Our View: California's 'great budget head fake'

In looking ahead at what to expect, the recent UCLA Anderson economic forecast also looked back. What economists saw was state government's "great budget head fake."

It's unclear how many Californians were fooled by the Legislature and governor's proclamation in July that they had closed the $40 billion budget gap. But as the UCLA economic analysis put it: "[P]ronouncements from Sacramento to the contrary, this was a head fake. The gap was never closed."

The UCLA economists concluded the "head fake ... was not necessarily a bad event at all" because it effectively delayed adding state employees to the growing unemployment numbers, and therefore postponed added drag on an already sinking economy.

Inevitably, as economists pointed out, state government began to contract, just as the rest of the economy had been doing for some time. Today the scant 1.5-percent reduction in state government employment is part of California's 12-percent overall joblessness.

State officials either were disingenuous when they assured us they had closed the budget deficit, or they ineptly believed they had, when they really hadn't. Frankly, we prefer honesty and competence to deception or incompetence. We also prefer smaller, rather than bloated state government.

As the UCLA analysis pointed out, "our expectation was to see dramatic cuts in (state) employment as the new budget went into place." Fiscal years 2008 and 2009 "should have seen substantial drops in government employment." But those cuts weren't made by Sacramento, even while local governments were eliminating 50,000 jobs in '08 and '09, about 3 percent of their workforce.

Once again Sacramento played by different rules than the rest of us. Over the past two years while private sector jobs evaporated at historic levels and even local governments significantly cut payrolls, the state "actually saw an increase in jobs, and reductions only began this past September," the economists said.

This was institutional incompetence at best, duplicity at worst. Either way it helps explain the catastrophe that state government has become. No wonder a mere 13 percent of Californians say their state lawmakers perform satisfactorily.

Sacramento is detached from the world the rest of us live in. What else explains Gov. Arnold Schwarzenegger boasting to an international gathering in Copenhagen Tuesday that California is an example of achieving a clean environment and economic growth?

"We've proved that over and over again in California," Schwarzenegger said, apparently ignorant of or willfully oblivious to the fact that the state had 45 percent more businesses go out of business than begin business in 2008 alone, more than four times the 10.5-percent national rate, according to the U.S. Census Bureau.

UCLA economists remind us that, "a head fake is a move which gets you to look in the wrong direction for a sufficient amount of time so that when you discover that you have looked the wrong way, it is too late to correct the error."

Fool us once, shame on them. Fool us twice...