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Sacramento Bets on Santa

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Opinion: Sacramento Bets on Santa

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Londoners dressed in Santa Claus costumes participate in 'SantaCon', a Santa-themed pub crawl in 2009.l

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These are happy times in Sacramento, for reasons we previously explained here. But Sacramento is banking on more good budget times ahead, with projections of even small surpluses in the future.

But if these happy times are to continue, much depends on Santa. Specifically, a Santa who will deliver improved revenues to the state.

That's because the happy talk is based on a host of assumptions. Here are three of them.

1. That the country won't go over the fiscal cliff. Another recession would undermine the state's gains, as the Legislative Analyst's Office has noted.

2. That the temporary taxes in Prop 30 will produce the billions in new revenue expected. 

Those revenue assumptions are conservative, but the state has been burned before. In 2009, the state raised the same taxes -- income and sales -- temporarily, and the budget hole remained deep. There are a host of possible reasons for that, but one is that those two taxes have produced relatively unpredictable revenues, with the income tax revenues being famously volatile.

3. That the budget system won't undermine the projections.

Much of the happy talk is based on the assumption that the budget hole won't get any deeper if new revenues materialize and that spending stays at roughly today's level. That would be logical, but the California budget system isn't logical. It's a ratchet that unexpectedly ratchets down revenue and ratchets up spending. The status quo on revenues and spending may not prevent a deeper hole.

For all these reasons, Sacramento's Santa may end up providing little more than a lump of coal -- and more budget problems.

Lead Prop Zero blogger Joe Mathews is California editor at Zocalo Public Square, a fellow at Arizona State University’s Center for Social Cohesion, and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (University of California, 2010).

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