Prospects are rapidly diminishing for the five ballot measures that Gov. Arnold Schwarzenegger and legislative leaders say they need to keep the state budget from drowning in red ink.
So, one might ask, what's Plan B?
Rejection of three measures (Propositions 1C, 1D and 1E) would have a direct impact totaling nearly $6 billion on the 2009-10 budget, which was supposedly balanced by Schwarzenegger and legislators in February.
Legislative Analyst Mac Taylor has already proclaimed that the 2009-10 plan is $8 billion out of whack, so rejection of those three measures would create a $14 billion hole. But wait, there's still more bad news.
Taylor's projection assumes that the state's economy will begin picking up in 2010, but the most recent state economic forecasts don't support that assumption.
"There is no measure of economic strength that provides even a glimmer of hope for California's economy in the near term, none," says William Watkins of the University of California, Santa Barbara, Economic Forecast Project. Watkins sees unemployment, now over 11 percent, rising to near 14 percent next year as well as at least two more years of economic decline.
State income tax receipts, a critical measure of revenues, appear to be falling short, as well. Through Wednesday, income taxes for the fiscal year were a whopping $8 billion under what the state had received by that time in 2008.
Another measure: The California New Car Dealers Association reported new car sales this year running 43 percent under 2008, adding that sales for 2009 could fall below 1 million autos, less than half of sales three years ago.
The economy is in free fall, and if Schwarzenegger and legislators lose on May 19, they could face another $20-plus billion deficit in 2009-10, beginning with a severe cash crunch in July that will force them to float short-term loans – if they can find lenders.
More taxes? Rejection of Proposition 1A, the linchpin measure, would not only short-circuit the taxes enacted in February but probably make any additional levies politically impossible. Democratic leaders could try again to enact taxes without Republican votes but would face a legal challenge and political fallout. A massive bailout from Washington? Unlikely.
This is an immense mess, partly caused by the recession, partly caused by years of fiscal irresponsibility. And it may be the day of reckoning that Capitol politicians had long avoided, compounded by the obvious anger of voters.
A new statewide Field Poll has found historically low approval ratings for the Republican governor and the Democratic- controlled Legislature, just 33 percent for the governor and 14 percent for the Legislature. So their credibility to marshal support for any plan is virtually nil.
Wholesale slaughter of state spending may be their only option. This is a pivotal point in California political history, a fiscal Armageddon.
Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters.
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