If the key propositions fail, California’s carefully crafted budget compromise will unravel leading quickly to further massive public spending cuts.  These cuts will violate the terms of the national economic stimulus plan which requires “maintenance of effort” to be eligible for the funds. Florida and other financially troubled states have already been forced to undue budget cuts to qualify for stimulus funds.  $6.8B of stimulus funds allocated to California is already in jeopardy.  The Obama administration has ordered California to reverse a $2.00/hour pay cut ($74M) for home healthy care workers represented by the Service Employees International Union (SEIU) or forfeit the $6.8B.  Reversing the pay cut would require a 2/3’s vote of the legislation which is very unlikely because the cut is part of the compromise budget plan.

California voters know all this but are apparently so angry with the state government over bloated pay and benefits for public employees that they are again, as in 1978, willing to endure an interruption of public services to make a long tern fix. Although the same voter anger has not yet reached most other states when most of the larger states, except Texas, are forced to make nearly California size budget cuts and tax increases.  States survived fiscal year 2008 with less painful cuts and tax increases and drawing down reserve funds. That well is now dry in most states. Expect California style budget plans in many states in the next year.  Some will be rejected by angry voters forcing deep cuts in public construction for several years.

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