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Fallout: The Financial Crisis

Proposed Calif. budget slashes services

Jeff Tyler Jul 21, 2009
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Fallout: The Financial Crisis

Proposed Calif. budget slashes services

Jeff Tyler Jul 21, 2009
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TEXT OF STORY

Kai Ryssdal: So California has a budget. Almost. After weeks, months, really, of bickering, state lawmakers and Governor Schwarzenegger have seen eye to eye. They’ve got a plan to close our $26 billion budget crater. A vote is expected Thursday. Seeing as how we’re actually here in California, and we’ve been through this before, we’re not making any predictions about that. The details are still fuzzy at best. But Marketplace’s Jeff Tyler reports some of the proposed cuts could wind up costing more money than they save.


JEFF TYLER: Some of the savings will come from reducing services, like health care for children and the elderly. But that will just drive up emergency room visits, where medical care is more expensive.

Part of the budget shortfall will be covered by the state — ahem — borrowing from county coffers. John Ellwood is a professor of public policy
at the University of California at Berkeley.

JOHN Ellwood: A lot of the borrowing appears to be coming by borrowing from other levels of government. And they are going to scream bloody murder. But they can’t do much about it.

As counties are forced to loan money to the state, they will have to cut services and jobs. President Obama has said that during the recession, when people are out of work, it makes sense to go back to college and get retrained.

But California is dramatically reducing enrollment at its community colleges and universities. Stephen Levy is director of the Center for Continuing Study of the California Economy.

STEPHEN Levy: The budget cuts for higher ed are pennywise and pound foolish. Looking over the next 10 years, we’re disinvesting where we ought to be investing.

The budget gap will also be closed by some fancy accounting. State employees will get paid at the end of each month, so the payment shows up on next month’s ledger instead of this month’s. John Ellwood explains how that works.

Ellwood: When I worked for the federal government, we did this all the time. You would take payments, and you shift them from one fiscal year to the next fiscal year. And then you get to the next fiscal year, and you’d shift them back to the previous fiscal year. Nothing has really changed there, but it makes it look good on the books.

That means the budget shortfall isn’t really fixed. Instead, it’s effectively punted for others to worry about down the line.

I’m Jeff Tyler for Marketplace.

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