Gov. Arnold Schwarzenegger has called the Legislature into special session to deal with a catastrophic shortfall in California's budget: at least $6 billion in immediate deficit and more than
$25 billion over the next two years.
Actually, the adjective attached to shortfall is worth considering: A catastrophic event usually is sudden and unforeseen. Our budget crisis is now a reliable annual event, part of California's distinctive natural cycle, like the swallows' return to Capistrano or the gray whales' migration. More to the point, can we really call a self-inflicted wound a catastrophe?
The only thing remarkable about this crisis is the rapidity of its onset; the ink barely is dry on the budget the Legislature passed and Schwarzenegger signed 100 days after their constitutionally set deadline. Oh well, its tardiness hardly mattered, since this probably was the worst of the ramshackle budgets passed over the past decade, a plan composed in equal parts of wishful thinking, willful self-delusion and self-interested avoidance. It's as if the finances of the world's eighth-largest economy had been entrusted to Dickens' archetype of sunny impecuniosity, Mr. Micawber: "Something, my dear Copperfield, will turn up."
Don't look for any solutions from Schwarzenegger's "special session." Of the innumerable things he has done badly during his failed governorship, none has been worse than his leadership on the budget, which both Sacramento's Democratic majority and his nominal Republican brethren have rejected or ignored. The notion that Arnold the lame duck somehow is going to pull out an 11th hour victory wouldn't wash as the ending for even the most preposterous of his films. Moreover, passage of Proposition 25, which allows a simple majority of lawmakers to approve a budget, means the Democratic majority no longer has any incentive to take the GOP into account.
As Assembly Speaker John A. PÃƒÂƒÃ‚Â©rez said in a statement this week, his chamber's Democrats don't think working with Schwarzenegger "offers the best path" toward their goals of reducing the deficit and creating jobs. Like their colleagues in the state Senate, they're waiting for Jerry Brown.
Fair enough, but that means the Democrats now own the budget crisis, and to understand the implications of that, you have to take into account a bit of history that begins when Brown last occupied the governor's office. Until 1978, passing a balanced budget each year -- as California's Constitution requires -- was a fairly straightforward process. That year, however, the voters passed Proposition 13, dramatically reducing property tax revenue and forcing Sacramento to fund things like schools and other local services out of its general fund. A decade later, voters further constrained budget writers by approving Proposition 98, which assigned 40% of state revenue to education.
For most of the 1990s, that wasn't too much of a problem because the dot-com boom produced a flood of income tax revenue -- more than $75 billion by the turn of the century -- allowing Govs. Pete Wilson and Gray Davis to give Democratic legislators what they wanted, increased social spending, and the GOP what it wanted, cuts in personal and corporate taxes. The state, however, had become hostage to the global economic cycle. Davis was recalled in large part because of his attempts to raise revenue after the dot-com bust, and Schwarzenegger pushed the state further into the hole when he pushed through a refinance of California's short-term debt with a $15-billion bond sale. The interest on those instruments now is a significant drag on the general fund.
The economic downturn and a stuttering recovery have created an untenable problem for a state overly dependent on income tax revenue and with an overly open-handed public employee pension obligation. As the nonpartisan budget analyst Mac Taylor has said repeatedly, it's a position that can be truly improved only by both raising revenue and cutting spending.
Does Brown have the will to propose that and, equally important, to lead his Democratic legislative majority into accepting it? At the very least, he'll have to reconsider his own electoral pledge not to increase taxes without a popular vote. A grand reform compromise will be required to extract California from 10 years of smoke-and-mirrors budgeting. Brown was elected by a new majority that is younger, more Latino, more feminine and more insistent on its identification with political moderation than previous Democratic majorities. It's a new kind of coalition that desires security now and opportunity in the future.
We need a budget that reflects that.