By Dan Walters
dwalters@sacbee.com The Sacramento Bee
Published: Sunday, Dec. 12, 2010 – 12:00 am | Page 3A

Gov.-elect Jerry Brown’s “budget discussion” last week fairly framed the woeful reality of California’s budget debacle.

Simply put, voters and legislators have committed the state to spending more than its revenue system can support. The income-outgo gap is about 7 percent when the economy does well, but the “structural deficit” is now about 20 percent because of recession.

Outgoing Gov. Arnold Schwarzenegger, elected on a promise to fix state finances, largely failed, and he and legislators plugged the deficit with gimmicks, phantom revenues and borrowed money.

Brown says he wants to get real on the budget, and he must. California cannot continue down this path without corrosive consequences.

He appears to be leaning toward some combination of real spending cuts and real revenues to close the gap, the latter dependent on voters being convinced that he and the Legislature are serious about the former.

Meanwhile, he faces a $6 billion-plus current-year deficit.

Fixing California’s budget mess would be a three-stage, multiyear process. The first would be cutting spending to close the current gap and doing so in a way that convinces voters that Brown and legislators are serious about the new reality.

Stage two would be a 2011-12 budget that continues the spending cuts and asks voters for more revenues, possibly a limited extension of the $8 billion-plus in last year’s temporary tax hikes that will soon expire.

Were those two steps to avert fiscal disaster and improve voter confidence, stage three would be a massive restructuring of public finances, including a much-discussed “realignment” of state-local responsibilities to, as Brown put it, “bring governmental activities … closer to the people.”

It should also include a serious review of big-ticket spending. We should, for instance, find out why, with 12 percent of the nation’s population, we have 32 percent of its welfare cases, and why we’re spending three times as much on prisons as Texas, which has almost as many inmates.

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