California Budget Comes Up Short Again

It takes about three months before the average person gets the hang of making a budget that balances, says famous personal finance adviser Dave Ramsey. What is California’s problem then?

After so many years of failed budgets, you would think that lawmakers would have figured it out by now. But no, it seems like lawmakers perennially have their heads in the clouds, hoping the economy will magically repair itself and solve their budget problems.

State controller John Chiang says the state will need to come up with an additional $3.3 billion by early March if it wants to avoid sending out ious, or delaying tax refunds again. The rest of the deficit can be covered using creative accounting and other emergency measures, he indicated.

Lawmakers not only underestimated spending, but overestimated tax collections, according to Chiang. They spent $2.6 billion more than planned, and collected $2.6 billion less than hoped.

It is the tax shortfall that is particularly worrisome for California. More than two years after the recession officially ended, tax revenues should be soaring as the recovery takes hold—at least that is what has happened after previous recessions ended. Not so this time. Not only haven’t the jobs returned, tax revenues are under-performing to expectations as well. It just confirms what many people intuitively realize as they struggle to make their mortgage payments and keep up with the increase in the cost of living. This recovery is the worst on record.

Tax collections are usually one of the better indicators of how the economy is really doing—and in California’s case, it is still coming up short.

On a national level, California’s condition is troublesome too, because California typically leads the nation in economic recoveries.

Remember the saying? As California goes, so goes the nation. 2012 may not be a very good year for the nation either.