California Budget Prognosis

CALIFORNIA BUDGET PROGNOSIS….This week should be fun: it’s the week Arnold has to unveil his budget proposal for 2004/05. He’s promised not to raise taxes, but legally only about $20-25 billion of the California budget is touchable and the deficit is currently estimated at $14 billion. How do you cut $14 billion out of $20-25 billion?

There are two answers, I suppose. The first is good old fashioned trickery:

  • Assume higher economic growth, even though the $14 billion number already assumes fairly healthy growth.

  • Lop off several billion via programs to identify waste and fraud. This never works, but people fall for it every time.

  • Take it out of the hides of local government. This has worked before, and it can work again.

  • Raise fees. Not taxes, of course. Fees.

The second part of the answer is that you cut back on programs for the poor, which is the only part of the budget that doesn’t have a broad and powerful constituency. (Higher education is also certain to get whacked.) Arnold says he doesn’t want to do this, and I’m sure his proposals will be accompanied by much wailing and gnashing of teeth about how hard it is to do it, but he’ll do it nonetheless. After all, balancing the budget on the backs of the poor is a rich conservative tradition, and even liberals have lately lost the will to fight back against this. So the poor will get screwed.

However, my guess is that even at that Schwarzenegger’s team can’t manage to eke out more than $4-5 billion in actual cuts, so here’s my projection:

  • Higher growth projections: $3.5 billion.

  • Fighting “waste and fraud” in workers comp, MediCal, etc: $2.5 billion

  • Local government cutbacks: $2 billion.

  • Fee increases: $1.5 billion.

  • Actual budget cuts: $4.5 billion.

I’m not sure how to score this to see how close I come, but on Friday I’ll revisit this and try to take a crack at it.

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