By Tim Yaryan, Legislative Counsel and Advocate

It was Friday morning at 4:51 A.M. when the deciding 27th vote for the 2009-2010 Budget was finally cast in the Senate by Senator Abel Maldonado (R., Santa Maria), breaking a two month budget log jam.

Technically, this was a “budget revise,” because state revenues had vanished quicker than a magician’s rabbit, but, in fact, it was both a budget revise for 2008 and the 2009-2010 Budget.

Frankly, this is a budget that everyone hates! The Democrats hate the spending cuts, the Republicans hate the taxes, everyone hates to borrow more and put the state further in debt, however, in the final analysis, what other choices were there?

We could do nothing and allow the state to go insolvent, default on bonds, ruin its credit, lay off tens of thousands of employees (except Franchise Tax Board employees), close hundreds of schools and more. This list goes on. This is not a responsible alternative even though some may secretly get a feeling of “shadenfreude” if that were to occur. (“Shadenfreude” is a feeling of delight at someone else’s misery).

We ended up, instead, with a 2009-2010 Budget that gave us $15.7 billion in cuts, raised taxes $14.3 billion, and borrowed the remaining $10 plus billion – just as the state was closing down millions of dollars of ongoing construction projects statewide and issuing IOU’s to vendors. We were close to the edge of the cliff!

Is this fiscal crisis now over? The short answer is NO! As long as this economy keeps spiraling downward, the state will continue to go along for the ride – and the patient is on life support. In truth, if the economy keeps tanking, we could be looking at another $10 billion dollar deficit come next June. That is better than a $40 billion deficit, but still it is not good.

The RX, however, will rest with the voters in May. The entire budget will be subject to voter approval, and getting voter approval of new taxes in these tough economic times will not be easy!

This problem is not going away anytime soon. If the voters turn the budget deal down, we will likely be facing a $50 billion deficit – half the state budget - and the bloodletting will then be draconian! Quite honestly, many of you will then face layoffs, demotions, furloughs, and other cuts, because the county will just get swamped by the state’s fiscal tsunami!

What we have, for lack of a better example, is a fiscal cancer that requires a short term painful solution if we are to survive these tough economic times. The cancer will spread if we don’t take the curing medicine, and future solutions will get even more painful!

The “cure” is Proposition 1 A, and it will be on your May 9th Ballot.

Frankly, I am not crazy about this initiative. It has some serious flaws. I don’t much like the structure of the spending cap (a/k/a “rainy day” fund), I don’t much like the increased sales tax. However, I am going to hold my nose and vote for Proposition 1A anyway, for these three reasons:

1. We need to have a “hedge” against economic downturns and statewide emergencies (i.e. major floods or fires). This Proposition increases the size of the “rainy day” fund from 5% to 12.5% of the General Fund! It is a forced savings account, and it will help us get through future tough times! It will help “smooth” future budgets!
2. The increased taxes will “sunset,” meaning that they will expire in four years if this measure is approved. Coupled with the increased “rainy day” fund, I think the state (and local governments) will be better prepared to handle this fiscal cancer going forward.
3. The “decider” for me, however, in voting for Proposition 1A is public safety funding. If Proposition 1A is approved, most public safety programs will be fully funded through 2013! Even though, in the short term, there are serious public safety cuts we must survive, passage of Proposition 1A ensures full public safety funding for the next four (4) years!

As I said earlier in this article, there’s a lot to hate about this budget and the May statewide propositions. In the final analysis, both public safety and education are protected and the alternatives, if this “cure” fails, will be much worse! We can’t run away from our fiscal problems or ignore the painful reality we have to deal with. In the long term, I think the state needs to take a hard look at its budget process, with a view towards making it operate more like a public pension system. Pension systems have, so far, successfully coped with serious economic downturns. But, we don’t have that luxury now! We have to stop the bleeding now and that’s why I will support and vote for Proposition 1A come May!

Click here for a chart outlining public safety funding in the 2008 and 2009–2010 Budget.