Are “Automatic” Budget Cuts Really Automatic?

Is anyone else starting to wonder just how automatic California’s planned “automatic” budget cuts are going to be?

Especially when Gov. Jerry Brown, the Legislature and state finance officials, channeling their inner Bill Clinton, seem to be suggesting that a cut-triggering budget shortfall depends on what your definition of what — and when — “shortfall” is.

It seemed so straightforward last June, when Brown and the Legislature finally agreed on an $86 billion budget that was balanced with $4 billion of magic money — a late-arriving guesstimate of the additional funds the state’s purportedly improving economy would pump into California’s coffers over the next year.

But just in case that fortuitous budget estimate turned out to be a bit optimistic, the budget mavens agreed to a trigger mechanism that called for deep, automatic midyear program cuts if the state finance officials found the budget was running more than $1 billion below estimates.

Fast forward to last Thursday, when state Controller John Chiang announced that California’s revenues were $1.5 billion below budget estimates for the first four months of the fiscal year.

Under the budget agreement, a shortfall of that size would trigger $601 million in cuts on Jan. 1, including $100 million each to the University of California and state college systems, $30 million to community colleges, and millions more to social service programs.

If the projected shortfall rose above $2 billion, an additional $1.8 billion in budget reductions would take place Feb. 1, including $1.5 billion in K-12 school funding.

Those are some ugly numbers that are going to slash deeply into all levels of education and threaten the safety net for California’s most vulnerable residents. But if the money’s not there, what other choice is there, which is why the cuts were put on autopilot.

Still, there’s no way a Democratic governor or legislator wants to see those kinds of cuts on their watch, regardless of how necessary — or automatic — they may be.

So now there’s a growing murmur about how it’s not the actual, cash money budget shortfall that exists that will trigger the cuts, but the projected health of the budget in June 2012. And, boy oh boy, are those second half numbers going to be good. Trust us.

Stop me if you’ve heard this before.

“The bulk of the $4 billion, to the extent that it’s going to be realized, will be coming in between December and June,” H.D. Palmer, spokesman for the state Department of Finance, said last month. “We are still in the early innings.”

According to a memo obtained by the Sacramento Bee,  the Assembly’s Democratic budget team is convinced that the state and national economy is beginning to roll, which will be good news for the state’s future budget numbers.

“Whether the trigger is pulled,” the memo said, “will have much more to do with thesubjective forecast for the second half of the year than the objective data that we have in hand now.” (Emphasis contained in memo).

So, to paraphrase, while the magic money used to balance the budget last June hasn’t arrived in the state treasury so far, the check is in the mail. We hope.

It’s the no-real-money-needed budget plan. If the state is, say, $2 billion in the hole on Dec. 15, when state finance Director Ana Matosantos is required to release her budget estimate for the rest of the fiscal year, just project that $1 billion and one additional dollars will arrive by June 30 and, voila, no midyear “trigger” cuts needed.

And when the money isn’t there come budget time? As Texas Gov. Rick Perry would say, “Oops.”

But of course by then it’s time to put together the 2012-13 budget, so the deficit can has been kicked down the road for yet another year, once again avoiding the hard choices the governor has repeatedly said must be made.

In September, Brown struck a blow for honesty in budgeting by vetoing a bill that would have let Democratic legislators fiddle with the budget trigger in the name of fairness, not to mention political expediency.

It’s two months later, though, and those automatic cuts no one wants are looming larger every day. It would be easy enough to fudge that December estimate, arguing that any current shortfall is just a technical issue that will disappear in the months to come.

Yet Brown was elected on an “eat your vegetables” platform that promised he would be the bringer of hard truths, doing whatever was needed to get the state back on a firm economic footing.

It won’t get much harder than letting those devastating cuts take place. But if Brown wants to have any credibility when he starts the next round of budget negotiations in January, he can only grimace and let them happen.

(John Wildermuth is a journalist and noted political commentator. This article was first posted in Fox & Hounds.)

Comments

  1. “Are “Automatic” Budget Cuts Really Automatic?”
    If even these meager budget reduction measures are rescued by derilict congressmen from the jaws of financial responsibility, their individual election upsets will pretty much look ‘automatic’!

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