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The State | CAPITOL JOURNAL

Calling Up That Old-Time Budget Magic

April 25, 2002|George Skelton

SACRAMENTO — SACRAMENTO

Gov. Gray Davis and Democratic lawmakers heard more bad news Monday. So did school districts and local governments. They learned that the state's budget deficit just keeps growing.

It's up to around $20 billion maybe. Don't look for an exact figure. This is all guesswork and the numbers change every week.

Democrats are in power so the blame falls on them, justly or not. It's mostly not.

This is mostly the fault of an unstable tax structure that relies too heavily on volatile incomes--especially stock options and capital gains--and not enough on stable property. But that gets into a debate about Proposition 13. Another time.

It isn't bad news for the out-party, Republicans. Their target--Davis--just keeps getting bigger along with the deficit.

So there's no deficit of demagoguery. "The governor's three-year spending spree has brought the state to its fiscal knees," GOP gubernatorial candidate Bill Simon asserted Wednesday after state Controller Kathleen Connell said she needed to borrow up to $11 billion to keep money in the checking account.

It's a favorite Republican mantra: Under Davis, general-fund spending has increased 36%.

Fine. And in Republican Pete Wilson's second term spending rose 37%. In Republican George Deukmejian's first term it climbed 45%. In Ronald Reagan's first term it soared 61% and in his second, 72%. The modern record: 95% in Democrat Jerry Brown's first term, when Sacramento began shoveling bailout money to local governments after voters passed Prop. 13.

Those figures come from the the State Library.

Neither Simon nor Republican legislators will specify which major whacks they'd take out of programs. That's because cuts alone won't solve this.

Here is a reality check:

* If you closed all 32 state university campuses--UC and CSU--it would save only $6.1 billion in general-fund money, according to nonpartisan Legislative Analyst Elizabeth G. Hill.

* Empty all the prisons and you'd save $4.7 billion.

* Eliminate benefits for welfare families and "save" $2.7 billion.

Those fantasies add to just $13.5 billion.

OK, so get serious: Shut down state government. Fire all the civil servants, including those--like highway workers--who don't even draw their checks from the general fund. You'd save $11 billion.

The fact is that 70% of the $78-billion general fund flows to schools and local government, Hill says. Schools--kindergarten through community colleges--get 40%.

So what can the state do? Well, it can raise taxes temporarily, as gutsy Gov. Wilson did in 1991 during a recession. That's upfront and honest.

Senate Leader John Burton (D-San Francisco) has proposed raising income taxes by $2.5 billion on the wealthiest--couples with taxable incomes exceeding $260,000.

Assemblywoman Carole Migden (D-San Francisco) has advocated returning vehicle license fees to their 1998 level, netting about $4 billion.

Anybody for that stuff?

"There's no will for a tax increase--from Jane and Joe Neighbor to the corporate guys," says Assemblywoman Jenny Oropeza (D-Long Beach), new head of the Assembly Budget Committee. "We are a representative government."

But there's sure to be fee increases, including at parks. They're a subtle version of tax hikes.

And there'll be ugly cuts--in education, health care, help for the aged and disabled. The state already has pared back roughly $5 billion.

"There's no way of avoiding pain in every corner of the state," Oropeza says. "We're going to try to be creative."

Creative: Smoke and mirrors.

"It is smoke and mirrors, that's fair," says Senate budget chairman Steve Peace (D-El Cajon). "That doesn't make it a bad thing."

Exactly. I'm all for smoke and mirrors. It's practical budget policy and politics.

Wilson never would have gotten through the recession without smoke and mirrors--cooking numbers, raiding funds, sleight-of-hand money shifts, borrowing to the hilt.

The state undoubtedly will borrow--maybe $4 billion--from future tobacco settlement payments. It will refinance about $2 billion in previous borrowing. Interest rates couldn't be better.

Davis and Democratic leaders will declare their eternal faith in the recuperative powers of this great state. They will--and should--underestimate spending and pad expected revenues. Just get a budget passed in July. It's all guesswork anyway.

If they're wrong, the Legislature can return after the November election to increase taxes and inflict more pain.

Smoke and mirrors may avoid--certainly delay--packing school rooms, closing trauma centers and freeing prisoners. Not to mention raising taxes.

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