California's "Balanced" Budget All Smoke and Mirrors


Posted by Matt Blumenfeld on Friday, January 25th, 2013, 1:59 PM PERMALINK


Jerry Brown used his State of the State speech yesterday to gloat that "California has once again confounded our critics," and that under his leadership California has “wrought in just two years a solid and enduring budget.” "Two years ago,” Brown added, “they were writing our obituary…Well, it didn't happen. California is back, its budget is balanced and we are on the move."

Sounds like a great comeback story right? Too bad it’s not true. Leonard Gilroy, director of government reform at Reason Foundation, published an article this week in which he methodically dispels California Gov. Jerry Brown’s claims that the Golden State’s fiscal woes have been cured. Gilroy notes the following problems with Brown’s claims:  

“For all of Gov. Brown’s talk about spending cuts and ‘fiscal discipline,’ his budget forecasts a 5 percent jump in state spending, rising from $93 billion in 2012‑13 to $97.7 billion in 2013‑14.”

But those figures don’t tell the whole story, as Gilroy points out:

“You need to add in all the other spending that is not included in those numbers: nearly $41 billion in special funds and over $7 billion in bond funds. Suddenly, the state is spending over $145 billion in 2013-14, not $97.7 billion.”

Despite boisterous claims from the Department of Finance that California has already paid down their debt to less than $28 billion, that figure does not include the state’s mountain of unfunded pension and benefit liabilities, which total around $181 billion –  as high as half a trillion according to some estimates -  and unfunded state retiree healthcare liabilities set at $77.4 billion that continue to steadily increase each day.

Gilroy points out another key fact that Brown left out of his speech:

“Golden State politicians have systematically skimped on making annual contributions to retiree pension and health systems so future taxpayers’ tab to cover the cost of the “shadow” state workforce that’s no longer actually working continues to climb.”

In light of this, and the fact that Gov. Brown is pressing forward with his $68 billion high-speed train to nowhere, which is shaping up to be a an almost tragic budgetary folly, don’t be surprised if Brown and his friends in the asylum, more commonly known as the California legislature, unexpectedly find themselves back in the red in the not-too-distant future. 

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