California Drowning

The Budget Crisis

When Gov. Gray Davis unveiled his revised budget proposal this week, many local government and school officials expressed relief that the dreaded spending cuts were not as deep as expected. They would do well to remember that the governor's spending blueprint will undergo plenty of changes by a Legislature that is none to happy with him or his fiscal vision.

In short, this deal is far from being sealed.

State Finance Director Steve Peace's belief that this budget can get done on time next month may represent the triumph of hope over experience. Having procrastinated over the fiscal crisis since Davis called them into special session six months ago, lawmakers likely will miss the constitutional deadline of June 15 for approving a budget. So polarized are they over spending cuts and tax increases that the crisis could drag through the summer, prompting the issuance of IOUs to state employees and vendors.

The longer this saga goes on, the greater the likelihood of the state's creditworthiness being called into question. And that means even higher interest rates on the bonds that Davis hopes to sell to help pay off California's $38 billion deficit.

Meantime, there will be court challenges over the bailout bonding proposal and the tripling of vehicle license fees. Which is all more reason that Californians should be reluctant to assume the revised budget proposal will resemble the finished product.

It's bad enough that Davis and the Legislature seem committed to a credit-card solution to the budget crisis. It's downright disgraceful that they haven't embraced the structural reforms that are essential to the state's economic well-being.

When asked about a statutory spending cap earlier this week, the governor gingerly allowed that a guaranteed budget reserve might be in order. That's a far cry from the constitutional spending limit needed to keep future legislatures in line. Without such a check, what is to prevent lawmakers from digging an even deeper deficit hole?

Davis readily concedes the need to overhaul the state's volatile tax system. But will he and legislators reform the system or simply fob this off for further study to yet another blue-ribbon commission?

We are no less suspicious of the recent talk in Sacramento about realigning the fiscal relationship between the state and local governments. How many times has this subject arisen since the passage of Proposition 13 a quarter century ago, only to be dismissed? A reliable revenue stream for local governments and the latitude to spend that money as they see fit are crucial.

Absent these structural reforms, California will continue to careen from one fiscal crisis to another.