Editore"s Note
Tilting at Windmills

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January 10, 2004
By: Kevin Drum

ARNOLD'S BUDGET....On Monday I made some projections about how Arnold would close California's $14 billion budget gap. So how did I do?

In a word, not so well. However, it's also damnably hard to tell exactly what's in his budget plan, despite a fairly thorough reading of his budget document combined with combing through at least a dozen different press accounts. Still, here's my best guess about where the savings are coming from.

Warning: these numbers don't necessarily match what the news reports say. And they might be wrong. Trying to reconcile the various tables is nearly impossible, and I've made a lot of guesses about what's really going on. Take it with a big grain of salt. The entire budget document is here if you feel like diving in yourself.

Area

Projection

Reality

Notes

Higher growth
projections

$3.5 billion

$.1 billion

Despite some press reports to the contrary, Arnold doesn't seem to have made any rosy growth projections. There are three main sources of revenue for California (income tax, sales tax, and corporation tax), and in November the widely respected and trusted Legislative Analyst's Office estimated that these sources would bring in $70.5 billion. Arnold's budget estimates $70.6 billion. If his economic estimates were hyped, the revenue from these sources would be higher than the LAO's estimates.

"Waste and
fraud"

$2 billion

0

At first glance, Arnold seems to have decided not to play this traditional shell game. However, some of his cuts are unspecified and it might turn out later that waste and fraud reduction play a part in some of them. Some of his MediCal cuts, for example, seem to be predicated on increased anti-fraud programs.

Local
government
cutbacks

$2 billion

$1.3 billion

He said he wasn't going to do this, but he did it anyway.

Fee increases
(and other
magic)

$1.5 billion

$1.3 billion

$500 million from tribal casinos, $400 million from higher education fees, $18 million from increased park fees, $50 million from state land royalties, $350 million from the federal government.

Borrowing

0

$4 billion

Even I didn't think he'd have the gall to propose more borrowing after railing against it so consistently, but he did. This includes $3 billion from his $15 billion bond proposal plus $1 billion to pay off pension obligations. The $3 billion part appears to be money taken from this year's bond sales that weren't actually used this year. Or something. I'm a little confused, although the number itself seems clear enough.

Debt service
reduction

0

$1.3 billion

I have no idea where this comes from, but apparently Arnold's team thinks we've saved $1.3 billion by restructuring our debt.

Actual budget
cuts

$4.5 billion

$6.3 billion

This one is hard to figure out. Arnold says spending reductions in his budget total $4.6 billion, but some of this appears to be smoke and mirrors reductions in payments to the federal government, fee increases, etc. My best guess is that the real number is about $3.3 billion.

At the same time, he's not giving himself credit for $3 billion in reductions in primary education and transportation spending, referring to it as "cost avoidance" so that he can continue to say he didn't "cut" primary ed.

We're not buying that here at Calpundit, of course. Overall, the cuts appear to be approximately as follows: $900 million from MediCal, $800 million from CalWorks welfare-to-work programs, $.6 billion in other health and human services programs, $400 million from higher education, $2 billion from primary education, $400 million from prisons, $1 billion from transportation projects, and $.2 billion in miscellaneous.

Total

$14 billion

$14.3 billion


It's worth noting that there's still plenty of fun and games in this budget. My favorite (so far) is a savings of $143 million by delaying MediCal checks to doctors by one week. It's a one-time savings, of course, and allegedly it's to give the state some extra time to detect fraudulent invoices. Sure it is....

Kevin Drum 11:55 AM Permalink | Trackbacks

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