SAN FRANCISCO — Not only is California facing a huge budget deficit, but lawmakers and the governor have a very short time to fix it to keep things from getting farther out of balance, the state’s independent Legislative Analyst’s Office
“The Legislature and the governor will need to agree to a framework to solve much of the budget problem by the end of March,” said the report from legislative analyst Mac Taylor, prepared in response to the fiscal 2011 budget plan Gov. Arnold Schwarzenegger released Friday.
“The Legislature faces incredibly daunting challenges in balancing this year’s budget,” according to the report, citing the significant lead time needed for most possible budget solutions to have an impact.
The LAO describes Schwarzenegger’s $18.9 billion estimate for the size of the state’s budget problem over the next 18 months as “reasonable.”
At the same time, the report says a major element of his planned solution — almost $7 billion in federal support to keep health and welfare programs going — has “almost nonexistent” chances of happening.
Schwarzenegger’s budget includes a trigger provision that would implement a series of even deeper program cuts and revenue increases if the federal money doesn’t come through.
The analyst’s calls for quick budget actions may be difficult to implement.
The Republican governor’s budget proposal was all but mocked by the leaders of the Legislature’s Democratic majorities.
“With regard to the bulk of the budget proposal I have one reaction,” Senate president pro tempore Darrell Steinberg said Friday. “You’ve got to be kidding.”
Assembly Speaker Karen Bass set a similar tone.
“When I do look at his budget proposals, they seem to be a big pile of denial,” she said.
Taylor urged lawmakers not to engage in their own exercises of denial.
“We see no way that the Legislature can produce a credible balanced budget that avoids the types of choices posed by the governor’s trigger list,” the report said. “The Legislature will have to make very painful cuts to programs in order to balance this year’s budget.”
Time is of the essence, the analyst reported, in part because the budget proposal includes $1 billion that depends on getting two ballot measures on the state’s June primary ballot asking to divert revenue from two voter-approved taxes from special programs into the general fund.
Voters rejected those exact measures in a special election last May.
That’s just one of the assumptions baked into the governor’s budget that could go awry, according to the LAO.
“The Legislature and the governor eventually may have to address a budget problem a few billion dollars larger than the administration identifies,” the report said.
March is also a key time point because the administration has identified it as the month the state’s cash position will be at its weakest.
Controller John Chiang, Treasurer Bill Lockyer, and finance director Ana Matasantos released a joint statement Monday reiterating that the state will have the cash resources to redeem $8.8 billion of revenue anticipation notes that mature in May and June.
“As California’s finance team, our three offices will continue to work together to ensure California has sufficient cash resources to meet its constitutional and legal obligations,” the statement said.
“That’s what we did successfully last year, in the face of the worst state government cash crisis in decades,” the joint statement continued. “Our three offices closely coordinated to ensure that California had adequate cash on hand so the state’s priority payments — including debt-service payments to bondholders — could be made on time and in full. We will build on that relationship this year to keep California in a reliable cash position.”
