Of all the disgraceful aspects to California’s budget impasse — which this year is breaking all lateness records — perhaps most maddening is that our lawmakers seem to have absolutely no sense of urgency even though every day without a budget needlessly costs state taxpayers $52 million.
The present delay has sent California’s credit rating plunging and our borrowing costs skyrocketing. Standard & Poor rates the state A-, its fourth-lowest investment grade and the lowest among big states. Extra yield that investors demanded on 10-year California bonds rose 14 percent in a week, up 124 points above AAA-rated municipal securities.
This unnecessary additional cost burden comes as the state must borrow as much as $10 billion in short-term notes within four weeks of any budget agreement and more than $6 billion in longer-dated bonds by December for public-works projects. It’s as if our Sacramento elected officials have no qualms about pointlessly throwing hundreds of millions of dollars in extra expenses on top of the $19.1 billion deficit that was constitutionally required to be balanced by July 1.
Now it seems that the Big Five — Gov. Arnold Schwarzenegger and the party leaders of both legislative houses — have agreed on a budget deal “framework” and hope to announce it at a news conference sometime today. Any encouraging fiscal news is a welcome change. But experience from recent hyperpartisan years suggests that Big Five agreements tend to be merely starting points for stubborn debate among the more uncompromising elements of both parties.
Early leaks indicate the leaders have agreed to make $7.5 billion in spending cuts, significantly less than the $12 billion that Republicans were demanding. The rest of the deficit-balancing is supposed to come from Sacramento’s traditional smoke-and-mirrors stunts.
The plan apparently assumes the state will receive a generous amount of federal money, which is far from certain. Also shaky is reliance on the legislative analyst’s $1.4 billion revenue estimate, which is considerably more optimistic than the Department of Finance forecast. There is also a proposal to obtain $1.2 billion by selling state buildings, and then leasing them back.
During early stages of this spring’s deficit debate, Schwarzenegger got tough and said he wouldn’t sign any budget not accompanied by legislation fixing some of the worst structural flaws in the state’s dysfunctional fiscal process. However, it remains to be seen how much, if any, of the governor’s hopeful reforms will survive a compromise signed off by both the no-cuts Democrat majority and the no-taxes Republicans.
There can be no doubt that without serious long-term reforms, California will never escape its paralyzing annual budgetary farce. At least this opening phase of the budget “framework” is said to include a deal to put a pension reform proposition on the 2011 ballot. That would be a valuable start, but it will take much more to stop criminally predictable losses of more than $50 million per day from returning every summer and autumn.