A Budget That Should Have Been Closed Sooner

If Democratic legislators were willing to surrender and adopt a largely fictional budget based on hidden borrowing and accounting gimmicks, why did they wait until mid-September to do it? Such a gimmick-based budget could have been passed weeks ago, without the pain suffered by programs and people who depend on the state in recent weeks. Putting folks through that kind of difficulty, pain and uncertainty only makes sense if you have a strategic endgame that makes material improvements to the state's budget situation. But there clearly was no coherent strategy. There was merely a surrender--as this private email turned up by the Sacramento Bee makes clear.

As details trickle out this morning, the state budget compromise seems to be the worst of all worlds. It's not clear that it has the kind of strong budget reforms that can reduce the state's boom and bust cycle on revenues. (Democrats don't like those reforms). While it closes some tax loopholes, It doesn't have the responsible tax increases that could help balance revenues and spending. (Republicans don't like taxes). While there are some cuts, It doesn't have enough cuts to bring the budget into balance -- in fact, it raises education and health care spending. So what does it have?

Gimmicks and accounting tricks that simply push the problem off into the future. This is borrowing in disguise. Estimated tax payments are now due sooner. Proceeds of a tax amnesty program will be collected in this budget year, rather than the next. Democratic senate leader Don Perata calls these and other tricks "revenue accelerations." Translation: they're borrowing from future budgets for this year. 

Republicans are making fools of themselves by celebrating the victory of what they call -- fradulently -- a "no new taxes" budget. It's a "no new taxes before the November elections but we'll soak our kids" budget. So it turns out there is bipartisanship in Sacramento. Both parties and their legislative leaders can get together and agree on one thing--pushing problems off into the future.

Gov. Schwarzenegger is likely to cave and embrace this budget. Facing low approval ratings and a recall threat, he would be taking a huge political risk to veto this mess. Probably too big a risk. But a veto is what this budget -- a conspiracy between the left and the right of California -- deserves.