California’s long-term finances still shaky 

Were Gov. Jerry Brown’s deficit workout plan to become reality, its spending cuts and additional revenues would probably bring the California state budget into balance for at least a few years — but the fiscal picture then becomes much cloudier.

As a two-house budget conference committee convened this week, Democrats concentrated on short-term aspects, while Republicans asked questions about the longer term that went largely unanswered.

The most important piece is a five-year extension of temporary income, sales and car taxes enacted two years ago. With other revenue moves, these would fill about half of the projected gap between income and outgo.

Republicans are refusing to place tax extensions before voters, and Brown publicly castigated them Thursday. He dubbed it a "moment of truth" and called their refusal "not American, it’s not acceptable, and it’s not loyalty to California."

Whether a tax election deal eventually emerges is uncertain. But assuming it does and voters extend the taxes, what then?

Under Brown’s plan, the sales and car taxes would flow to county governments to finance some public-safety and mental-health programs that would be shifted from the state in a move called realignment. The additional income taxes would be dedicated to the schools.

County officials are leery about realignment because the program shifts would be permanent while the dedicated revenues would be temporary. Brown promises to ask voters for a constitutional amendment guaranteeing counties’ realignment funds after the taxes expire.

The schools’ guaranteed financing, meanwhile, is already fixed in the constitution. It would increase with the income tax extension, which also would expire after five years.

"Do we have a long-term projection of where we will be [when taxes expire]?" Assemblywoman Diane Harkey, R-Dana Point, asked Chief Deputy Finance Director Michael Cohen. Cohen replied that the administration hopes "the state revenues will be there."

As Harkey implied, however, a constitutional realignment guarantee and the constitution’s school financing provisions would create $10 billion-plus in annual spending mandates that the state likely could not finance without raising taxes again, even if the economy rebounds sharply — which is by no means certain.

Making permanent spending commitments based on one-time or temporary revenues is how California slid into this mess in the first place. Doing it again would be downright stupid.

 

Dan Walters’ Sacramento Bee columns on state politics are syndicated by the Scripps Howard News Service.

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