Schwarzenegger's Numbers

According to an analysis by the L.A. Times, California Governor Arnold Schwarzenegger's proposed 2004-2005 budget will "close" next year's projected budget gap of $14 billion by:

Cutting spending by $6.8 billion

Borrowing $4 billion

Shifting $1.3 billion of local property taxes to the state

Increasing fees by $238 million

Astute readers may have noticed that the L.A. Times numbers don't add up to the full projected $14 billion shortfall.  In fact, there is still at least a $1.5 billion gap.  On top of this, Schwarzenegger's numbers may be a little shaky.

In all, about half of the shortfall for next fiscal year would be eliminated by borrowing and accounting maneuvers similar to those he has criticized in the past.

Arnold has made some shaky assumptions.

The governor assumes he can save nearly $1 billion with the kind of cuts to the Medi-Cal program that a judge last month ruled illegal because they conflict with federal Medicaid regulations. The proposal would reduce the rate paid to doctors in the program by 10% on top of a 5% cut in the current budget.

That 5% reduction was blocked by the court on Christmas Eve in a ruling that left no room for further reductions.

Arduin said the administration intends to appeal that decision.

Other savings rely on much the same sort of speculative assumptions made in the final budget of Davis' tenure. Schwarzenegger's budget, for example, sets aside $500 million in new revenue from Indian casinos. That is based on the hope that the governor can extract more money from tribal gambling operations through negotiations.

Tribes are under no obligation to renegotiate their compacts with the state and so far have shown little interest in doing so.

The budget assumes $438 million can be saved by the Department of Corrections without any early release of prisoners, but offers few details. The budget also assumes $350 million in additional help from the federal government, which state Controller Steve Westly describes as dubious.

The governor appears to be a hypocrite for trying ploys similar to the ones he so recently derided.  But, can this budget work?  It won't eliminate the budget shortfall, but will it allow the state to reach a point where the gap can be closed completely in 2005?  Or is it doomed from the outset by rosy and unrealistic predictions?