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Thousand Oaks

Cooking The State's Books

by Tom McClintock [politician] 8/20/07

When Mike Genest's appointment as state finance director came before the Senate last year, I voted against his confirmation. Although I had supported both of his predecessors, Genest had already demonstrated a willingness to cook the state's books in a manner that we hadn't seen since the Davis years. In the time since his confirmation, he has produced the biggest single-year general fund deficit in California's history and employed accounting gimmickry that would make an Enron accountant blush. These qualities are on full display in his recent attack on Sen. Jeff Denham's courageous stand for a balanced budget.

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]

Genest first attacks Denham because of the hardship that the budget delay is causing. That's not Denham's fault. Before the Senate abruptly adjourned on Aug. 1, Denham moved to appropriate $10 billion to assure that the state's bills could be paid during the budget impasse. That motion was killed on a straight party-line vote. Denham voted to continue the Senate session so that negotiations could continue. That motion was also killed on a straight party-line vote. Denham voted to take up $800 million in general fund savings that could have broken the impasse that night. That motion was also killed on a straight party-line vote.

Genest dismisses these efforts as meaningless because both houses of the Legislature must agree and the Assembly isn't scheduled to return until Aug. 20. What he fails to mention is that the governor can call the Legislature back at any time. Why hasn't he? Indeed, the Legislature's joint rules prohibit recessing until a budget is adopted, and the state constitution forbids one house from adjourning without the consent of the other.

Then comes the big whopper: the budget, he says, is balanced. Even his own Department of Finance admits that the current budget will spend $700 million more than it takes in, but that is before Genest's notorious accounting gimmicks are taken into account. For example, the budget pretends that the state took in $600 million more in May and June than it actually received. After correcting for such flimflammery, the budget is at least $2 billion in the red, even accepting many ludicrous assumptions such as the state will see twice the revenue growth this year that it had last year.

Genest then states that the budget will produce a $3.4 billion budget reserve, growing to $4.1 billion when the governor uses his blue pencil.

First, what he calls a $3.4 billion budget reserve is what is left of roughly $10 1⁄2 billion of (mostly borrowed) money with which the state began the last fiscal year. That's how fast California is being spent into the hole.

Second, much of the $700 million of promised line-item vetoes aren't real. For example, $160 million is "saved" by "slipping" Medi-Cal payments due this year one month into next year -- akin to delaying your December mortgage payment until January for a big year-end "savings."

Third, Mr. Genest ignores the $5 1⁄2 billion deficit for next year that this budget sets in motion.

Gov. Schwarzenegger's budget runs the very real risk of plunging California into insolvency within the next two years, and Sen. Denham's courage in trying to prevent that disaster deserves the support and admiration of every Californian who cares about the future of our state. CRO




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