "assumes," "borrows" and "delays" in the Legislative Analyst's review of the 2009-2010 budget.

Under the heading of "assumes" and "unspecified" the Legislative Analyst counts $4.4 billion. Under "borrows, shifts or delays" the Analyst counts another $5.3 billion. For the next budget some of the temporary taxes adopted in February expire and some of the federal stimulus money goes away.

Even if the economy roars back California will face state budget shortfalls far into the future.

How has this happened? There are three principal reasons. First, in 2000 when the economy boomed the legislature with large bipartisan votes continued a series of tax cuts ($10 billion in total) and implemented increases in education and health care. Then the boom disappeared and the state has faced a structural budget gap between normal year revenues and spending ever since.

Second, California and other states face plunging revenues from the nation's deep and continuing recession. A large part of what we face today is nobody's fault and the choices we face as a state are between bad and bad. I think additional federal aid to all states and localities is needed for this no-fault dilemma but that does not seem to be in the political cards today.

Additional federal aid is especially justified for health and social service programs—our safety net against getting wiped out by misfortune. States are powerless to protect the safety net when recessions cause deep cuts in revenues. States have to produce balanced budgets and as the just adopted California budget shows, that means fewer people will be covered by public health and social service programs at exactly the time when more and more people need help.

But there is a part of California's continuing budget saga that is our fault and for which we need to find a solution. Residents tell leaders don't cut services, don't raise my taxes (maybe you can raise someone else's taxes) and elected leaders say "we hear you loud and clear."

And then there is the constant barrage of chatter about "living within our means" and "excessive state spending" even though with the recent budget cuts, today's spending is far below the increase in caseloads and inflation over the past ten years. And the share of the state economy that goes to the state budget in 2009-2010 will be the lowest since Proposition 13 was passed in 1978.

On the other hand we passed $12 billion in temporary tax increases just to maintain the challenging situation we are in now.

The challenge is that without these or alternative taxes in 2011 or beyond and even with a strong economy there is no way to reverse any of the cuts to education that were recently passed and probably no easy way to pay back the money to education and local governments that has been promised.

It is easy to blame elected leaders who seem to have difficulty agreeing on much of anything in California. But until we as residents find a way to send them a clear message with budget arithmetic that adds up, we are part of the problem and not part of the solution.