California has become the nation’s poster child for state budget crises, and every Golden State nonprofit knows how to read the dismal fiscal news: Lower revenues mean more budget cuts. In November Mark Zandi, chief economist at Moody’s, announced at a briefing sponsored by the Center for Budget and Policy Priorities that the two states with the biggest revenue declines in the five quarters ending with the second quarter of 2009 were California and New York.

Fiscal Health Checkup

Budget Deficit per Capita . . . . . . . . . . . . $922Unemployment rate, Dec. ’09 . . . . . . . . . 12.4%

ARRA per Capita . . . . . . . . . . . . . . . . . . $504

California spends more, on a per-capita basis, than any other state in every budget category except two: highways, and notably for nonprofits, public welfare. But the state’s deepening structural deficit has repeatedly devastated the budget with every downturn in the state’s famous boom-and-bust economy. As of November, a state budget analyst concluded that California had a current deficit of $20 billion —that’s a deficit larger than the entire budget for many states. The analyst went on to warn that the state would face the same baseline budget deficit every year through 2015, unless permanent changes were made to the overall revenue and expenditure structure, as opposed to the collection of one-time budget band-aids that were used to balance the front-end of the FY2010 budget this past July. (That $24 bil-lion deficit was “fixed” by cutting health and welfare programs and the state college system, closing state parks, and putting state workers on furlough.)

The Economist magazine says that California’s sorry finances threaten the entire nation’s economic recovery. In September the Sacramento Bee termed the state’s budget “a mess.” And in November, the Pew Center on the States ranked California’s fiscal peril as the nation’s worst, based on a formula that combined its gigantic budget deficit with the state’s rampant unemployment and astounding rate of home mortgage foreclosures.


The good news is that California’s revenues appear to be improving as the national economy straightens out, according to the November 2009 budget update from the National Conference of State Legislatures. But of course, the depth of California’s fiscal morass means that an uptick in revenue doesn’t mean the end of pain for nonprofit contractors.

The current round of budget cuts has the word “nonprofits” written all over it. In December the state barred new enrollments for free screenings for breast and cervical cancer for poor, uninsured women. Also in December, word emerged that another round of fee hikes at public universities and community colleges was in the cards. Over the summer, the legislature authorized moving adult education funding back into schools’ general funds to pay for general education expenses. Lawsuits by community service advocates successfully fended off the legislature’s plan to cut Medicaid reimbursement rates and limit adult day-care services to three days a week, but in-home services for the disabled were ultimately cut back. Even California’s bottle and can recycling programs have been hobbled by budget cuts.

Perhaps the best gauge of California Governor Arnold Schwarzenneger’s predicament comes from a fellow governor, David Paterson of New York. When the New York Amsterdam News asked Paterson about the Empire State’s budget situation, he answered, “It’s tough, but at least it’s not California.”