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Editorial

The dire state of California

In his final State of the State address, the governor must lay out a plan that no longer pushes California's fiscal problems into the future.

January 06, 2010

The state of the state is still dire, as Gov. Arnold Schwarzenegger will no doubt remind Californians this morning in his final required address on the topic. A breathtaking 12.3% of residents who want to work are unemployed. Businesses are hurting, and too little revenue is flowing to public coffers to pay for the safety-net services that are needed more now than they have been in decades. Nor is there enough money for K-12 schools, higher education, the court-ordered relief of prison overcrowding and substandard inmate medical care, road and bridge maintenance, and everything else the state does.

Many cuts and other maneuvers tried last year either have been reversed in court, such as some furloughs of state workers, or are stuck there, such as the plan to sell part of the State Compensation Insurance Fund. In the budget plan he is to release Friday, the governor will have to propose new ways to resolve a shortfall that now exceeds $20 billion.

California's credit rating is the lowest among the states, in part because of the chronic revenue/spending gap and in part because the requirement of a supermajority vote on the budget almost always pushes it past its legal due date, leading the state to suspend payments to vendors and issue IOUs in lieu of paychecks. Some states are worse off, yet they mock California for its combination of misfortune and self-inflicted wounds.

Schwarzenegger swaggered his way into office on a campaign of tax cutting, which helped bury the state; then he helped dig us out by moderating his stance. Now the governor and Republican lawmakers can serve the state best by carefully targeting their proposed cuts and being open to smart tax increases (such as an oil severance fee and a reversal of last year's generous corporate tax breaks), rather than pushing the budget debate past July yet again in order to gin up a crisis and ramrod policy changes that have more to do with serving special interests than with saving money. Democrats can serve the state best by remembering that they are sitting atop a temporary revenue bubble as a result of increases in sales taxes and the vehicle license fee adopted last year and set to expire in 18 months. They must acknowledge that painful cuts are necessary.

More interesting challenges lie ahead, including a revamp of our tax and governance structure and an election for Schwarzenegger's successor. But in the meantime, for the state of the state to move from dire to hopeful, the governor and lawmakers need to agree on a budget that, for once, does not push our fiscal problems into the future.

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