CHESSNOID

On an individual level, we all have budgets that we have to live by.  Simply put, we can only spend what we make.  Sometimes we use credit to leverage our standard of living.  In a sense we borrow from our future earnings to have things now (i.e cars, houses. etc).  In this economy, credit has become tight or simply unavailable.  When that happens we must truly live on what income we bring in.   At that point, you live within your means and spend only what you bring in, otherwise you have debt collectors calling you, emailing you, or even doing field chases to your house or work demanding payment.  This of course makes life miserable.  It is easily remedied in on of two ways: you spend less or you earn more money.

That is what the budget crisis at the state level is going through right now.  California is finally about to balance its budget.

AP News:

The budget agreement will be felt in nearly every community of the nation’s most populous state.

Cuts to public schools are expected to force teacher layoffs, more crowded classrooms and scaled-back offerings in art, music and sports.

College students will pay hundreds of dollars more per year in fees, course offerings will shrink and tens of thousands of prospective students will be turned away.

Welfare, health care programs for low-income families and in-home services for the disabled, elderly and frail will be reduced. Nearly 40,000 will have their in-home support services terminated.

Even state workers, long protected by powerful public employee unions, have been affected. Schwarzenegger has ordered them to take three days off a month without pay, equating to a 14 percent pay cut.

An undetermined number of state parks will close after Labor Day, and the state will be authorized to sell 17 state office buildings to raise cash, renting the space back from the new landlord. The Orange County Fairgrounds also will go on the market.

State Senate leader Darrell Steinberg, D-Sacramento, said he was pained by the cuts to public schools and health and human services programs. After his chamber passed the series of budget bills early Friday morning, some 12 hours after it began debate, he said he did not feel joy, but only relief.

“I think we did our job well and cut in a way that was as responsible as it could be,” he said.

The oil-drilling measure emerged as one of the most contentious, with Assembly members debating for more than an hour before Democrats prevailed in killing it. Assemblyman Pedro Nava, a Democrat from Santa Barbara who has long opposed the project, said the governor appeared to be willing to hijack California’s future because of a budget crisis.

The spending cuts amount to roughly 60 percent of a budget deficit projected at $26 billion through June 2010. The size of the shortfall is unprecedented, representing nearly 30 percent of the state’s $88 billion general fund.

Spending hasn’t been at that level in California since 2005, underscoring the severity of the state’s economic collapse. Its unemployment rate of 11.6 percent is the highest on record, and personal income tax revenue to the state fell 34 percent during the first half of the year.

When Schwarzenegger signs the budget agreement, state officials hope it will be enough to satisfy the bond markets and allow the state to begin taking out short-term loans.

But other issues loom.

The state’s largest employee union, representing 95,000 workers, is asking its members whether they want to authorize a strike or walkout to protest the monthly furloughs.

Cities and counties, meanwhile, have said they might to stop the state from taking some $4 billion in local tax money. Local governments throughout the state, hit by declining property and sales taxes, already are laying off law enforcement officers, firefighters and other employees, while trimming park maintenance, library, trash and other services.

Has California and other states really solved their budget crisis? I would definitely say most states have not solved the real issue but are closer to getting at the solution. The states either have to raise more revenues or decrease spending. The idea is no different than what all of us do in our personal lives.

According to the article:

The rapid decline in tax revenue and Republicans’ insistence on no tax increases left lawmakers with few options but to cut spending, borrow money from elsewhere and resort to various accounting tricks to balance its books.

One of those gimmicks was to defer state employee paychecks by one day, from June 30 to July 1, 2010, for a savings on paper of $1.2 billion. The state also will accelerate collection of 2010 personal income and corporate taxes to bring in revenue earlier than anticipated.

I think this is like robbing Peter to pay Paul scenarios.  The problem still exists because the state government doesn’t want to be disciplined and make hard decisions to either raise revenues or cut spending.  Changing the dates on paychecks doesn’t deal with the problems at hand which is the state is simply spending more than it makes.