Sacramento Meltdown

Note: Rafael contributed to this post as well.



As the LA Times reports, the state of California still doesn't have a budget after a 30-hour marathon session in the state senate. Lawmakers on both sides were so exhausted many fell asleep at their desks.

That means pretty soon CHSRA officials will no longer get paid, their consultants are already being offered IOUs. If the impasse is not resolved, the HSR project could be seriously delayed unless the Obama administration awards some stimulus funds directly to the authority, bypassing the deadlocked state legislature. It's conceivable that might happen, but politicians from other states will wonder if it's wise to spend anything at all on such an ambitious project in a state whose own funding depends on a budget process that is broken beyond repair. As an indication of things to come, consider that the national media are now lampooning (starting at 2:10) the whole thing as the political equivalent of a horror movie, the production of which the proposed state budget would subsidize. While they mention why lawmakers are asleep, the mere fact that it has come to this means the Bear Republic is now the front line in this era of serious financial crisis.

It should be noted that Prop 1A and the HSR project are not to blame here. Our bonds haven't even been sold yet. Of course, the longer this crisis goes on, the more costly it is going to be to float those bonds, and that means less money for high speed trains and tracks.

But perhaps the worst possible outcome of this mess is a proposal that is likely to be on the May 2009 special election ballot. It's a "hard spending cap" - a far-right effort to ensure that the spending cuts that are being made can never be reversed. It's actually worse than that, as it would prevent the state from ever taking on a major new project, regardless of its level of popular support, regardless of its need, and regardless of its ability to pay for itself.

The way a cap like the one proposed works is this: spending is only allowed to grow by a rate determined by population growth and inflation. If those numbers are 0, then no spending growth is possible. The cap might allow for 5% growth in spending, but only meet the educational and social services need of those new people and the higher cost of doing business thanks to the inflation. ALL state spending is subject to this cap, even something like high speed rail.

In practice what this means, as the state of Colorado discovered when their cap hit hard earlier this decade, is that government programs have to fight each other. If California wanted to spend $2 billion of the Prop 1A bonds in, say, 2012, then $2 billion in corresponding cuts have to made elsewhere in the budget. HSR would be pit against schools and hospitals. I don't know about you, but that's not a good situation for us to be in.

Worse, the spending cap means that California will have to make further cuts in coming years even above and beyond what Governor Arnold Schwarzenegger proposes, and that's itself a set of rather conservative spending plans. The California Budget Project shows what the impact looks like:



In short, a spending cap like the one proposed could be catastrophic for the California High Speed Rail project. The Legislature has already voted to put it on the ballot in May. Defeating it is going to be a high priority for HSR supporters and transit advocates around the state.