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Tuesday, June 14, 2011

Some Mental Reservations on the State Budget: Time to Reconsider?

News accounts this morning are full of the budget drama in Sacramento and whether Governor Brown will get the four Republican votes to put tax extensions on the bracket. The accounts use the usual metaphors. Brown wants a budget with "no gimmicks." Anything else is "smoke and mirrors." Etc., Etc. However, the reason Brown might now possibly get the needed GOP votes is that Republicans think that if tax extensions are on the ballot, they will be defeated. In that case, Brown will have made pension, spending cap, and regulatory concessions without getting his extensions.

Lost in this reporting is that the Legislative Analyst indicated at the outset that it might be reasonable to consider a multi-year workout rather than trying to achieve "balance" by the end of the coming fiscal year. As this blog has pointed out, the word "balance" is misused in state and local finance (not just in California). What Brown means by "balance" is not just inflow=outflow but inflow>outflow to pay off past debt that has accumulated in the General Fund by next June 30. Moreover, even if that were achieved, there are other forms of de facto debt (funding obligations for Prop 98 for K-14, for example). There will be "smoke and mirrors" - if you want to call it that - even if the budget is passed as Brown proposes.

Meanwhile, there is no sign that UCOP or the Regents have made any appeals to Brown to remove UC from his pension deal (which would override what the Regents did last December).

Let's hope that Gov. Brown may have reconsidered his inaugural pledge:

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