ShareThisOfficially, California works on a one-year budget cycle, coinciding with a fiscal year that begins on July 1 and ends on June 30.
There have been some discussions about shifting to a two-year budget cycle to ease the one-year cycle's tight -- and usually unmet -- timetable. In reality, though, the state has shifted to a five-month cycle, with the latest version of the budget, which was undergoing the dreary drill of adoption Thursday night, being the latest example.
To recap: After a record-long stalemate, Gov. Arnold Schwarzenegger and legislators last September finally enacted a 2008-09 budget, claiming it to be balanced even though everyone in the Capitol knew its numbers were billions of dollars removed from reality.
Three months later, the governor finally acknowledged the budget's big holes, and two months after that, he and lawmakers agreed on a revision of the 2008-09 plan and what they said was a head start on the 2009-10 budget, including some new taxes.
Three months later, after voters had rejected key sections of the budget deal and revenues had dropped even further, the Capitol began another revision effort and two months after that -- this week -- another deal was done.
If the five-month cycle holds true, the deal's deficiencies will be acknowledged in October, when the state must redeem the IOUs it's sending to creditors. And then legislators will return to Sacramento to be entertained by lobbyists, plug the new holes and collect about $1,200 a week in tax-free per diem checks.
In January, the governor will propose a 2010-11 budget and the game will begin again.
This new budget will probably collapse because it has a paper-thin reserve and its assumptions are just as shaky as those of the past two versions, including revenue estimates that may be billions of dollars too high, lofty expectations of federal aid and uncertain judicial approval of raids on local government treasuries.
Last September's budget lasted just long enough for the state to peddle some short-term loan paper to relieve its cash-flow squeeze, and that motive appears to loom large again. Even though the state is issuing IOUs to some vendors, it faces another cash crunch and desperately needs to float some more paper.
The question, as yet unanswered, is whether credit-rating agencies and lenders will find the new budget credible enough to reissue the state's now-suspended credit cards. Apparently worried that it won't pass the creditworthiness test, politicians included in the 31-bill budget package one measure that allows the state to sell its paper to its own State Compensation Insurance Fund (which they also want to sell) and the state lottery -- a Social Security-like money shuffle.
Looming on the horizon, meanwhile, are even worse fiscal woes as February's tax increases expire and the spending deferrals and promises of compensation, especially to schools, come due. We may be into one-month budget cycles before this ugly situation ends.
(E-mail Dan Walters at dwalters(at)sacbee.com. Back columns, www.sacbee.com/walters. Distributed by Scripps Howard News Service, www.scrippsnews.com.)
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