Time to Kick the Can Down the Road?

When he was governor, Arnold Schwarzenegger use to speak pejoratively about “kicking the can down the road” when considering state budget remedies. In fact, when he came into office in 2003-04, he basically borrowed his way out of the budget crisis of that time that he inherited. Such borrowing effectively kicks the can down the road.

Right now, no one in Sacramento seems to have a Plan B after Governor Brown’s plan to put tax extensions on the ballot seems to have failed for lack of a 2/3 vote. The governor is being pushed, as an earlier post noted, to get the legislature just to enact the tax extensions without a vote of the people. But that approach also requires a 2/3 vote – which he doesn’t have.

Gov. Brown is due to issue a new budget plan – the May revise – in a couple of weeks. Undoubtedly, there will be new estimates of revenue and expenditure as part of the May revise. But using his old (January 2011) numbers, the original objective was to go from a negative reserve in the general fund of over $5 billion at the start of the current fiscal year (July 1, 2010) to a positive reserve of around $2 billion by the end of the next fiscal year (June 30, 2012). That’s a swing of around $7 billion. But do we need to accomplish everything, including that $7 billion swing by the next fiscal year?

At the time of the original proposal, the Legislative Analyst pointed out that everything needed not be done within that time period, i.e., by June 30, 2012. A multiyear approach – kicking the can down the road if you like that phrase – should be considered. See the video below for that opinion. So perhaps it is time to drop the seeming choice between a budget that is a mix of taxes and cuts (the governor’s January proposal) or a cuts-only budget. There is a third approach.

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