California kicks the can (again)

You have to love the politicians in Sacramento -- maybe not as embarrassing as those in Congress but pretty darn close! As I've written previously, the state has been in a fiscal mess of its own making, issuing high-interest IOUs in lieu of cash. Its just the latest annual budget fiasco in a state that spends more than it takes in -- in part because it gets over half its tax base from a tiny percentage of its richest residents whose incomes don't stay steady. Add to that an annual "cost of living increase" baked into the state's huge employee and pension contracts (regardless of annual revenue) and you have the kind of deficit spending that government is so good at. Now news comes tonight that the state has -- at least according to the questionable standards of the  San Jose Mercury News -- made a Budget Breakthrough solves California's long fiscal nightmare. Only it hasn't "solved" anything -- other than the current fiscal problems. What it didn't do is come to any kind of structural or long-term solution:

The deal would include Democratic concessions of more than $14 billion in program cuts — hitting the poor, children, the elderly and disabled while avoiding outright elimination of the state's welfare-to-work CalWORKS program and the Healthy Families health insurance program for children.Though they failed to get permanent reductions in welfare programs, Schwarzenegger and Republican legislators were able to uphold their vow of no new taxes with a series of accounting shifts and an enforced "loan" of nearly $4 billion from local governments.

Those accounting tricks include accelerating income tax withholdings from residents' paychecks by 10 percent,effectively shifting millions of next year's revenues into this year's budget, and delaying state workers' June 30, 2010 paychecks by one day — and thus, into next fiscal year.

From the beginning, Democrats had little hope that they could win approval of tax increases, though they proposed popular measures such as $2 billion in taxes on oil companies, alcohol and tobacco sales and the closing of numerous corporate loopholes.

Although they represent barely more than one-third of either the Senate or the Assembly, Republicans have near-veto power over the proceedings, thanks to the constitutional requirement of a two-thirds vote for budgets and taxes.

Despite an ardent lobbying effort, cities and counties likely will take a major hit, with the state poised to borrow nearly $4 billion in revenues from property taxes and gas taxes. Critics say that will result in a devastating impact on local services.

Only in California, then, can you fail to make any headway on the longer-term issue of out-of-control spending and a shrinking revenue base while solving the problem with accounting gimmicks -- and call it a "success".  What the state has done is simply to kick the can down the road yet again, so that next year it will have to go through this all over again. Now that's what I call inspired political leadership!

What do you expect from a legislature that is bought and paid for by the unions and special interests, and a governor who talks tough but doesn't really have the stomach (or principle) for the kind of show down that might have really fixed this problem once and for all?  Creative accounting followed by a huge passing of the buck to local governments, which will now have to make the tough choices that Sacramento didn't have the courage to make.

And we now are going to give health care to Washington? Are we completely nuts?