Wednesday, February 10, 2010

STATE BUDGET BATTLE GEARING UP

Op-Ed by Thadeus Greenson/The Times-Standard [Eureka/North Coast]

Posted: 02/10/2010 01:31:30 AM PST

Anyone questioning the severity of California's budget woes needs only to look at some recently considered proposals to generate revenue for a rebuke, and a glimpse into just how dire things really are.

Recent months have seen cash-strapped California seriously consider proposals to sell naming rights to its state buildings, to legalize and tax marijuana, to keep marijuana illegal but tax it anyway, to privatize the state's prisons, to build and operate state prisons in Mexico and to sell off surplus state vehicles autographed by the governor.

The latest proposal comes from the governor, and is looking to convert overhead freeway displays -- historically used for public service announcements and to warn of road hazards -- into electronic advertising billboards.

While the proposal isn't likely to gain much traction, it further underscores the bleak reality that California is in the throes of budget problems the likes of which haven't been seen in a long, long time. It's also an indication that the state isn't taking its problems as seriously as it should, according to Ryan Emenaker, an assistant professor of political science at College of the Redwoods.

”We are in a desperate situation, and I think this is another thing in a line of us pretending that the situation isn't that dire -- that we can fix it with a gimmick,” Emenaker said. “It's the idea that we can avoid making hard choices and find the magic bullet to fix all our problems.”

But, Emenaker cautioned, there won't be any magic bullet and the only answer will be a long-term reshaping of the state's budget and tax systems.

In the short term, however, there's a budget to bring into balance.

With the state having issued $32 billion in budget cuts in the last year, most believe California has long since run out of easy answers. Now, facing a pending $20 billion deficit for the next fiscal year, and projected shortfalls of about $20 billion in each of the next five years, the budget battle is gearing up again.

”Our budget is seriously out of whack, and it's becoming worse by the day,” said state Sen. Patricia Wiggins, D-Santa Rosa, in a statement.

This week, legislative committees will continue chewing over Gov. Arnold Schwarzenegger's budget proposals, with the familiar refrains: Democrats calling to protect education and health and human services, and Republicans pledging not to raise taxes. All the while, state finance officials are warning that lawmakers must act quickly to avert another cash crisis.

To make up for a drastic drop in tax revenue and plug a $20 billion deficit, Schwarzenegger is proposing further cuts to health and human services, welfare programs, prisons, transportation and environmental programs.

He also seeks to raise money by rolling back recent corporate tax breaks, expanding oil drilling off the Santa Barbara coast to provide $140 million for state parks, and demanding more money from the federal government.

In his proposal, Schwarzenegger banked on almost $7 billion in additional federal funds -- money he claims the state is owed. But the federal budget proposal President Barack Obama recently released only includes a fraction of that amount -- about $1.5 billion.

The governor's proposal contained a contingency plan in the event that Obama didn't offer up what Schwarzenegger asked for, and it includes the elimination of some of the state's social service programs, including in-home care for frail seniors and the disabled, the Healthy Families program that provides health care for millions of children of the working poor, and CALWORKS, the state's main welfare and work-training program.

Many have their doubts about the proposed cuts, saying that they come with huge moral and fiscal ramifications.

The California Budget Project -- a nonprofit, nonpartisan organization -- warned that the proposed cuts come at a time of growing need.

A recent report released by the project indicates the state has about the same number of jobs it had 10 years ago, when the state's population had about 3.6 million fewer working-age individuals. More than 2.2 million Californians were out of work in December, and the state's jobless rate was 12.4 percent. Additionally, the report states that more than 1.5 million Californians were underemployed in December, working part time “involuntarily.”

Things are so bad, the report states, that the CALWORKS rolls increased by more than 86,000 over the last two years and the number of Californians enrolled in Medi-Cal increased by more than 450,000. Almost 1 million more Californians were receiving food stamp assistance in October 2009 than in October 2007, according to the report.

In light of all those numbers, California Budget Project Executive Director Jean Ross warns that the governor's proposed cuts could exacerbate the state's problems.

”The governor's proposed budget will batter a struggling economy and make life tougher for millions of families already struggling in the face of double-digit unemployment rates,” Ross said in a statement. “... He's proposing cuts to the Healthy Families program, which will lead to more uninsured children. He's slashing the In-Home Supportive Services Program, which will increase demand for costly nursing home care. At a time when the governor is talking about the importance of 'jobs, jobs, jobs,' he's proposing deeper cuts to the CALWORKS Program, California's highly successful welfare-to-work program.”

But, nobody disputes that something has to give, and that the bleak state of California's finances necessitate some very tough choices, in both the short and the long term.

In a presentation to the Assembly Budget Committee last week, State Controller John Chiang issued a stark warning. Not since July 2007 has California actually had cash on hand, Chiang reportedly told the committee, adding that, since then, the state's relied on external and internal borrowing from various special funds to pay its bills.

Chiang told the committee that, in the short term, the state faces a cash crunch in March. An influx of tax revenue is expected in April, but much of that will reportedly be quickly diverted into repayment of short-term loans, leaving the state cash-strapped by the July 1 start of fiscal year 2010-2011. The state encountered a similar situation last year, prompting the issuance of IOUs, widely considered a national embarrassment.

To address the short-term issue, Schwarzenegger proposed a plan to give the state Department of Finance unprecedented authority to delay almost any state payments at any time over the next two years, which critics argue would leave a host of entities, including local schools, people expecting tax refunds and CalGrant recipients on the fence, unsure of when they would receive state payments.

”Sadly, it's just another power play,” said Assemblywoman Noreen Evans, D-Santa Rosa, in a post on her budget blog. Evans is currently running for the First District state Senate seat currently held by Wiggins, who has announced she will not seek re-election in November.

Assemblyman Wesley Chesbro, D-Arcata, also took issue with the governor's plan, saying in a statement issued Friday that he finds it unacceptable to give Schwarzenegger's administration that kind of blanket authority.

”The governor has a responsibility to present his deferral proposals to the Legislature so that there can be a hearing and public testimony, followed by a vote of the membership,” Chesbro said in the statement. “The people of California have a right to learn about his proposals and participate in this process. Government must be open and accessible to the constituents it serves.”

However the state bridges the gap in the short term, Chiang warned that the way the state balances its budget for the next fiscal year will dictate what California looks like for years to come.

”Your actions can make the difference in setting this generation on the right fiscal path,” Chiang told the assembly committee, according to a report in the California Progress Report. “For too long, when people don't make tough choices, students, the aged, disabled and taxpayers all end up suffering.”

Wiggins said she and her colleagues in the Senate have been going over the governor's proposals and crafting counterproposals with a sense of urgency. But, she cautioned, the Legislature needs to find some common ground.

”Budgeting requires a balancing act, but it's darn near impossible to achieve a balance if some of the players refuse to make compromises,” she said, adding that while Democrats have conceded to tens of billions in spending cuts, Republicans refuse to budge on tax increases.

For his part, Chesbro said he knows difficult choices lie in his future.

”With our current financial situation, the Legislature will be facing tough choices. But, these choices need to make sense financially and provide real budget savings,” Chesbro said in the release, adding that he believes many of Schwarzenegger's proposals would prove more costly in the long run by pushing the elderly and disabled into nursing homes.

Emenaker said he thinks the Legislature will continue to face similarly difficult choices until the economy rebounds, because the structure of the state's budget and tax systems necessitate them. Because the state's revenue base is so dependent on sales and income tax revenues, Emenaker said the state is assured to see revenues dip in down economies. Conversely, Emenaker said demands for state services increase in a down economy, when more people find themselves in need of assistance and relying on state programs for the poor.

”We've set up a system where we always have the least amount of money coming in when we have the most amount of need,” he said. “Structural changes need to be made.”

37 comments:

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