In Budget Deal, California Shuts $42 Billion Gap
Take-home pay for Californians is about to shrink. Jeans, hammers, burgers and fries will cost more. Public school children will make due with old textbooks and find more classmates sitting next to them. Parents will receive fewer tax benefits, and state university students will pay 9 percent more in tuition.
As the sun rose in Sacramento on Thursday, state lawmakers ended months of political gridlock and agreed on a series of budget measures that included something for most everyone in California to despise. The $143 billion budget closes a $42 billion deficit through 2010 with tax increases, deep cuts in services and extensive borrowing.
Although California’s budget process is unusual and its fiscal problems outsized — the state’s deficit is larger than the expenditures of all but 10 other states — economists say this budget foreshadows the difficult choices that other state legislatures will soon face as the national economy worsens.
Republican lawmakers voted for tax increases at the possible expense of losing the next election; Democrats agreed to spending cuts unheard of in other downturns; and most everyone in Sacramento averted even greater compromises by looking to the federal stimulus money to bail them out.
California wrestled with its budget shortfall earlier than other states essentially because of a trick of timing. The state’s current budget was passed months late last fall and was immediately shot through with holes because of the economic downturn. In a lengthy emergency session that ended with the vote Thursday, legislators closed the current gap as well as the projected gap for the next fiscal year.
Most other states are only beginning to address their shortfalls. But with 40 states operating in the red, similar days of reckoning will soon be coming to state capitals from Florida to Arizona, state budget officials say.
“California is an example of what you will see” across the country, said Susan Urahn, the managing director of the Pew Center on the States and a budget expert. The size of budget deficits in other states will lead to similarly hard-fought debates on how to close the gaps, Urahn said.
What is more, California might have set the template as other states ponder how to apply the more fungible outlays of the federal stimulus money. “My guess is states will use what they can to reduce cuts to the bone in education and health care,” Urahn said.