The AP has gotten a hold of the governor's May Revise speech and therefore the major budget proposals that are to be unveiled later today. The key elements are described below and over the flip I provide some analysis of each proposal.

• Arnold will float bonds using the state lottery as security. $15 billion over 3 years will be raised but $10 billion goes into "rainy day fund"



• If that fails, 1% sales tax hike to last no more than 3 years



• Prop 98 suspension abandoned; instead COLA will not be paid



• State parks closures abandoned; instead fees to rise $1 to $2



• $6 billion still left to cut or balance out somehow."

Overall thoughts: Here we go again. Arnold Schwarzenegger came to office in the recall of Gray Davis in 2003 promising to solve our state's budget problems once and for all. Instead he immediately blew a $6 billion hole in the budget with the Vehicle License Fee cut and then borrowed to close the rest of the gap - costing the state around $3 billion in annual debt service.

Now that Arnold's solution has predictably failed, he is predictably offering more of the same. Borrowing against the lottery is a problematic concept for many reasons, the main one being it avoids the core issues of our budget. It's yet another one-time fix that does nothing to solve the structural revenue shortfall that has plagued our state for 30 years.

It is significant that Arnold seems to be backing away from his most significant cuts - especially the K-12 cuts. Obviously the details released tomorrow will be key, and we should fully expect higher ed to take another crippling blow. But this does indicate that the activism many of us have launched against the primary schools cuts has had an impact.

And of course, there's still $6 billion left over - $6 billion that the Yacht Party will insist come in the form of destructive cuts that damage the economy, $6 billion that Democrats will - we hope - insist come in the form of wise, long-term revenue solutions.

Finally, Arnold seems to be gambling that the economy will make a quick recovery and that the current woes are just a dip and not the opening stages of a deeper recession. That, I think, is a major and probably reckless gamble to make.   Read More »

When Arnold took office in late 2003 he argued that one of the state's highest priorities was to "reform" a workers' compensation system that was supposedly driving businesses, and therefore jobs, out of the state. And the Legislature did so, cutting benefits to injured workers in order to try and keep business and the Chamber of Commerce happy.

Five years later California faces a similar crisis, as skilled workers flee the state in droves, taking their salaries and therefore their positive economic impact with them. But this time, Arnold seems happy to see their backs, because it's teachers and not well-connected corporations that are fleeing a state thanks to poor budget priorities:   Read More »