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'Quick Fix' for Budget to Be Costly

Lawmakers' failure to hash out long-term solutions to the state's spending plan will cost billions more in the long run, officials say.

May 29, 2003|Evan Halper | Times Staff Writer

SACRAMENTO — As the Legislature approved last year's budget, Senate President Pro Tem John Burton reflected the conventional wisdom by calling it a "get out alive" plan that pushed a growing deficit into the future with accounting maneuvers and borrowing.

This year, lawmakers from both parties said that they had used up all of their one-time solutions and that the hard work of balancing the budget would take place in earnest.

But with the constitutional deadline for enacting a spending plan only a month away, the failure of lawmakers to compromise has them slipping once again toward a get-out-alive deal. Only this time such a deal would be far more costly to the state, thanks to the loans, transfers and funding shifts that have already been made.

The continuing inability of lawmakers to work together in finding a long-term solution was clear in a Senate Budget Committee hearing Wednesday in which Democrats pushed through a draft plan that rejected $1.5 billion in spending cuts proposed by Gov. Gray Davis earlier in the month. One Republican member called the committee's work a "gross failure."

A similar plan was approved by Democrats in the Assembly the day before -- also to the revulsion of Republicans, some of whose votes are needed for final budget approval.

The underlying disagreement hasn't changed: Republicans want to close the $38-billion budget shortfall with deep cuts, some borrowing and no new taxes. Democrats want to raise at least $8 billion in taxes to avoid decimating schools, health care for the poor and other government services.

Yet with the state poised to run out of money by summer's end absent a budget, lawmakers are under pressure to approve something fast.

So far there is little indication that what they are able to approve will actually solve the problem: In recent years California has been spending more money than it takes in. To fix it would require tax hikes or billions of dollars more in program cuts or a combination of both.

Republican political consultant Dan Schnur said all signs right now point to lawmakers pushing through "a cross your fingers and hold your nose prayer" of a budget.

"The decisions it would take to actually balance the budget are far too distasteful for legislators of either party to actually make," he said. "If you don't have the stomach for making those decisions, the only option is to roll the whole mess over into next year and hope for an economic miracle."

Absent that economic miracle, fixing the problem only becomes more difficult with delay.

"The longer you wait on some of these structural reforms, the harder it will be," said Assemblyman Dario Frommer (D-Los Feliz). "The costs keep going up."

Burton said a budget similar to last year's is not an option, as the state has maxed out its credit cards and has no choice but to face the consequences. But others say there are plenty of opportunities for lawmakers to put off the growing problem for another year.

Lawmakers from both parties who have been working on solutions to fix those structural problems are expressing concern that lawmakers are once again taking the path of least resistance.

"There is a real push by a number of us to construct a budget that is more than just a quick fix," said Assemblyman Joe Canciamilla (D-Pittsburg). "But my fear is that, because of the pressure out there to get a budget on time, it could go either way."

The cost of pushing the problem off another year would be in the billions of dollars, according to Canciamilla and others.

"Folks looking for a quick fix are underestimating the severity of the state's financial problems," he said. "Unless the financial markets get some assurances we are trying to deal with the state's underlying instability, it will be difficult if not impossible to get the financing we need."

Jean Ross, executive director of the California Budget Project, a left-leaning research group, said pushing the problem into the future one more time would quickly come back to haunt California.

She used transportation as an example. Lawmakers can defer payments to contractors and put off projects for a while, she said, but "at some point the freeway is going to collapse and you have to fix it."

Ross and others say the revised budget that Davis proposed earlier in the month was already a "get-out-alive" plan because it rolls $10.7 billion of the debt over the next five years and leaves an $8-billion annual deficit to begin reemerging next year.

"What the governor proposed would leave us pretty much where we are right now," said Kim Reuben, a budget analyst with the nonprofit Public Policy Institute of California.

She said that while the refusal of Republicans to discuss tax hikes has made progress difficult, Democrats have contributed to the breakdown by rushing to use federal aid approved this week to restore cuts.

"You would think using that money to build up more of a buffer so that we have less of a deficit next year would be the prudent thing to do," Rueben said. "But what's prudent and what's expedient are usually not the same things."

Several Assembly Democrats said privately that there was disagreement in the caucus over the restorations, and moderate members of the party working on structural reform argued against them.

State Controller Steve Westly, also a Democrat, said putting more spending in the budget now is not the way to impress Wall Street as California struggles to emerge from the lowest credit rating of any state in the country.

"I need the Legislature to continue to show that we are in fact nailing down the final pieces of a budget here," Westly said. "We must close the structural gap, and we must do it soon."

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