Speaker Bass has taken the position that the Legislature has already made $10 to $12 billion in cuts over the past several years, and enough is enough. Therefore, her preference in addressing the budget deficit is "I want to do 50 percent revenue and 50 percent from the federal government." This is an understandable position from a Democratic Speaker, but is it practical? After all, with a twenty-month budget deficit pegged by the Legislative Analyst at $27.8 billion, could we expect Washington to deliver $13 billion or so next year just to California?
 
Happily for this analysis, US Senate Majority Leader Harry Reid recently released his economic stimulus proposal, called S. 3689, the Economic Recovery Act of 2008. Among the provisions in the proposal is Title III, State Fiscal Relief, which provides about $38 billion for states by increasing the federal match for Medicaid. For California, it would increase the match by eight percentage points (from 50% to 58%). The benefit to California from this bill would be about $3 billion or so.
 
Three billion dollars is not nothing, but it is one-time only, and of course comes nowhere near the $13 billion in fiscal relief sought by the Speaker. The new Congress and President may provide some bail out for state governments, but California leaders will still be saddled with the responsibility of resolving most of the problem themselves.
 
The House of Representatives approved a stimulus bill in September called H.R. 7110, which would have increased the Medicaid match by up to four percentage points, delivering about half the benefit of Senator Reid's bill.
 
Horrifying afterthought:  To forestall possible bankruptcy of one or more of the domestic automobile manufacturers, some members of Congress are drafting legislation to provide bridge loans conditioned on limits on executive compensation, and possibly changes to companies' UAW labor agreements. Will the rush to "protect the taxpayers' investment" spread to restricting a state's compensation, governance and labor policies, in return for a fiscal bailout?