Cash-Strapped California Short $24 Billion

California's finances are a wreck. Its credit rating is dead last in the nation, and the state faces a $24 billion budget gap. But this week voters rejected a package of budgeting measures that Governor Schwarzenegger and the legislature had placed on the ballot. NPR's Scott Simon speaks with KQED reporter John Myers about the budget crisis.

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SCOTT SIMON, host:

This is WEEKEND EDITION from NPR News. I'm Scott Simon.

Californians can be just about as boastful as Texans. If California were a country, it would be one of the largest economies in the world and home to signature high-tech corporations like Google and Apple. But California's finances are a wreck right now - its credit rating is dead last in the nation.

The state faces a $24 billion budget gap. This week voters rejected a package of budgeting measures that Governor Schwarzenegger and the legislature had placed on the ballot.

We're joined now by John Myers. He's the Sacramento bureau chief from member station KQED. John, thanks very much for being with us.

JOHN MYERS: Thank you.

SIMON: The results weren't unexpected. Five of six ballot measures were defeated, but still, what was the reaction in Sacramento? Did it kind of sharpen the mind?

MYERS: I think the real reaction has been confusion, and surprisingly enough, I think worry. And as you said, that's even though we knew that these five budget ballot measures were going to go down. It was a foregone conclusion. I think some context is probably important.

You know, in all of the recent years of deficits in California, of which there have been a lot, the budget was balanced largely through one-time fixes and some gimmicks and at least a few times by some unexpected tax revenue windfalls, especially from Silicon Valley. A lot of money came in in years past.

But that's not going to happen this time in California. The personal incomes in the state are actually, we're told, showing negative year-to-year growth for the first time since 1938. Unemployment statewide is about 11 percent.

And so there is a lot of worry and I think Governor Schwarzenegger now feels with that election, and as he said on Thursday to a lot of reporters, it's as though the clock has been rolled back.

Governor ARNOLD SCHWARZENEGGER (Republican, California): Our revenues now are back to the 1999 level. So we have to do drastic measures and we have to recognize that we have to dial back to what was happening in 1999, what kind of programs were available, and what kind of programs were not available and where did we expand on spending and then eliminate all of those programs in order to make ends meet.

SIMON: John, what's your best seasoned reporter's appraisal of why the measures were defeated so soundly?

MYERS: Well, Scott, I think that the proposals, you know, they were crafted for inside politics. You know, they were placed on the ballot by the legislature and the governor back in February - the mechanics began for this election. They made sense politically but they made no sense to the voters.

There were tax increases, they were borrowing, cuts, and a spending cap for the state. And there really was not base support of voters out there. You know, the governor tried to say they were about reform in the beginning of the campaign. That didn't work, so then he started warning about massive budget cuts coming if they failed, and that didn't work.

I think also these ballot measures really ran into an angry California electorate. It didn't understand why the voters were being dragged into issues that they pay the lawmakers to do. That was the opinion of Democrat Darrell Steinberg. He's the president pro tem of the California state senate and he talked about it just hours after the election.

State Senator DARRYL STEINBERG (Democrat, California): I don't think you can take from the voters that a singular message about cutting versus revenue. I think it's much different than that. I think the voters are having a difficult time in their own lives and they pushed back and said don't bring this to our doorstep here - you solve the problem.

SIMON: Now, as I understand it, at least for the moment the Democrats don't want to budge on cuts and the Republicans don't want to budget on taxes. So where does that leave everything, or at least where does it leave the argument?

MYERS: Well, you know, a lot of these proposals were rejected, in some cases by a 2-1 margin. And I think since then everybody's kind of seen this as the ultimate political Rorschach test. They all think it means something different.

You know, the governor, though, really does drive the debate here in Sacramento about what happens next. And as he told reporters, he thinks the voters have told him to cut.

SIMON: Of course, it's one thing to say cut, cut, cut, and another thing when the public begins to wonder why they lose a police shift or a school has to close.

MYERS: The kind of cuts he was talking about at week's end are really severe, more than $15 billion worth. He's even talking about the complete elimination of the welfare-to-work program, state-sponsored health care for needy children. These are going to be difficult decisions, and I think it's going to put Californians finally in this notion of having to understand what it takes to pay for the services they want. And they have to decide whether they're willing to do it.

SIMON: John Myers in Sacramento, thanks so much.

MYERS: You're welcome, Scott.

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