Professor On California Budget Deal Earlier this week, California lawmakers reached a tentative deal to end the state's 26 billion dollar budget deficit. Philip J. Romero, dean of the College of Business and Economics at California State University, Los Angeles, discusses some of the accounting tricks used to balance the budget and how cuts to education affect the state's higher education system.
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Professor On California Budget Deal

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Professor On California Budget Deal

Professor On California Budget Deal

Professor On California Budget Deal

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Earlier this week, California lawmakers reached a tentative deal to end the state's 26 billion dollar budget deficit. Philip J. Romero, dean of the College of Business and Economics at California State University, Los Angeles, discusses some of the accounting tricks used to balance the budget and how cuts to education affect the state's higher education system.

ROBERT SIEGEL, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

MADELEINE BRAND, host:

And I'm Madeleine Brand.

Here in California, details continue to emerge about the proposed new budget. The legislature is poised to vote on it as soon as tomorrow. On top of massive cutbacks in state programs and services, the budget deal relies on some questionable accounting tricks.

And here to talk about them is Philip Romero. He's dean of the College of Business and Economics at Cal State, Los Angeles. He was also California's chief economist under Republican Governor Pete Wilson in the 1990s, and he witnessed firsthand the last big budget meltdown in 1992.

Welcome to the program.

Dr. PHILIP ROMERO (Dean, College of Business and Economics, California State University, Los Angeles): Thanks for having me, Madeleine.

BRAND: Well, let's talk about these accounting gimmicks in this budget. What are they?

Dr. ROMERO: Well, first thing I should say is that this budget is being revealed step-by-step. The legislative leadership are keeping a lot of it under wraps, because the first law of politics is that once you reveal the details, you create a lot more targets for opponents to shoot at. And so they've revealed very little thus far.

But I've seen two kinds of gimmicks already. The first is a very simple thing. They're moving the last payroll of the year from June 30th to July 1st. And so, therefore it will hit against next year's budget not this year's budget. So that's a classic gimmick.

Second kind of gimmick is that they are borrowing extensively from other jurisdictions. The state funds K through 12 schools in cities and counties substantially, and they're choosing to basically expropriate those funds under a nominal loan for several years, which means the state will have to pay it back with interest later.

BRAND: And how are they allowed to do that? I mean it sounds like the first one, at least, sounds like, just as you say, a blatant trick. And how would that pass muster with the accountants?

Dr. ROMERO: It is a blatant trick and it is absolutely business as usual for the state. Tricks like this have been used, routinely, probably in two-thirds of the budgets that have been passed in the last 20 years. Government and jurisdictions are held to very different accounting standards - or lamentably are held to different accounting standards from private companies. So this goes on all the time.

BRAND: And you mentioned the money used to pay for education. Part of the problem with that is Proposition 13, which was passed in the 1970s. And that greatly capped property taxes, which in other places is what pays for the majority of public education.

Dr. ROMERO: That's absolutely correct. And after Prop. 13 was passed in 1978, because that greatly reduced the traditional funding sources cities and counties and school districts used, as you mentioned, the state then, quote-unquote, "backfills," it committed to providing state general revenues to backfill. And periodically when the state's general revenues decline drastically, as they do in most recessions, especially including this one, they then suspend that offer. And cities, counties and school districts are going to be grappling with, collectively, close to $6 billion in reduced revenues. So, as the L.A. Times put it today: essentially, the state has outsourced accountability.

BRAND: Now, this budget crisis is hitting you and your students directly. Tuition at Cal State is going up and most Cal State workers, including you, will be furloughed two days a month and see their pay cut by 10 percent. So I imagine you are following all this with special interest.

Dr. ROMERO: I think most about our students. We've been obliged to cancel a number of classes. And because of the long delay in the state budget being passed, sometimes we had to do it with virtually no warning. This is a special problem for Cal State students on any campus because our essential mission is to educate the working class, to give them entry into the middle class. And many of these kids work one, two, three jobs, have great difficulty completing their curriculum and graduating in a reasonable amount of time. And this state budget is just putting additional barriers in our way.

BRAND: Philip Romero is dean of the College of Business and Economics at Cal State, L.A.

Thank you very much.

Dr. ROMERO: Thank you.

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