The Nation's Recession Caused California's Budget Crisis

Abstract

THE CALIFORNIA Journal of Politics & Policy Commentary The Nation’s Recession Caused California’s Budget Crisis Stephen Levy* Center for Continuing Study of the California Economy I offer some ideas below for reaching a short-term solution to the state budget for 2009–2010. But for any civil budget discussion to take place, it would be helpful for all parties to acknowledge a few key facts. Key Facts The current budget challenge is 100% the result of the deepening national recession. Our current budget challenges are shared by many states and local governments www.bepress.com/cjpp Volume 1, Issue 2, 2009 throughout the nation. While California failed for many years to resolve our structural budget deficit and has no plan to close the gap for the future, we did our part for 2009–2010 back in February with more than $10 billion in spending cuts and more than $10 billion in temporary tax increases. When the 2009–2010 budget is adopted Californians will be spending the smallest share of our income on General Fund spending since the early 1990s and, perhaps, since the early 1970s. The 2009–2010 spending level does not even keep pace with caseload and inflation growth over the past 10 years. California ranks 2nd lowest among states in state employees relative to population and 4th lowest when local government employees are included. *Stephen Levy is director of the Center for Continuing Study of the California Economy in Palo Alto.