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California Faces Massive Deficit - 2002-12-12


At least two dozen U.S. states face budget deficits, but California's projected shortfall of more than $20 billion is the nation's largest. In September, California officials estimated the shortfall at $10 billion. More recently, a nonpartisan state analyst put it at $21 billion.

Republicans say four years of solid Democratic control of California state government is to blame. "I don't know whether it's $21 billion or $22 billion or $25 billion or $30 billion," says Dave Cox, Republican minority leader in the California assembly.

And neither does anyone else, but Democratic governor Gray Davis has declared a fiscal crisis and called for drastic cuts in spending for health and education.

Democrats blame the problem on a drop in income from capital-gains taxes, which had soared during the stock market boom of the 1990s, but plunged in the recent high tech crash. Mr. Davis hopes to plug the budget gap by cutting $10 billion in spending immediately, reducing payments to public schools and universities, for example, by $3 billion.

School administrators have reacted to that proposal with anger. Caprice Young is president of the Los Angeles Unified School District, and she spoke with reporters after the governor's announcement. "We're here saying no cuts," she sya. "Don't force us to increase class size. Don't force us to cut teachers' salaries. We're not going to do it."

Under the governor's proposal, $2 billion would also be cut from health care and welfare programs. State workers face a pay freeze and some will face layoffs.

John Burton, the leader of the Democrats in the California senate, has suggested releasing nonviolent offenders from prison before their sentences are finished, but not, he assured a questioner, notorious criminals like one famous killer. "We're not talking about letting Charles Manson out, but there are a lot of people who, if they got out, would be absolutely no threat to society," he says.

California legislators are now meeting in emergency session to discuss that and other proposals.

Mr. Davis faces an uphill battle in the legislature to get his plans approved. Republicans are opposed to any tax increases, while the Democrats would rests cuts in state services. Herb Wesson, Democratic speaker of the California assembly, says the hurdle is high, like Mt. Everest, but not insurmountable. "People have climbed Mt. Everest in the past, and somehow we in the Assembly will climb our financial Mt. Everest."

Los Angeles county economists and their colleagues at UCLA's Anderson Business School predict a sluggish economy and rising unemployment through much of next year. California officials expect continuing budget deficits in each of the next five years.

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