The federal stimulus package passed last month will be a huge boon to California. The money will soften the blow of the recession and, with any luck, hasten economic recovery for the state and the nation.
But California officials should resist the urge to bank too much on the package to fix what ails the state's budget problems. It can help in the short term. But over the long run, as Friday's report from the Legislative Analyst comfirms, state officials, are going to have to do even more than they already have to cut spending and perhaps raise revenues to get the state's books back into the black.
The California budget package passed last month assumed that federal money would allow the state to avoid borrowing $5 billion in a scheme that had been part of earlier discussions on the budget. And the aid from Washington will be used to postpone or eliminate another $3 billion in cuts or taxes that would otherwise have been necessary.
But the California package also included some provisional cuts and taxes that were directly linked to the size of whatever aid package came forth from the feds. If the federal money is going to amount to more than $10 billion for the state's general fund by June 30, 2010, then half the increase in personal income tax rates already enacted will never take effect, and $1 billion in planned cuts to social programs will go away.
Nobody likes higher taxes or cuts in programs that aid people who are truly in need. That's why it has taken so long to get a bipartisan deal on the budget that included these real solutions, rather than the gimmicks that were so common in years past. But the worst thing state officials could do now would be to undo the results of those hard-fought votes.
The governor's finance director and the state treasurer will decide by April 1 if the anticipated federal aid meets the threshold spelled out in the budget. Finance Director Michael Genest has already said he does not think the federal aid will be sufficient to repeal the cuts and taxes linked in the budget.
Treasurer Bill Lockyer should take a hard look at the numbers and avoid bending over backward to please his fellow Democrats in the Legislature. If in doubt, stick with the current plan. The state is still in deep trouble, and undoing tough choices already made will only mean more rancor, stalemate and pain down the road.
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