California's budget problems

California faces a special election May 19 to ratify the ugly budget deal made by the governor and legislature to close a $40b budget gap. The deal included including $15b in spending cuts, $12.5b in tax increases, with the rest a combination of smoke and mirrors.

In the Los Angeles Times this morning is a thoughtful op-ed by Tom Campbell, the governator’s former finance director and former dean of the UC Berkeley b-school dean. Campbell’s understanding of financial issues is widely respected here in the Valley (where he once was a congressman), at least among the economically literate.

Campbell gives the true story behind the governator’s deal, admitting that one measure (Proposition 1B) was given to the K-12 teacher unions in exchange for supporting another measure (1A) that the governator badly wanted.

Rumored to be running for governor (against Meg Whitman and a half-dozen elected Democrats), Campbell pulls no punches in criticizing one (obvious) attempt at financial sleight of hand:

Proposition 1C would borrow $5 billion in future revenues from the state lottery. The problem is, it's a one-time salve for a recurring problem. Proposition 1C does nothing to reduce state spending -- the chronic cause of our budget woes. The $5 billion would have to be repaid, with interest, from lottery sales in future years. It's terrible public policy to postpone reckoning in this way.

Campbell has much deeper understanding than the action hero movie star, and both he and Whitman have significance administrative experience. Unlike Schwarzenegger, neither has significant name recognition, making victory difficult in a state that has a 13% Democrat voter registration advantage and a 24% margin for Obama las November.