Calif. budget plan relies on accounting maneuvers

October 7, 2010 7:24:47 PM PDT
California will soon have a budget, but it is 99 days late. Before 6 p.m., the Assembly passed the compromise budget plan and it's now before the Senate for final approval.

The budget got the bare minimum votes needed to pass in the Assembly, with eight Republicans crossing over.

Even if a budget does pass on Thursday night, California will head into another fiscal mess, maybe before the ink dries from Gov. Arnold Schwarzenegger's signature.

"This is the very best we can do," says St. Sen. Mark Leno, D-San Francisco.

"Is this going to work? Is the tape going to work?"

"We'll have a deficit next year; there's no question about it," says St. Sen. Darrell Steinberg, D-Sacramento.

As the Legislature works its way through a massive $87.5 billion budget plan, held together partly with band-aids, almost everyone knows it will only temporarily end the state's financial woes.

Revenue projections appear to be too optimistic, such as $5 billion in federal aid that typically falls short every year and many budget solutions are one-time remedies rather than permanent fixes.

"I'm very clear. This budget does not address California's structural imbalance, and I don't say that with any great pride," says Steinberg.

So why approve this flimsy budget plan? Because California is embarrassingly approaching 100 days into the fiscal year with no state budget in place. Plus, the state needs to do some borrowing very soon for infrastructure projects and needs proof it is good for the money.

"What bottom line is important is both our treasurer and controller have told us they think it's solid enough so they can go to Wall Street," says Leno.

In a few short months, lawmakers might have to go back and re-work the budget. It could mean more cuts and/or more payment withholdings. People who depend on state funding, like adult daycare provider, Medi-Cal Provider Jim MacDonald, has had it with not knowing one day to the next if he'll get any money on any given month.

"We've already had the budget cuts that we've had and the budget impasse has affected us dramatically and it's hard for us to really keep our doors open. It's getting to a point where I just don't want to do it anymore," says MacDonald.

It's frustrating as well for rank-and-file lawmakers who are not part of the leadership that negotiates the final budget compromise.

"Taxpayers should be upset. We need to get the job done. That's what we were elected to do and we continue to fail step after step," says Assm. Jeff Miller, R-Corona.

There are some measures in this budget package that could help future leaders, but not immediate help. If approved, it'll be harder to qualify for social programs, the rainy day fund will be a lot bigger and the state's pension liability will be smaller.

One of the more controversial provisions of the state budget is a tax break for the wealthy Fisher Family of San Francisco -- the founders of The Gap.

Two years ago, the Fishers bought Pacific Lumber Company in Humboldt County, rescuing it from bankruptcy, and promising better management of its 200,000 acres of timberland.

Weeks later, the legislature eliminated a tax write-off that was a key part of the bankruptcy negotiations, and that left the Fisher family with an unexpected $20 million tax bill.

Backers of the budget deal say the Fisher tax break rights a wrong that was created by the state.


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