Oops! We didn't really balance the budget after all

by Brian Leubitz [courtesy of Calitics - Front Page]

You know that extended standoff on the state budget over the summer? That colossal waste of time? Well, it turns out they didn't even get the numbers right. Shocking, I know.

"It's fair to say the revenue situation is not going to be as good as we had hoped," Finance Director Mike Genest said in a recent interview. "It's likely the $6.1 billion (projected operating deficit) will be higher."

Of course, we knew this was coming. When you play games with numbers, you end up losing in the end. While it is clear that what should be happening here is the reinstatement of the Vehicle License Fee (VLF) to overcome much of these deficits, that doesn't seem likely to happen anytime soon.  

Part of this is just fluctuations in income and sales tax receipts. That's going to happen sometimes. The Finance Dept. tends to wear rose colored glasses on its projections. It kinda has to lie to the Legislature/Governor to get things done in some ritualistic dance they've been doing ever since the late 90s when the Davis Administration thought it would be a great idea to cut taxes. But, of course, that's not it. We've bet on winning a bunch of lawsuits and getting a ton of money for basically selling off EdFund, California's student loan program, and the lottery.  Flip it for some of our losing bets... 

[S]everal of the assumptions that went into the current $102 billion spending plan -- such as a $1 billion sale of EdFund -- are considered shaky. A Department of Finance memo listed several "threats" to the budget, including the sale of the state's student loan guarantor, which it acknowledges "could slip" beyond this fiscal year. The sale of EdFund is among over a dozen issues and lawsuits that could easily wipe out the state's $4.1 billion reserve projected when the budget was approved. Already, the state has had to dip into the reserve to repay $500 million for a court judgment over a supplemental fund for 63,000 retired schoolteachers.

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In the fiscal year that closed June 30, the state fell $821 million below what it had anticipated to collect from its three major taxes -- personal income, sales, and corporate -- than it had projected just six weeks earlier. The trend appears to be continuing. During July and August, the state fell $308 million below forecast in those three taxes. If receipts continue to fall below what the state anticipated for the rest of the year, California could come up $2.5 billion below what was projected based on averaging the tax receipts from the last five months available.

We really have nobody to blame but ourselves on this one. We played with fire on the projections and got burned. It happens. When you put yourself in a constant strain to pay for services by tying your hands on revenue, you have to deal with these problems.