California Insider

As expected, the gov’s revised budget pretty much represents a capitulation. His spread-the-pain January budget found no takers, so now Davis is taking the easy way out. He shifts his tax increases around, dedicating them for this and that, and reduces the level of budget cutting he is proposing. It looks as if the schools will get nearly enough to pay for enrollment growth and cost of living, and the harshest cuts in local government and health care have been taken off the table. But the real headline is the deficit spending. Davis is proposing a $10.7 billion deficit bond to be repaid over five years from a half-cent increase in the sales tax. After shifting all that debt off the books, he says his 2003-04 budget balances. But he concedes that the state will immediately be facing a new, $8 billion shortfall in the fiscal year that begins July 1, 2004. Davis and his finance director, Steve Peace, say they are proposing a path-of-least-resistance budget because they must have it in place on time or they won’t be able to do the borrowing they need to pay the state’s bills in July. But it’s a highly risky maneuver. If the Legislature passes Gray’s plan and then walks away, and odds are good that it will, the state will be right back into the fiscal soup, with the added burden of paying off the loan to finance a huge debt. As I’ve said before, this is like refinancing your house to pay off your credit cards and then charging your cards right back up to the limit. It’s also incredibly selfish and shortsighted. Californians will be paying for at least five years for our consumption of government services last year and this. And we still won’t have fixed the long-term problem. The whole thing is eerily similar to the energy bonds with which Davis put us on a path to pay for one year’s worth of electricity over 10 years. California needs to get real. Let’s either recognize what our services are costing and pay for them, or bite the bullet and reduce them. Unlike the feds, the state treasury can’t print money. But we can mortgage our future, and that’s what is being proposed here.