Show me the money: Huge budget deficit tops agenda as Legislature reconvenes.

• Author: Allen, Bruce

The 32 new California Assembly members have joined with the seasoned veterans in the 80-person Assembly to immediately grapple with the critical issues facing California. First among these issues is determining how the state is going to balance its budget.

According to the state's financial experts, California's combined $24 billion budget deficit for the previous two fiscal years is going to be dwarfed by a forecasted $15 billion to $20 billion budget deficit for this fiscal year.

In December, Cov. Gray Davis called the Legislature into special session to begin sorting out the budget issues.

As California residents and business people, understanding the state's finances can help us prepare ourselves--and our clients--for the future.

Budget Basics

California's budget is close to $98 billion a year. So a deficit of $15 billion is a little more than 15 percent of the state's total budget. It would seem possible to make up that difference with a little belt-tightening.

But remember that California did not really address last year's $24 billion deficit, so the total deficit for three years is closer to $39 billion.

More than $36 billion of the state's entire budget is allocated to education. Approximately $28 billion is spent on K-12 public schools; $2.6 billion goes to fund community colleges; and a combined $6.1 billion goes to the University of California and California State University systems. Roughly $10 billion is spent on Medi-Cal to provide health care for poor Californians.

State adult and youth corrections facilities spend $5.2 billion a year.

If California eliminated all college funding, closed the prisons and refused health care to all indigents, it could save $23.9 billion.

However, the cost in lost revenue could be substantial if displaced employees were unable to replace their publicly funded positions.

Additionally, retailers and others in the community who depend on income from public employees would be adversely impacted.

California legislators, like their counterparts in most other states, are facing hard choices.

Balancing the budget without driving businesses out of California or reducing publicly funded services to unreasonable levels will be a major priority for the state's lawmakers.

This is going to be a difficult task that the state's lawmakers may be unable to agree upon without significant help from those who live and work in California.

The majority of lawmakers in this state have limited--if any--business...