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California faces $19 billion budget deficit despite massive cuts

The California budget deficit stands a $19.1 billion, even after two years of steep cuts. Democrats oppose Governor Schwarzenegger's proposed cuts but can't agree on a solution.

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“But the bad news is that the recovery is going to be slow and local government finance always lags behind the overall economy by a couple of years at least,” says Mr. Kyser.

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Other creative ideas are floating around, including electronic, ad-bearing license plates for all vehicles to raise money. That, and the idea to shift programs to the counties is not inspiring to a population that has lost trust in its politicians.

“In California budget politics, ‘creative’ does not mean ‘innovative’ – it means ‘sneaky,' ” says Jack Pitney, Professor of American Politics at Claremont McKenna College. “Cutting spending and raising taxes are the only genuine responses to the budget problem. But since both are unpopular, legislators will seek ways to put off tough choices and slough off obligations."

"Realigning functions is a clever way for one set of politicians to force another set of politicians to take the blame for raising taxes, says Pitney.”

The past two years have been particularly gruesome for California because of the wider economic downturn. But California’s tax structure is always volatile because it leans on agriculture and manufacturing when the state economy is based on services.

Two groups are hovering in the wings with major plans to redesign state government itself so that this doesn’t happen every year.

One, called "Bay Area Council," is a bid to amend California's constitution.

The other, "California Forward," consists of bipartisan business and political leaders who have spent two years holding focus groups across the state to find citizen-driven solutions to end the structural problems that plague the state.

“One of the biggest problems with California government has been that counties are not flexible in shifting their revenues around from what is not needed to what is needed,” says Robert Hertzberg, former speaker of the state Assembly and now co-chair of California Forward.

But as bleak as it appears in Sacramento at the moment, some analysts say there are reasons for optimism. Gov. Arnold Schwarzenegger is supporting a legislative proposal to reform the pensions of state workers and head off a future fiscal calamity. Pension reform was among the priorities he targeted in January, the beginning of his final year in office.