August 21, 2003
That wacky state budget

There’s been some day-after buzz about Arnold’s statement Wednesday that the California budget is so “crazy” that he’ll need a 60-day audit after he’s elected to figure out where the money’s coming from and where it’s going. Some of the other candidates are suggesting that this shows his ignorance of state policy. That’s an easy enough shot to take. But as someone who has spent the last 15 years studying the budget every year from cover to cover, I think Arnold is more right than wrong. I don’t think the craziness absolves him of the obligation to spell out his plans in more detail. But the thing is seriously screwy. And some of the recent bookkeeping moves would shame Enron.

Consider:

--The state will delay a payment to the schools from the end of June until the first week of July next year. The schools will book the money as received in June, but the state won’t count it as paid until July. That will make the current year’s budget appear $1.1 billion smaller while adding that amount to the next fiscal year’s spending plan. Perhaps three or four people in the entire state can explain how all of that affects the constitutional provision requiring a minimum amount of funding for the schools.

--About $900 million of this year’s obligations under the Medi-Cal program won’t be counted until the next fiscal year, when the checks are actually cut. This makes the current year’s Medi-Cal program appear that much smaller, but forces an artificial leap when the new fiscal year begins.

--The state plans to sell about $1.8 billion in bonds to pay the taxpayers’ annual obligation to the employee pension fund. Such bonds are commonly used to pay an un-funded liability because of changes in pension rules or benefits. But this borrowing is being done simply because the state doesn’t have enough money to make its regular payment. Next year, the obligation will be even higher, and the state will have to pay that, plus the payment on the bond.

--The budget will raid the state transportation fund by taking $856 million in sales tax revenue on gasoline that was supposed to go for roads and transit and spending it on general government instead. This loan is to be repaid by 2009.

--The budget assumes that the state will sell about $2 billion in bonds secured by the flow of money from a legal settlement with the tobacco companies. That money was supposed to flow to state programs for 25 years to compensate taxpayers for the cost of providing health care to smokers. Instead, the state will spend it all in one year and then repay the bonds over 20 years.

--The state will sell a $10.7 billion bond measure to finance the deficit that was accumulated by the end of the last fiscal year. This bond will be repaid by a portion of the sales tax. But to get around a constitutional prohibition on such borrowing, the Legislature and Gov. Davis have created a special fund into which money from a portion the sales tax will flow until the bonds are repaid. This is not considered a debt because each year the Legislature will vote anew to use the money in the new fund to repay the bonds. The flow of money into the fund was created by increasing the state sales tax a half-cent, reducing the local sales tax by a half-cent, shifting property tax money from the schools to city and county governments to make up for the half-cent reduction in the sales tax, and then shifting tax money from the state to the schools to make up for their loss of property tax.

If that’s not crazy, I don’t know what is.

Posted by dweintraub at 08:39 PM

Arnold on illegal immigrants in the schools

The LA Weekly's Bill Bradley digs up an Arnold quote from a Q and A after a speech in San Francisco during the Prop. 49 campaign last year:

"I would never stand in the way of any child going to school, whether he or she is here legally or illegally, it does not matter."

The statement seems to contradict Arnold's claim that he voted for Prop. 187, the 1994 measure that sought to limit services to illegal immigrants, and Bradley notes that it is at odds with the campaign's suggestion that he might back the measure again if it were revived and placed on the ballot. In the piece, Bradley says the campaign won't reconcile the statements despite days of inquiries. And it looks as if he didn't ask Arnold himself in another one of those brief exchanges with the candidate that pepper his weekly dispatches.

NOTE: Bradley points out that he doesn't think Arnold's quote contradicts his current claim to have voted for 187, but I still do. Bradley intreprets "I would never..." to refer to the future, but it seems to me it could also be a description of one's past and future. If he had stood before that group in SF and said what he'd said and then added, by the way, I voted for 187, the statements would have sounded very inconsistent. Then and now.

Posted by dweintraub at 05:36 AM

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