State budget plans are built with fiscal gimmicks

"We never actually fix it," state Sen. Bob Dutton (R-Rancho Cucamonga) said of the perennial deficit.

GOP lawmakers have not offered a budget of their own.

Paper fixes

Deferrals and sleight of hand are well-trod ground in Sacramento because Democrats oppose deep budget cuts to balance the budget and Republicans resist new taxes.

"Do I think this is a good way to do business? No," said Sen. Denise Ducheny (D-San Diego), vice chairwoman of the joint committee. But it's necessary to save health and welfare programs, she said, and to help the state recover.

Government programs have already been pared back severely, with billions more in cuts on the docket. Department of Finance spokesman H.D. Palmer said the governor hoped "to avoid even deeper reductions" by proposing the deferral of schools money and other such maneuvers.

Schwarzenegger warned Democrats "not to add on to" his list of budgetary patches, but they did. "We just followed his lead," said Senate President Pro Tem Darrell Steinberg (D-Sacramento).

Schwarzenegger suggested, and Democrats approved, a $1.7-billion stopgap, which would be achieved by withholding 10% more in taxes from workers' paychecks beginning in January 2010. Workers would see larger state tax refunds the next year.

Democrats have proposed a 3% tax withholding on payments to independent contractors, who now pay their taxes quarterly or once a year. The shift would yield $2 billion in the fiscal year that begins July 1, and is the only device that lawmakers say may provide more money to the state over time, by increasing compliance with existing tax laws.

Shaky assumptions

Both proposed budgets rely on billions of dollars in revenue and savings that few experts believe will pan out.

Among them is the governor's proposed sale of the state-run workers' compensation insurance company to bring in $1 billion. The committee approved the move, but the legislative analyst has said such a complicated sale would be "very unlikely" to provide financial relief within a year.

Schwarzenegger's plan also includes $1 billion in Medi-Cal cuts that would require a federal waiver. But without the waiver in hand, "you shouldn't be counting the savings," complained Assemblyman Jim Nielsen (R-Gerber), a member of the joint committee.

Democrats, who oppose a waiver and the cuts that would come with it, vowed to get the $1-billion savings instead by securing money they say the federal government owes California. It is unclear whether Washington would pay.