California's Slow Turn-Around

Slowly, oh ever so slowly, California is digging out of its prolonged recession.

A recent report published by state Controller John Chiang shows modest improvement in key areas relative to last year.

Between March 2011 and March 2012, employment in California increased by 200,000.

That means 200,000 more people are paying taxes into the state treasury and, presumably, purchasing services and goods. One sign of the latter is the increase in automobile registrations--up by more than seven percent.

There are other indicators as well. Single family home sales increased slightly over the past year at slightly higher prices, while the number of foreclosures dropped by nearly 15 percent.

Taken together, these data auger hope that our long recession--and concomitant fiscal crisis--may be abating.

Still, the recession has taken its toll. The Controller's report finds that revenues for the fiscal year, while improving, continue to lag behind the Governor's projections by $3.5 billion.

That's hardly reassuring, given that the treasury began the fiscal year $8.2 billion in the hole. At the same time, the state has spent about $3.1 billion more than anticipated, partly because of losing a few court battles on funding and partly because of reduced federal support.

We're not out of the woods yet, but we can now see a path.

So, what happens next?

On Monday, Governor Jerry Brown will announce the results of the "May Revise," the last report by the Department of Finance before the end of the fiscal year. Presumably, the report will reflect much of the Controller's findings, which may well lead Brown to ask again that the legislature make more budget cuts to minimize the damage before the year's end. The less those cuts are made, the more that the state will begin the 2012-2013 fiscal year deeper in debt than this year.

Just what the legislature will do remains a mystery. Up to this point, legislators have rejected Brown's demands for more spending reductions.

Meanwhile, there appears to be a bit of light at the end of California's dark fiscal tunnel.

An improved economy should bring in more revenues in the months to come--not enough to replace the drastic cuts of recent years, but perhaps enough to slow the bleeding to manageable proportions. For a state that's been hemorrhaging badly for the past few years, such news will be welcome.

Larry Gerston teaches political science at San Jose State University and is the political analyst at NBC Bay Area.

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