It is easy to understand why Gov. Arnold Schwarzenegger, in touting the passage of the state's budget, wants to ignore the elephant in the room. The elephant is the state's structural deficit - the continuing imbalance between state revenues and expenses - which is more than $4.1 billion this year.
The governor used unexpected revenues and past borrowing to mask the problem, shirking his responsibility to present a truly balanced budget. That structural deficit is an unfilled budget hole that will harm our efforts to ensure a better education for our children, provide health care for California's children and protect our environment.
For three years in a row, the governor has declared that he would tear up the state's credit card and bring state revenues and spending into balance. That hasn't happened, and as a result, the state's nonpartisan Legislative Analyst Office has projected that state spending will outrun revenues by more than $3.3 billion in the 2007-08 budget and by a similarly large gap in 2008-09.
The inconvenient truth is that California's budget situation remains in difficult straits, despite a fortuitous revenue windfall from higher than expected levels of capital gains pumped up by stock option transactions and real estate sales. The governor says that we are out of the woods now. But we're not. Indeed, the legislative analyst has warned that the state already is committed to spending more than any projected economic growth could cover.
In short, what the governor has done is like paying down your credit cards with a little money you won in the lottery. It feels good, but if your income doesn't match your living expenses, you'll soon max out those cards again.
That is why, looking at the state's failure to fix its ongoing budget gap, the nation's three major bond rating agencies, in quick succession, corroborated my warning and that of the legislative analyst that while state revenues have improved, California's economic condition will remain insecure until the state produces balanced budgets. Thus, even with increased state revenues, those three rating agencies peg California's credit rating at next-to-last in the nation, better only than the rating of Louisiana.
California must have a truly balanced budget that protects education. Even in a year when the state has received billions in unexpected revenue, Schwarzenegger has failed to confront the structural deficit by proposing a balanced budget. His revised budget would continue to shift the burden of today's deficits onto the backs of future generations.
The governor's budget places an undue burden on working families. On higher education, Democrats in the Legislature did the right thing, when the governor would not, and rolled back community college fees by $6 per unit. That's a start. But the governor's budget will leave community college fees nearly double what they were just three years ago. And the budget will also leave untouched the fees at California State University and the University of California, which have increased by $2,000 and $5,000, respectively, under Schwarzenegger.
The governor also failed to get members of his own party to agree to a budget that funds health care for more kids from working families. Compassion requires - and intelligent public health practice demands - that all children residing in California have access to adequate health care.
At the same time, over the previous two budgets, the governor has imposed fee and tax increases on working families totaling more than $1.6 billion - the bulk of which will remain in the coming year. Meanwhile, the governor has resisted all efforts to close tax loopholes for big corporations.
California's children and hard-working families deserve better. Just as a family must balance its checkbook every month before it can meet its long-term goals - buying a house, saving for retirement, or putting away money for college tuition - a truly balanced, fair budget must be the beginning of any plan to meet our state's long-term goals. If we continue to ignore the inconvenient truth of a budget that is chronically out of balance, we will shortchange ourselves, our children and our future.
