Thread: CA Editorial: State Government of Denial

Published: Feb. 26, 2010
Updated: Feb. 28, 2010 9:53 a.m.

Editorial: State government of denial
THE ORANGE COUNTY REGISTER

Story Highlights
Lawmakers wait to cut spending, hoping economy – and revenue – will pick up.

Unlikely as it may seem, the Legislature's Democratic leadership appears to be taking Republican Gov. Arnold Schwarzenegger at his word. Last weekend, the governor said "the worst is over" for California. Behaving as if they believe him, legislators probably unwisely compounded the error as they use the optimistic forecast as a reason to delay action on the budget.

It's debatable whether California has turned the economic corner, much less the state government that relies on taxes generated by the hamstrung economy. Some financial analysts predict another round of mortgage failures ahead, perhaps an even greater collapse in the commercial lending market and likely continued layoffs in the private sector. Those aren't exactly seeds of recovery.

Nevertheless, Democrats, who are loathe to reduce any government spending, have decided to wait for things to improve, rather than make the severe reductions necessary to compensate for a projected $19.9 billion budget deficit through mid-2011.

"We're watching to see what the size of the deficit will be this spring," Democratic Assembly Speaker Karen Bass said. "Once we know what the number is, we can make more informed choices about how to fill that hole by doing the least amount of harm possible."

Of course, a more prudent way to approach this would be to make necessary cuts today so those relying on the money have time to adjust for tomorrow. If conditions improve, funding could be restored, or bonded debt paid down or even a rainy day reserve added for the next crisis.

If the governor's words gave Democratic leadership false hope, state Controller John Chiang may have given them an even greater false sense of security. The controller reported that January's revenue was $1.28 billion more than expected. But Mr. Chiang explicitly warned against being lulled into a "false sense of security." He explained that, despite the modest boost in one month's revenue, the state is on track to run out of cash by summer.

The governor's proposed budget once again is based on accounting gimmicks and hoped-for billions from Washington unlikely to materialize. Meanwhile, the Legislature's unwillingness to make necessary spending cuts and political obstacles to ramming through substantial new taxes will bring lawmakers to a familiar place as summer nears. They are likely to face another multi-billion deficit and miss another constitutional deadline on June 30 for adopting a balanced budget.

http://www.ocregister.com/opinion/state ... udget.html

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