Legislative habits are hard to change. Otherwise, legislators would realize that easy trivialities will not fill a $28 billion budget gap, nor will short-term expedients that cost taxpayers more in the long run. Simple, painless fixes to this fiscal crisis do not exist, and the sooner politicians abandon that delusion, the better off the state will be.
But legislators were still grasping for easy solutions even after the legislative analyst last week predicted a $28 billion shortfall over the next 20 months, and annual $22 billion shortfalls for years afterward. Some Republicans, for example, suggested that the state should sell off surplus property to balance the budget.
While selling off unneeded property makes sense for a state in financial distress, no one should mistake the idea for a realistic budget strategy. The state would have to do far better at selling property than it has ever done, at a time when real estate prices have tanked.
And voters passed Prop. 60A in 2004, mandating that any money made on the sale of surplus state property go to pay off the $15 billion in deficit bonds voters approved in 2004. Repaying the borrowing, and reducing the $1.5 billion in annual debt service on those bonds the state now pays, would ease some pressure on the state's finances. But the money would not be available to use for other state services.
And any income from surplus land sales is likely to be miniscule compared to the budget deficit. The legislative analyst said in 2004 that state land sales had averaged about $30 million a year in the previous decade. And in July, the Sacramento Bee reported that the state had sold less than $60 million in property since 2004.
Selling state property provides one-time money, not a steady revenue stream. Using one-time income to pay ongoing expenses helped create the budget mess.
The current budget already banks on temporary cash, with plans to borrow against state lottery proceeds. The budget counts on raising $5 billion annually in 2009-10 and 2010-11 from the lottery. A host of obstacles make that prospect uncertain.
Even if successful, the plan only fills budget holes for two years, and does not end the ongoing imbalance between spending and revenue. And this scheme has long-term costs: By 2013-14, California will spend nearly $1 billion a year to repay the borrowing.
Trading immediate gain for large future expenses is all too typical of California budgeting. The current budget reduced some business tax breaks to raise $1.9 billion this fiscal year. But the Legislature crafted those changes to slice state revenue by $965 million by 2011-12, when the state will still face huge budget shortfalls.
California needs permanent solutions, not temporary stopgaps and unrealistic schemes. The state can no longer afford legislators unwilling to face a dire fiscal reality.
Published: Monday, November 17, 2008