California’s Fiscal Tsunami


You may have not have felt it yet, but the breakdown in budget talks between Democratic Governor Jerry Brown and state legislative Republicans has signaled the onset of nothing less than a fiscal tsunami.

In the coming months, huge waves of resentment will roll in from all sides as the budget impasse takes its toll.

Let's not kid ourselves, for many Californians this crisis is real. Here's why. The budget hole for the coming year originally was a staggering $26 billion, or 30 percent of anticipated expenditures.

Brown proposed finding half the money through drastic budget cuts, which were made by the legislature, and half the money through continuation of three temporary tax hikes on income, sales and motor vehicles for five years upon voter approval in a June 7th election.

That's where things got ugly.

Republicans demanded 53 "reforms" as the price for committing to the election. Brown countered that most proposals were off the budget mark (they were) and others would be considered later.

On that score, both sides blew it. Republicans should have been less greedy with their list, and Brown should have given in publicly to some changes; pension reform would have been a good start. Each side had to walk away with something for political cover, if nothing else.

No movement, end of negotiations.

Back to the tsunami. You don't cut 30 percent out of an already lean budget without repercussions. The biggest loser will be public education, and in a very dramatic way. That's because about half the budget goes to public education, 40 percent to K-12 schools and 10 percent to state universities and colleges in round numbers. It doesn't take a rocket scientist to see that half the $12 billion in cuts will go to public education--there's no way to avoid it.

As a result, expect thousands more teacher layoffs and a school year shortened by as much as three weeks; some districts are already talking in those terms. The public colleges and universities will contract further and raise tuition probably another 15 percent or so.

Rounding out the reductions will be even less money to the counties for public hospitals and already-gutted social welfare programs.

Some Californians will be totally unfazed in the short run. Those who send their kids to private schools and retired folks aren't likely to see much change. But in the long run, we all will pay. Shorter school years and fewer kids in college will water down California's already weak workforce capabilities. More people with fewer skills means increased unemployment, which will cut down on consumption and send others scurrying out of the state.

These changes will further dampen the state's ravaged economy.

Ladies and gentlemen, check your insurance and emergency provisions--the fiscal tsunami is about to slam the state.

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