The harsh truth is that California’s recession-strapped economy shows only faint signs of recovery, and state and local governments will be squeezed by yawning income-outgo gaps for years.
There’s almost nothing that political officeholders can do about that fact other than attempt to raise taxes. Gov. Jerry Brown wants to try, but there are also no indications that voters would be receptive.
Most likely, he and other politicians will be restricted to spending only the revenue that a moribund economy delivers, and must prioritize.
One factor, however, is that very large chunks of revenue are locked into virtually unchangeable categories, and as overall revenue stagnates, those fixed pots grow and crowd out what’s left for discretionary — or at least unprotected — spending.
The most protected haves are bondholders who have lent money via general obligation bonds, and public employee pension funds, especially the enormous California Public Employees’ Retirement System.
Their pieces of the budgetary pie are absolutely locked and have been growing. As Treasurer Bill Lockyer notes in a new "debt affordability report," the portion of the state budget devoted to repayment of bonds ($91 billion now outstanding) has more than doubled recently to 7.8 percent, over twice the national average.
State school financing obligations have just slightly less constitutional protection, and now Brown wants to lock another $6 billion per year commitment into the state constitution to pay for shifting some criminal justice functions from the state to local governments.
Prison spending, which is at least twice as high as it should be, when compared with that of other states, may not have constitutional protection. But politicians fear, equally, turning loose felons who might commit more crimes, and the California Correctional Peace Officers Association, whose fat contracts have driven prison spending upward.
The fiscal have-nots are health and welfare programs that serve the poor, who have very little political clout, and higher education, which can make up losses of state money by raising student fees.
That’s the reality, as played out in this year’s budget process, and it will dictate what happens for years to come.
We should make lowering fixed costs a first priority, meaning some serious pension reforms and a freeze on bond debt, including the tens of billions that have been authorized by voters but not yet sold.
We should put the high-speed rail project on indefinite hold, since it would consume nearly $10 billion in bonds and lacks a credible financing plan, rewrite and perhaps suspend a pending water bond issue, and sell only those bonds whose need falls into the emergency category.
Reality bites, but if we don’t accept it, California could become the American Greece.
Dan Walters’ Sacramento Bee columns on state politics are syndicated by the Scripps Howard News Service.