California Dreamin'

September 04, 1992

Sixty-three days after it began, California's budget crisis is over. Well, sort of. Let's just say the crisis has been put on hold till next year.

After Gov. Pete Wilson signed the $57 billion budget (yes, VTC California's annual spending program is that big -- more than the combined budgets of Greece, Finland and Ireland), state officials started figuring out ways to cash the $3.5 billion in IOUs that had been issued from Sacramento to pay state workers, vendors and nursing homes during the prolonged deadlock between the Democratic legislature and the Republican governor.

Mr. Wilson won his fight to reduce the amount of state spending rather than resorting to another round of big tax hikes, as the legislature had proposed. His insisted on a downsizing of government to bring expenses more in line with revenues. As a result, aid to localities will be curbed, as will welfare benefits. School aid in future years will be sharply reduced. College tuition will soar.

On paper at least, the state's $12 billion budget gap has been closed. But much of this amounts to political legerdemain. Much of the budget-balancing comes from one-time fixes or accounting gimmicks. Other expenses have simply been delayed a year. No money was set aside to pay for still-soaring social service demands.

Worst of all, California's new budget is predicated on a set of revenue projections that makes Maryland's outlandishly optimistic revenue numbers look downright conservative: Sacramento leaders are assuming a nearly 8 percent rise in personal income next year, a virtual impossibility in a state that is still staggering from massive job losses in the key defense and space industries and a depression in commercial real estate construction.

So be prepared for a revival of this West Coast story in 1993. A massive new deficit seems inevitable. The feud between Governor Wilson and the Democratic state legislature is far from over. And California's wobbly economy may be little better off six months from now.

Is this budget crisis over? Only for those who believe in California Dreamin'.

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