CALIFORNIA'S BUDGET IS FULL OF GIMMICKS …including delaying payments to schools

By DAN WALTERS, Sacramento Bee | http://bit.ly/LSD3JK

6-15-12 – SACRAMENTO  ::  The California Legislature's Democratic leaders insist that their new state budget is balanced, honest and contains an adequate reserve.

"Our budget contains no additional borrowing or so-called gimmicks," Senate President Pro Tem Darrell Steinberg said as details were unveiled.

Not.

It's "balanced" only with some very shaky income and outgo assumptions, it's "honest" only if one ignores dozens of bookkeeping tricks, fund shifts and other gimmicks, and its reserve is half of what Gov. Jerry Brown wants and a fraction of what it should be.

It is, in brief, a budget much like all recent budgets -- quite likely to fall apart when its suppositions meet reality.

The biggest of the shaky assumptions, of course, is about $8 billion in new sales and income taxes that require voter approval in November. Polls indicate that passage is no better than a 50-50 bet, and even if they do pass, they are likely to generate something less than the amount plugged into the budget.

Another assumption is that the deficit to be closed is what Brown says, $15.7 billion. Legislative analyst Mac Taylor has been telling his bosses in the Legislature that the gap between revenue and spending is probably $2 billion more but they chose the lower administration figure because it would be easier to cover.

Even without the increase in income and sales tax rates, the budget's underlying revenue assumptions are questionable. It assumes, for instance, that the state will get about $2 billion from Facebook's big stock offering, but the process was bollixed and the stock has been falling, not gaining in value.

The budget assumes that when the Air Resources Board auctions off cap-and-trade credits for carbon emissions next fall, it will generate a billion dollars and the state could use half of it for the general fund budget. But no one really knows how that auction will turn out, and using the proceeds, whatever they may be, for the general fund budget is of dubious legality.

By the same token, the budget would grab about $400 million from the national mortgage banking lawsuit settlement, even though it's supposed to be used to relieve pressure on homeowners.

Also very questionable are the local redevelopment agency funds that the state is seizing after abolishing the program. Taylor, among others, questions whether it will generate anything close to what the budget assumes, but the Legislature's budget uses an even higher number than the administration's $1.4 billion.

And then there are the gimmicks, such as raiding transportation money and other special funds (i.e., child abuse prevention money from special license plates) and delaying payments on loans and to schools and other agencies dependent on Sacramento.

An honest, gimmick-free budget? Hardly