The official party line – from both parties – is that the state has an $11.2 billion hole in its current budget and faces an additional $17 billion deficit in 2009-10.
Those numbers, however, are almost certainly too low, which is one of the many complications in the frantic search for a political solution.
Try as they might, even Democrats could come up with an array of new taxes and spending cuts adding up to only $16.2 billion over the two fiscal years, plus some bookkeeping maneuvers to pick up couple of billion more. That still left them $10 billion short of solving the problem as they defined it and even that package couldn't win approval, thanks to Republican opposition.
One of the Capitol's nightmare scenarios is that legislators and Gov. Arnold Schwarzenegger by some miracle cobble together a scheme to cover the current deficit number, only to find out later that it falls many billions of dollars short. They would have exhausted themselves politically, closing all options, without really solving the problem.
Privately, many of those involved in the budget believe that the deficit could easily top $15 billion this year and $20 billion next year, not only because the economy is continuing to contract and state revenues are continuing to decline, but because local property taxes are likely to fall short and the state is obligated to make up those shortfalls to schools.
Whatever the deficit's dimensions turn out to be, were the state's politicians to be brutally frank, they'd also admit that the gap ignores some big costs lurking out there on the periphery.
They'd put a number, for instance, on the cost of complying with looming decrees by federal judges on overcrowding in the prison system and health care for inmates. A federal court receiver is demanding another $8 billion to fix the prison health system and while those costs, if approved by the courts, might be financed out of bonds, servicing those bonds would put a new strain on the deficit-ridden state budget, and staffing those new facilities would cost billions of additional dollars in operational funds.
And then there are retiree health costs. New accounting standards require governments to report costs of providing health care to retirees. A year ago, a blue-ribbon commission appointed by Schwarzenegger said state and local governments have a $118 billion unfunded health liability, with the state accounting for $48 billion of the staggering total.
Schwarzenegger promised that the state would begin setting aside money in trust funds, similar to those maintained for public pensions, to whittle down the debt but he hasn't done it, even though a new report from the Center for State and Local Government Excellence says other states are taking action. Therefore, the official deficit estimate is at least $2 billion a year too low.
The time for hide-the-pea politics is past. The time for absolute candor about the dimensions of this fiscal calamity should be now.
Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters.
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