Good news on the budget front

Some good things can be said about the $145 billion California budget that emerged Tuesday from a 52-day legislative stalemate, the third-longest delay in the past 30 years. Fiscally, Gov. Arnold Schwarzenegger’s 2007-08 budget is more sound than the recent norm.

Surviving the last-minute wheeling-and-dealing are the governor’s healthy $3.4 billion reserve and $2.5 billion in early debt payments that will save taxpayers hundreds of millions in interest. And once again, there are no new taxes.

On paper at least, spending will be balanced once Gov. Schwarzenegger fulfills his pledge to Senate Republican leaders to cut $700 million with his line-item veto. This was a key factor in accomplishing the final deal package. The promised cuts will overcome California’s usual operating deficit for one year — a welcome rarity.

A general outlineof which priorities will be exempted from the chopping block was already agreed upon by Gov. Schwarzenegger and the top leadership of both parties. So there should be little budgetary disputation remaining — until the entire flawed process begins again in early 2008.

Virtually any budget that keeps the state functioning is preferable to no budget at all — once the annual standoff reaches that ugly stage where the news becomes crowded with stories of unpaid social service agencies struggling to keep the doors open for their vulnerable clients.

Ultimately each side did give up some demands in order to reach a workable 2007-08 budget compromise, which after all is what healthy politics is supposed to be about. In the daily Sacramento clash of differing viewpoints and rampant egos, visions of perfection are difficult to define, let alone to enact.

However, during this brief breathing space when state politicians are congratulating themselves for the good points in the new budget, everybody is studiously avoiding mention of the very large elephant in the room. California is on track for a whopping $5 billion deficit next year, according to the state’s nonpartisan financial auditors.

This means the patchwork of fixes enabling the 2007-08 budget to be approved is unlikely to be sufficient next year. Now would be an excellent time for the state capital to begin serious work towards finding an improved budget process that eliminates the almost ceremonial yearly time-wasting deadlock.

A good starting point for budget reform might be for the governor to empanel an independent commission to study methods for reworking California’s cumbersome system. An Associated Press roundup earlier this month outlined half-a-dozen sensible suggestions from Democrats and Republicans that are considerably more inventive than simply dropping the current two-thirds approval rule (which would end an important safeguard against overspending).

We particularly like Gov. Schwarzenegger’s idea for setting spending priorities based on what the state can actually afford in that year, and automatically cutting funding for lower-priority programs.

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