SACRAMENTO — The tobacco state of Virginia is raising cigarette taxes tenfold. Illinois will make do with a workforce smaller than it had in 1983. And New Jersey will force its millionaires to share more of their wealth with the state.
Virtually every state facing a major budget shortfall this year has made painful policy choices. Except California.
A year ago, amid the lingering effects of economic recession, state governments across the country were coping with deficits, shortfalls and financial angst of all kinds. But now, as other states are making their way back into the black, California continues to push its problems into the future with borrowing.
Corina Eckl, a state budget expert for the National Conference of State Legislatures, said no other state budget relied on as much borrowing as California's.
"When you look at the numbers, California stands alone. We are not seeing widespread pushing forward of budget problems," she said. "Most states are trying to resolve them in their entirety in fiscal 2005."
The $105.4-billion spending plan signed into law Saturday by Gov. Arnold Schwarzenegger includes a budget shortfall now expected to total as much as $17 billion over the next two years.
Even though the governor hopes to enact a sweeping reorganization of state government in the coming year that could save billions, the state's lingering debt looms like a long hangover, with today's spending causing pain years into the future.
The reason is simple: The state is making few sweeping spending reductions to keep the bills from piling up. And there is no plan to bring in more tax money to pay them in full. So California continues its credit card binge.
"Other states are going to be laughing at us for the way we have handled things," said Michael Bazdarich, a senior economist with the UCLA Anderson Forecast. "It's worrisome."
The budget Schwarzenegger signed is balanced with at least $15.6 billion of borrowing. The biggest chunk of that is $11.2 billion from the deficit bond package voters approved in March. The rest will come in several billion dollars of IOUs to various programs and a $920-million loan to make the payment into the pension fund for state workers.
"By 2006, this state is going to be in a deep, deep hurt unless this state has a tremendous recovery," said state Sen. Bruce McPherson (R-Santa Cruz).
The situation has also prompted continuing concern on Wall Street.
