Thanks for the whiskey, Jeff, now pass the budget

By MIKE GENEST

last updated: August 10, 2007 06:17:29 AM

It's difficult to take issue with a man who was kind enough to buy me a fine glass of Booker's Bourbon on the night of Gov. Schwarzenegger's inaugural. But I must take exception with Sen. Jeff Denham's comments in his op-ed ("Our budget should be balanced," Aug.8, Page B-6) on the state budget now pending in the senate.

(And as I was with the whiskey, I will be temperate in my critique).

There are, in fact, real consequences of not having a budget in place. A prime example is in Medi-Cal -- the state's health insurance plan for low-income California families. The state's loan authority to cover these payments without a budget was exhausted in late July. Without a budget in place, the state has been unable to make its scheduled payments to hospitals, clinics, nursing homes and other health care providers -- including many in the Central Valley.

Some might have enough credit or cash to cover this. But for those smaller providers that are operating on the margins, a continued delay is going to have a definite impact.

Yesterday, the state wasn't able to make a $213 million payment to these health-care providers -- bringing the total of missed Medi-Cal payments to more than $750million during this budget impasse. As an alternative to a vote on the budget, Denham has suggested passing a stopgap spending measure. But that would take both houses of the Legislature to agree. The Assembly isn't scheduled to reconvene until late August. So in the short term, this won't provide relief.

Beyond that, stopgap spending measures are what Congress resorts to when it can't come to an agreement on a federal budget. Unfortunately, that's been the rule more than the exception: the last time that Congress got the nation's budget done on time was in 1994. In this case, I don't think we want to use Washington as a role model for budgeting in Sacramento.

The budget that was approved last month by the Assembly and is now before the Senate is, in fact, balanced. Under this plan, the state would not spend more than it collects in revenues for the coming fiscal year. With the governor's promise of additional line-item vetoes to the spending plan, the year-over-year growth in spending would be $624 million -- or, just 0.6percent.

And as a prudent hedge against economic and budget uncertainties, the budget before the Senate contains a reserve of $3.4billion. And with the governor's vetoes, that reserve will grow to $4.1 billion -- an amount higher than last year's budget reserve. To me, that's a budget that's in the black, not the red.

Five Senate Republicans, including Denham, voted in favor of last year's budget -- which increased state spending by 9.3percent and had a budget reserve of $2 billion. Senate Republican Leader Dick Ackerman, who joined Denham in voting for that budget, said: "This budget does meet a lot of Republican priorities in paying the down the debt, increasing the reserve, taking care of education and taking care of law enforcement. We think it is a good balance for the state of California."

The budget that's now before the Senate accomplishes all of these same priorities and goes them one better, by limiting spending growth to less than 1 percent and boosting the reserve to more than $4 billion. It's hard to understand why this better budget doesn't warrant Denham's support.

Genest is director of California's Department of Finance.

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