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Sacramento Bee Columnist Daniel Weintraub

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July 25, 2003

Budget miracle or more smoke and mirrors?

The Senate hasn’t yet released all the details of the budget deal reached Thursday, but I can tell you this: something does not compute. Somehow they closed the gap while also agreeing to pay raises for state employees and cost of living increases to the welfare program for the disabled and aged. Cuts planned earlier for Med-Cal benefits were also set aside. And school officials, while claiming they are taking the biggest cuts in history (at least on paper) seem thrilled with the outcome. Teachers are pleased that the deal restores a teacher tax credit that was suspended last year. With all that rejoicing, John Burton and Jim Brulte have either performed a fiscal miracle or more budget sleight-of-hand. You decide.

You will be hearing a lot from legislative leaders and, especially, the governor, that they have whittled the deficit down from $38 billion to $8 billion, which sounds like substantial progress. But here’s another way of looking at it:

First, the shortfall was never $38 billion. At least $5 billion of that was future spending projected by the governor and no one else and then taken away, to produce phantom cuts. So let’s say it was $33 billion.

The biggest piece of that -- $11 billion – was erased with borrowing, an $11 billion deficit bond that will be repaid over at least five years, with the first payment not even beginning until the fiscal year that begins July 1, 2004. That gets you down to $22 billion.

Another $4.2 billion comes from tripling the car tax, a move Davis engineered by administrative fiat and which is now the subject of a lawsuit. At least $500 million comes from new fees. So let’s round up and count these items as $5 billion, which reduces your number to $17 billion.

I haven’t seen the final list, but I think they’ve got at least $5 billion in other gimmicks in there, the biggest of which is the $2 billion bond to pay this year’s pension obligations.

That brings the subtotal down to about $12 billion. I’m still looking for the detail on how they closed the rest of that gap. But based on the lack of howling from interest groups, very little of it is coming in real cuts. Besides, the leaders acknowledge that an $8 billion gap remains to be addressed next year. So they really haven’t erased the problem.

In fact, the $8 billion (I think it will be more like $10 billion) gap is really the same gap they have had all along. The big number bandied about this year was largely the result of failing to deal with that $10 billion hole three years running. So this year they borrowed to finance the accumulated deficit and raised the car tax to make a dent in the structural problem. Not a whole lot more.

The irony is that Democrats accused Republicans of holding out to help the recall, but Brulte here has cut a deal that seems designed to save Davis from the recall by papering over the problem and allowing the governor to take credit for reducing the deficit.

UPDATE: Sen. Brulte protests. His budget deal was not designed to save Davis, he says. OK. I should not have tried to read his mind. I should have said instead that Davis will use the Brulte-Burton budget deal to try save himself. And I predict the governor will get at least a small bump in the polls in the days ahead.