Calif. Gives Glum Look at States' Future

Washington Post: Impact of California's Proposed Budget Fix May Be Felt at All Levels; Other States May Soon Follow

(Washington Post)  This story was written by Karl Vick.

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California, famous for leading, on Tuesday showed the way into the deepening darkness that awaits every state groping to reconcile budget deadlines with collapsing revenue streams.

The $26 billion deal Gov. Arnold Schwarzenegger (R) and Democratic legislative leaders are asking lawmakers to approve Thursday would plug the deficit in California, the nation's largest state. But the total shortfall facing all 50 states through fiscal 2011 is estimated at nearly 10 times that figure, or $230 billion, according to state budget officers.

And even advocates acknowledge the hard-won package of service cuts and borrowing, announced three weeks after the June 30 budget deadline, would tide over the Golden State for just a matter of months.

"Just fix it," said Christian J. Lopez, 21, chucking a baby seat onto the mound of belongings that held in place just long enough for him to slide shut the minivan door in a post office parking lot. "Shouldn't be that hard."

It always is, though. California fell into a recession as much as a year before the country at large, caught short by the burst of the real estate bubble, a bubble that had been driven by the implied promise that things would always be just a little bit better here.

Reality hit hard, and not only for citizens. The 11.6 percent unemployment rate, exceeded in only five states, was catastrophic for a state budget that relies inordinately on income taxes. A February effort by Schwarzenegger and lawmakers to bridge the gap in part by hiking fees was beaten back soundly by voters in May.

The latest plug was fashioned from the ledgers of local governments and the pages of the calendar. The governor and leading lawmakers found revenue by taking back money from cities and counties and by accelerating withholding on income tax into the immediate future, when by all accounts, money will be even harder to come by.

About a third of the money would be diverted from accounts that must be repaid. Under ballot provisions approved by the voters -- whose direct involvement in lawmaking is among the many factors complicating California's budget process -- lawmakers must maintain certain funding levels for K-12 education and pay back cities and counties within three years. Meanwhile, local jurisdictions are howling.

"There are lots of seminal moments these days. This is one of them," said Salinas Mayor Dennis Donohue. The central California city of 150,000, known as "Salad Bowl to the World," is proposing a 1-cent sales tax increase, to 9.75 cents on the dollar, in part because of what the mayor called "the uncertainties of Sacramento."

"It's very clear there are starting to be strong sentiments not only for reform, but to move resources and some power from Sacramento to local jurisdictions," he said. "We're part of a vanguard who are trying to be more independent."

Stephen Levy, director of the Center for Continuing Study of the California Economy, said the crisis facing states overshadows even more dramatic problems among cities and counties, where most services are delivered.

"We are definitely a harbinger of the dilemma more at the Salinas level," Levy said. "Cities are in deep trouble across the United States, because when the recovery comes, it will help income taxes first. But sales taxes and property taxes, which is what cities live on, will take a while."

A proposed $15 billion cut to services is lower than many advocates feared.

In Contra Costa County, a suburb of Oakland, the director of Aging and Adult Services braced for cutting 2,000 of the 8,000 seniors receiving in-home support services.

On Tuesday, John Cottrell learned the figure may be as low as 400 and concentrated on less dependent seniors, "those who need medication reminders, light cleaning and cooking," he said.

"I'm not even worried so much about today, but tomorrow. What happens then?" Cottrell asked. "The very time when you have these crises, we all get our benefits and services cut when people need it. Medi-Cal and food stamp lines are coming out the doors. They're cutting our staff. Phone lines are ringing off the hook with complaints."

"Our lines are long, our workers are short, and tempers are short," he said.

The impact is felt at all levels. State offices have been closed at least one Friday a month since Schwarzenegger ordered employee furloughs. At Prunedale's cooperative preschool near Salinas, tuition went up $100 a month when the school lost funding for adult education programs.

"They sent a note saying they'll let us know the next round of cuts," said Tisha Morales, 29, who drops off Mateo, 3, at the preschool on her way to her job as a registered dental assistant. "Nobody's getting raises this year, either, and tuition's going up."

The bottom is not in sight. Nationwide, general revenue entering state coffers is expected to drop 2.2 percent this fiscal year, the first decrease since the 1983 recession, according to the National Association of State Budget Officers. So far, 42 states have responded by paring about $31 billion from budgets, the group said.

How the books were balanced -- tax and fee hikes, cuts to schools and services, or a painfully calculated blend of both -- varied from legislature to legislature.

"Just the fact that these budget gaps are so large, and for a lot of states this is the toughest situation since the Great Depression, you're seeing every option explored," said Todd Haggerty, an analyst for the National Conference of State Legislatures. "There's 50 different ways these states approach these things.

"California always stands out just because of its sheer size. Other states do kind of look over there to see what California's actually doing."


Staff writer Ashley Surdin in Los Angeles contributed to this report

[straightmate]

Whatever you do DON'T legalize grass! It's money and jobs in the bank and that won't fix anything.

[billcholee]

arnold and the rest of these do nothing idiots need to be flushed out of the system. my dream is a device that can erase them from the face of the earth.there is a way its called recall. recall all of them. asap please for the sake of myn sanity get rid of them

[jankebenzone]

No use posting the real reason Calf. (and other states) is in such deep economic trouble as the truth has been rejected decades ago. Repeted warnings were given, but as predicted, the masses ignored the truth, thinking they know better. Now, you are reaping what you have sown!

[antoniof123]

How true!

Instead of fixing things they just kept putting a band-aide on it now it looks like it is too late.

Most people live their lives looking backwards always willing to sacrifice long term gain for short term profit. Well looks like the reaper is coming and wants his due.

[credibility2]

They should have also placed a moratorium on doling out any government program monies to illegal aliens and their kids, whether that was education, health care or welfare.

[mjvwsr]

no mention in the article about california's killer tax rates nor their eagerness to take care of every illegal that crosses the boarder. they're getting what they deserve.

[pw08-2009]

Exactly,

We provide 30% of all welfare in the US and that is with a population of just 17%...30% of ALL US WELFARE!!!!!!. Everyone here wants major reform when it coms to ALL aspects of Illegal immigration, but our leaders DO NOT LISTEN!

[brianbwb-2009]

I have a good idea, whenever there is an election and the issues involve taxes, simply count every county that rejects paying for services, and cut off the services to that county.

It would be fun to watch the rich areas try to do without police, firefighters, schools, water, street and and power grid maintenance.

Let those who want the services pay for them, and those who don't want to pay do without them.

I have a feeling things would even out rather quickly.

[Matman001]

California IS NOT the largest state, Alaska is the largest, and then Texas, and then California. And if they would have placed a moratorium on the land and home values long ago then this would not have happened. This was inevitable. Deal with it.