The California state budget accord to be voted on Friday relies
on $5 billion in federal money, $10 billion in Wall Street loans,
and some pretty big assumptions, say some political observers.
California officials are high-fiving themselves over the
announcement that they have reached a compromise to close the
state's $19.1 billion budget deficit, ending a record-breaking
impasse. The new "accord," reached three months after the start of
the fiscal year, doesn't raise taxes as Democrats wished, but also
doesn't dismantle the state's welfare system, as Republicans had
After a five-hour meeting Saturday between Gov. Arnold
Schwarzenegger and Democratic and Republican heads of the state
Senate and Assembly, Senate president pro tem Darrell Steinberg told
the press, "We have a comprehensive agreement." More details, he
said, would be released Thursday at a hearing and a vote could come
as early as Friday.
There is only one problem, say several analysts: nothing is
"Don't count your chickens, yet," says Robert Stern, president of
the Center for Governmental Studies. "The budget still has a long
way to go before it is finally enacted."
"A lot can still happen to derail this," adds Sherry Jeffe, a
political scientist at The University of Southern California.
Details which have trickled into various press accounts include
$7.5 billion in spending cuts and the suspension of a corporate tax
break valued about $1.4 billion. Alicia Trost, a spokesperson for
Mr. Steinberg, says that the so-called "gang of five" also agreed to
erase another $1.4 billion by accepting an independent legislative
analyst's estimate of incoming revenue, which was that much higher
than Governor Schwarzenegger's. There is also the assumption of $5
billion in federal funds, and $10 billion in loans from Wall Street.
But one unknown is how legislators will respond to the sale of 11
state office buildings, which the state would rent for the long
term. Two of the buildings are at San Francisco's Civic Center,
which would bring in over $1 billion immediately, but would cost $30
million annually to rent.
More questions surround what kind of long-term credit the state
can arrange, given its falling bond ratings.
The budget plan reportedly relies on bogus economic assumptions
and unrealistic expectations about federal aid, says Jack Pitney, a
political scientist at Claremont McKenna College in Claremont,
Calif. "They debated, deliberated, and delayed - and then ended up
faking it anyway," he says. "Never have so many Californians waited
for so long for so little."
One of the biggest reasons why California set an all-time record
for budget lateness this year, says Ms. …