Saturday, October 9, 2010

Californians Committing Fraud Because We Must?

I'm not intending to pick on the Gubernator (my preferred spelling) as everyone who participated in the compromised budget (yes, I meant compromised) approved this week accepts this, but from the LA Times here's how our State leaders think:
Administration officials said many of the cuts announced Friday would be made in ways intended to minimize the effect on people who rely on state services. A $366-million cut to CalWORKS, for example, will be covered by an advance from the federal government that the state hopes it will not be required to pay back, said Ana Matosantos, Schwarzenegger's finance director.
In other words, the proposal would be termed "fraudulent" except that terms means "having the intent to deceive." In fact, these folks know they aren't deceiving anyone. If  what you're doing is taking money under false pretenses, do you really want to tell the press. Apparently so.

What's depressing is that it completely reflects how the Legislature "closed the deficit." Even if the deficit number itself was not the fraud it is, the budget process was.

I suppose it isn't like these "leaders" had a choice. If they hadn't found the votes the State soon would run out of money. With no budget, its ability to borrow would be severely crippled. The California Constitution says the budget was to be adopted June 15. But hey, that deadline has been met only five times in the last 30 years. So the simple fact that this is the longest the State has gone in a fiscal year without a budget isn't what made them act. The likelihood of running out of cash was the driving force.

Below is a screenshot from the document they presented before the voting:

The "Starting Problem" of a $17.9 billion deficit is a fraudulent number. The real number is more like double that figure. But even if we accept it, the problems buried in the other numbers are beyond imagination. Well, apparently not beyond imagination, as somebody has imagined this.

The silliest one is the "Federal Funds" item - $5.3 billion which is double any real possibility. The Sacramento Bee reporter who attended the presentation noted:
Presentation notes, in italics, "Still more work to do in Washington."
Yeah, right.

Expenditure reductions include interesting things such as reducing prison inmate medical costs by $820 million, a function completely controlled by a federal receiver because the State wasn't spending enough. The federal receiver must be shaking his head in wonderment.

The additional revenue portion of the document says:
More that half of this, $1.4 billion, is from the Legislative Analyst’s revenue forecast, which was $1.4 billion higher than the Governor’s May Revision – three months into the fiscal year, this additional revenue has already been realized.
That would be fine if it were a true number. But reality is that the Legislative Analyst in May predicted that revenue from income, sales and corporate taxes would come in $1.4 billion higher for the entire fiscal year of 2010-11.

In fact, the Controller has not publicly issued revenue numbers for September, but for the first two months sales tax data indicates a stagnate economy at best. Corporation tax revenues were down and Personal Income Tax Revenues year-over-year were flat.

Like last year only more so, much shifting of funds and delays in making payments is buried in the budget. More school districts this year will be borrowing against promised but delayed state revenue owed to them. Money will be wasted on interest. And in some cases, the state is nearly five years behind in payments owed to schools.

Presumably in January 2011 a new Governor and new Legislature immediately will face making revisions in this budget and trying to figure out how to deal with an even worse situation for 2011-12 without committing fraud.

Good luck with that my fellow Californians.

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