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How Can GOP Work Alone On Budget?

by Tom McClintock [politician] 8/17/07

This is not the first time the California Legislature has reached an impasse in its budget negotiations. In past years the state has gone until early September without a budget agreement.

But whenever the budget has snagged in the past, legislators kept working to resolve it. This is the first time in California’s history that they simply walked off the job.

Tom McClintock

Mr. McClintock is an expert on matters of the State budget and fiscal discipline. He is a Senator in the California State Legislature and ran for Governor in the 2003 recall election. His valuable website is found at http://www.carepublic.com/blog.html[McClintock index]

Before Senate Democrats unilaterally left on summer holiday, Senate Republicans tried to continue the session to resolve our differences and to appropriate $10 billion so that the state could continue to pay its bills. Both motions were killed on straight party-line votes.

Unrelated side issues should not cloud the only real budget issue: California faces the very real risk of running out of money next year without significant spending reductions. Spending increased much too fast, the economy is now cooling, and we have to take decisive action to avert far more difficult choices in the immediate future.

We’re told that despite an "operating deficit" of $700 million, the budget has the "biggest reserve in history" — some $3.5 billion. Actually, that "reserve" is what’s left from $10.5 billion of largely borrowed funds with which we began the last fiscal year. The state’s chronic deficit spending has consumed all but the last $3.5 billion — itself a warning sign.

But there’s more. The actual reserve is closer to $1.5 billion because of $2 billion of phantom revenue that simply doesn’t exist. For example, the budget pretends that we received $600 million more in May and June than actually came in. Another $200 million depends on a real estate boom that the nonpartisan Legislative Analyst’s Office urgently warns is unlikely.

And that leaves a paper-thin reserve, considering many other highly questionable assumptions, starting with the expectation that revenues will grow twice as fast this year as they did last year.

The failure of this or many other similar expectations could quickly blow through that remaining reserve and leave the state insolvent — even before it confronts a projected $5.5 billion budget deficit next year.

It will take at least $2.9 billion of reductions to truly balance the budget and provide a prudent reserve. If that sounds like a lot, it would still leave the state spending $8.5 billion more than the year before last, and nearly $22 billion more than at the outset of this administration.

Most Senate Republicans are asking for much less than that: just the $700 million of spending reductions that would balance the budget, if only on paper.

So far, the governor’s pledge to use his line-item veto to make those reductions doesn’t ring true. For example, about $160 million of the "cuts" his staff has outlined simply push Medi-Cal payments one month into the next fiscal year — akin to making your December mortgage payment in January for a big year-end "savings." These are the kind of bookkeeping gimmicks that put us in this mess. They’re not going to get us out.

Senate Republicans tried to take up $800 million of specific budget amendments to break the impasse and at least cushion the state’s fiscal fall, but Senate Democrats refused even to consider them before they left town.

In order to reach an agreement, both sides need to be engaged in a discussion — and that’s where the process has broken down. Budgets cannot be balanced with happy thoughts and pixie dust, and Republicans can’t negotiate with themselves. CRO

First appeared in Sacramento Bee




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