LAO's $25 Billion Bombshell

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Getty ImagesYou don't need to read far into today's sobering assessment of California's finances from the Legislature's nonpartisan analysts -- a $25.4 billion deficit-- to find the kind of tough medicine the state needs, but which no elected official will probably ever say:

The solutions needed to balance the budget will mean unavoidably painful sacrifice by today’s Californians. The benefit of this sacrifice would be putting the state on a sound fiscal footing. That sound footing may allow future Californians to live in a place where the annual state budget process is a chance to improve government's ability to serve its residents.

As the saying goes, the truth hurts.

There's a lot of analysis of the LAO report out there as of this writing on Wednesday night, and you can also read the bad news for yourself. But a few items that stood out to me:

Old Debt: The report's spreadsheet of last year's spending plan, this year's, and next year's projected spending (absent, of course, corrective action) seems to show that as much as $6 billion of the problem is a fiscal hangover from 2008-09. This year's revenue and expenses, it turns out, would be pretty much balanced were it not for the carryover deficit from the past. That seems to be an affirmation that previous budget deals were full of flawed assumptions... ones which, to use Governor Arnold Schwarzenegger's favorite phrase, are now the can kicked down the alley to the next group of elected officials.

The $12 Billion Body Blow: Of the $25 billion problem, almost half comes from the huge hit of having temporary tax increases and federal stimulus money all disappear at pretty much the same time. The blow is particularly painful to public schools, which feel the impact of both expirations and therefore are staring at the very real possibility of more lean times on top of what have already been several ugly years.

Cancel The Smoke & Mirrors? The LAO report's most pointed critique seems to be in proclaiming the October budget deal's assumed help from the federal government to be way, way too optimistic. Some 60% of the money that budget said would come in to the state simply will not arrive, says the LAO. One wonders whether this is the kind of 'smoke and mirrors' budgeting Governor-elect Jerry Brown was talking about doing away with during the fall campaign.

Hello 2011 Special Election? And speaking of the soon-to-be-guv, the report seems to again call into question whether a truly honest budget deal can be reached without a vote of the people. Brown's singular promise was to only raise taxes with a vote of the people. And the LAO report says revenues need to be included. "We suggest that the Legislature and the new Governor target $10 billion of permanent budget solutions in 2011–12 and $15 billion of temporary budget solutions," says the report. That begs the question: how long can Brown remain coy about a special election?

Below, an excerpt of Legislative Analyst Mac Taylor's comments to reporters earlier today:

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About John Myers

John Myers is Sacramento Bureau Chief for KQED Public Radio and "The California Report," heard daily on 23 public radio stations across the Golden State.

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