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September 25, 2008, 5:30-7:30 p.m., Doubletree Hotel, Rohnert Park

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Sacramento finds itself in yet another budget hole

Five years on from recalling a governor because of a $20 billion deficit, California is once again $14 billion in the red and in debt to boot.

In 2003, it was the telecom crash that got the blame for ending the fire hose of taxes that had been flowing for a few years into Sacramento.

In 2008, the real estate slowdown is getting the blame.

But the real culprit is Sacramento’s refusal to deal with its spending.

As recently as the 2000-2001 fiscal year, California’s general fund expenditures stood at $99.4 billion. That was nearly double expenditures just a decade before, but stay with us.

In the current fiscal year, according to the State Senate Committee on Budget and Fiscal Review, general fund expenditures will total $142 billion, a 43 percent increase in five years.

Warning: Do not try this at home.

Officials will argue that they had the revenue to justify this new spending binge, and, indeed, revenues did increase 40 percent over the last four years. This was due in large part to the strong national economy and an unprecedented housing boom from 2002 to 2005.

But as in previous tax bonanzas like telecom, it didn’t last. Because of the extreme progressive nature of California’s tax code, booms can fade quickly as the economy slows and revenues from capital gains of the state’s wealthiest residents diminish.

The probability that Sacramento will own up to this cycle and deal with it is not good. Gov. Arnold Schwarzenegger tried shortly after he was elected and was pummeled. The result was tens of billions in borrowing to pay for roads and levies that should have been built anyway.

You can bet that the same as in 2003, every lobbying group with an office in Sacramento will be gearing up to protect their programs.

Meanwhile, many of the state’s most productive residents are leaving for lower-cost states.

Unless Sacramento curbs it addiction to spending, all this is a recipe for an even harsher boom-bust cycle another five years on.

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