The revised budget Gov. Gray Davis proposed Wednesday represents a risky leap into the world of deficit financing, relying on an off-the-books $11 billion loan and a prayer that the economy will revive to bail out the state.
It's bad enough that Davis is proposing to pay for our recent consumption of government services over the next five years, a move that might be unavoidable now that the hole is too deep to crawl out of without a ladder. But the governor is compounding that problem by declining to offer a plan that rids the state of its multibillion-dollar structural deficit.

In lay terms, that means California's government is spending more than it's taking in, and remains on a path to do so again in the near future. If nothing is done to change course, by this time next year the state will be confronting a brand new, $8 billion shortfall. And that's probably the best-case scenario.

The governor's deficit plan will find favor with Democrats, who want to avoid making painful cuts to health, education and welfare programs. And it might even attract sufficient votes from Republicans, even though it includes a new, half-cent increase in the sales tax to retire the deficit bonds. But it would be foolhardy without a long-term plan to bring the budget back into balance.

That job, Davis says, can wait until August, when he is confident that he and the Legislature will somehow be able to do what they have put off for three years.

Davis said he had no choice but to propose a path-of-least-resistance budget because he must have a spending plan in place by the July 1 start of the fiscal year. Otherwise, the state won't be able to do the borrowing it needs in order to pay its bills this summer.

That scenario might sound like business as usual. It's not. The state has had budget deadlocks before, and once paid its bills with IOUs. But the state has never run out of cash and been flat broke, unable to pay and unable to borrow. That's what looms this July if there's no consensus by then.

No wonder Davis is worried. In the background is a nascent attempt to recall him from office, an effort that will only gain steam with his decision in this budget to increase the vehicle license fee, or car tax, back to 1998 levels without a vote of the Legislature. If the state somehow ends up insolvent this summer, voters are likely to point fingers at the man at the top.

Davis is hoping that all the borrowing will buy him time. It certainly allows him to forgo most of the tough budget cuts he proposed in January. Schools will get enough to tread water through difficult times, and most of the reductions in Medi-Cal that Davis asked for in January he has now taken off the table. Nearly all the cuts to local government are also gone.

The governor is claiming that his budget reduces spending by $7.6 billion from this year to next. But that number is highly misleading. In the wacky accounting of Sacramento, nearly $7 billion of the governor's spending cuts actually result from tax increases and accounting tricks.

About $4 billion of this total comes from raising the car tax. That counts as a budget cut for the state because the tax is a local revenue source and when it was reduced in 1998, Sacramento promised to use its general fund to make up the revenue difference for cities and counties. Raising the tax relieves the state of its need to keep the locals whole, so that's counted as a reduction in spending.

Another $1.8 billion in state "cuts" come from shifting a handful of health and welfare programs to local government and raising taxes to pay for them.

Finally, Davis takes credit for about $1 billion in spending cuts by shifting accounting for the Medi-Cal program, a trick that appears to reduce spending on paper while changing nothing in the real world.

The bottom line is that spending will pretty much remain frozen from this year to next. That's no simple task, given rising school enrollments and other demands on government services. But it's not nearly as dramatic as Davis suggests.

The governor's plan still calls for more than $8 billion in new taxes. The car-tax hike represents about half of that amount, or $4 billion, while the sales tax is about $2.4 billion a year. The final piece is a combined $1.9 billion from increasing the cigarette tax and raising income tax levies on the wealthy.

But even with those new taxes, the state still wouldn't be able to afford all of the government Davis is proposing. Unlike the federal government, California can't print money. But it can mortgage its future. And that's exactly what's being done here.

It's time for the state to acknowledge the true cost of its desires and raise taxes to pay for them, or else bite the bullet and reduce spending. To continue to do neither is both selfish and shortsighted.