California's day of reckoning
Its mega-deficit demands basic reform – not just fiscal accounting.
California faces a mammoth $24 billion budget deficit and potential bankruptcy. As its governor somberly told legislators last week, "California's day of reckoning is here."
But will politicians interpret this fiscal judgment day strictly as a dollars and cents accounting? Or will they also grasp its larger message – that fundamental budgetary and political reform is needed in this "ungovernable" and "dysfunctional" state, to name two commonly used adjectives?
That's not to underplay the importance of fiscal sobriety in the world's eighth-largest economy, which is an innovation generator for America and the world.
Indeed, the Golden State has been on a spending binge, up about 40 percent since Gov. Arnold Schwarzenegger took office in 2003. It risks running out of cash in the near future. It has the lowest credit rating of the 50 states, which sure puts a crimp on borrowing.
The governor proposes drastic cuts to meet the shortfall, projected for fiscal year 2010, which starts July 1. He would eliminate the state's welfare-to-work program, CalWorks, and health insurance for 1 million children. He would stop funding state parks, furlough nonviolent offenders, and significantly cut spending on public education – including phasing out college aid to poor students.
To put this in perspective, almost every state faces a deficit in this time of deep recession. While none comes even close to having to fill a $20-billion-plus budget hole, several are actually in worse shape if you compare the size of their deficits to their overall budgets.