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The Victor's Fiscal Hell

November 06, 2002

Congratulations on your victory, Mr. Governor-elect, and welcome to fiscal hell. Now start making millions of Californians angry by raising taxes and fees and cutting programs that benefit them.

That's the unhappy picture the election winner faces this morning. The desk groans under long-term problems that plague California. The state needs billions for transportation, additional water sources, new schools and other forms of infrastructure to serve a booming population. It also must provide adequate health care for all Californians and make public education better. The list goes on.

But the budget shortfall -- by far the biggest in state history -- looms as a giant thundercloud over everything else. Anything that involves new state spending has to wait until California brings this fiscal mess under control. The man in the governor's office will need to address the problem immediately. By the time he is sworn in during the first week of January, his budget for 2003-04 already will have a potential deficit of $10 billion. It may be worse than that if the fiscal tricks employed to offset this year's $24-billion deficit don't work. It's apparent now that some will not.

Before he decided to run for governor in 1990, Republican Pete Wilson debated with his advisors whether California was even capable of being governed. And that was before recession set in the next year, followed by a string of natural disasters.

Four years ago, Gray Davis took office with a roaring economy pouring billions in new tax collections into the state treasury. Today, conditions are far worse.

Republicans blame Davis. But there is plenty of blame to be shared. Surely Davis failed to react quickly and dramatically enough to the sudden falloff of tax collections, but he didn't cause it. He tried to raise taxes by rolling back the car tax cuts of 1999, but Republicans refused to agree to any tax increase. Democrats are responsible for pushing through expanded spending and refusing to accept some of the budget cuts Davis wanted.

That pattern of deadlock must be abandoned if the state is to begin working itself out of its fiscal hole in the coming year. Alas, Assembly GOP leader Dave Cox (R-Fair Oaks) says Republicans will stick with their no-tax vow. One can hope that was election campaign rhetoric. One possibility is to temporarily raise the state income tax on the wealthiest Californians, as was done in the 1990s. Unfortunately, there is no possibility of solving the fiscal crisis with budget cuts alone without devastating health and public safety programs. This crisis must be dealt with cooperatively. As there was in the early 1990s, there is a need for some tax increases balanced by budget cuts.

The governor-elect should begin today to build the foundation for a constructive budget compromise, consulting with both Democratic and Republican leaders. The state muddled through this year, after a record-long budget impasse, with a contorted fiscal plan rigged with string, duct tape and illusion. California cannot afford to do that again.

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