Surprise! More budget problems in California

Proving once again that the state of California is virtually ungovernable without some sort of an asset bubble in the inflation stage (rather than the current condition), Sacramento has released an early projection of its 2010 fiscal outlook and the news isn't good.

The LA Times reports that "borrowing, fiscal tricks and overly optimistic projections" have failed to stem the tide of red ink and another year of partisan wrangling awaits.

Less than four months after California leaders stitched together a patchwork budget, a projected deficit of nearly $21 billion already looms over Sacramento, according to a report to be released today by the chief budget analyst.

The new figure -- the nonpartisan analyst's first projection for the coming budget -- threatens to send Sacramento back into budgetary gridlock and force more across-the-board cuts in state programs.
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"Economic recovery will not take away the very severe budget problems for this year, next year and the year after," said Steve Levy, director of the Center for Continuing Study of the California Economy.

You might have thought that there would more trouble for the California budget after having done such things as paying state workers on August 1st instead of late July in order to push those costs into the next fiscal year.

It seems as though the game of "extend and pretend" has become something of a national pastime these days, now being played at all levels of society and all across the country - from Washington to Wall Street to Sacramento.

The gubernator will probably be happy to say "Hasta la Vista baby" to the state capital a year from now, ironically, leaving under circumstances that are now even worse than the conditions in 2003 that were instrumental in his election after former Governor Gray Davis was recalled.

Gov. Arnold Schwarzenegger, who will present his next proposed budget to Californians in January as he begins his last year in office, started sounding the alarm last week.

"I think that there will be across-the-board cuts again," he said at a San Jose news conference.

The task in 2010 could be even harder than it was this year, when record deficits and cash shortfalls drove California to issue IOUs for only the second time since the Great Depression. Lawmakers have already cut billions from education, healthcare and social services while temporarily hiking income, sales and vehicle taxes.

"I can't think of any good solutions," said Assemblywoman Noreen Evans (D-Santa Rosa), who chairs the lower house budget committee.

The current budget year accounts for $6.3 billion of the deficit, the nonpartisan analyst projects. Prisons spending will outstrip what has been budgeted by more than $1 billion, and K-12 schools were underpaid by $1 billion under the complex formula that governs education funding, the report says.

Another $14.4 billion of the deficit is for the fiscal year that begins next summer, say those briefed on the report. The governor's next budget will have to account for both years.

Let's see, four months later and the budget is $21 billion worse.

That seems to be about the same rate of decay that was seen last year when they were trying to close a budget gap of $40 billion or more. Don't be surprised if, in another few months, projections are right back at the $40 billion mark.