Dan Walters: California budget boss jumps off before train wrecks

By Dan Walters - dwalters@sacbee.com

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Mike Genest, who announced recently that he's resigning as Gov. Arnold Schwarzenegger's budget director, deserves a respite after four years of dealing with the state's chronic fiscal crisis.

Genest is a genuinely nice guy, as well as one of the few people who truly understand the state's tangled finances. "It feels like a good time for me to step back from the day-to-day fray of things," he said.

His imminent departure, however, is a reminder that as Schwarzenegger settles on what he'll propose on state spending two months hence, California is still speeding toward a train wreck.

Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters.

The Legislature's budget analyst, Mac Taylor, will issue his appraisal soon. He'll probably tell his bosses what they don't want to hear – that things are getting worse, not better.

State revenues are running billions of dollars below even the pessimistic estimates on which the current version of the budget was based. Several of the gimmicks and unspecific spending cuts in the budget, as insiders knew at the time, aren't bearing as much financial fruit as advertised. Adverse court decisions are torpedoing other cuts. Federal bailout money is running out. And the economy remains moribund, with unemployment likely to rise.

An educated estimate is that the 2009-2010 budget is about $7 billion out of whack and that the 2010- 2011 version will have at least a $10 billion gap between income and outgo. That's why Capitol insiders are now talking about a $15 billion to $20 billion problem that Schwarzenegger and lawmakers will confront when the Legislature reconvenes in January.

The options for dealing with another big deficit, meanwhile, are shrinking.

Schwarzenegger and lawmakers already have raised income, sales and car taxes temporarily, and the heat that a few Republicans took for voting for new levies, including a recall campaign against one, likely takes more tax hikes off the table.

At the same time, however, spending advocates, such as public employee unions, are ramping up pressure on Democrats to resist more cuts. That's why, one suspects, Democratic legislators staged a hearing last week to decry cuts in home care services for the disabled that would reduce the ranks of unionized care workers – cuts for which they had voted in July.

That leaves spending deferrals, raids on other funds and bookkeeping gimmicks – the sleight-of-hand that has been used too often to make budgets balance on paper.

They've already raided local governments' funds, but a direct raid is constitutionally limited to a one-time event, and siphoning off cities' redevelopment funds is being litigated. Many of the bookkeeping gimmicks are either not working very well or are also one-timers, such as counting the June 2010, state payroll in July, throwing it into another fiscal year.

No wonder Genest is jumping off the train.