Wish You Were Here? Maybe Not.

New York’s budget hole is huge and growing as Governor Patterson reminded us all on Wednesday but if you want to see how bad things can get, go west.

As the LA Times lays out in painful detail, California’s budget woes are much worse than ours. New York faces a $14 billion gap this coming budget year while California’s deficit is $42 billion over the next 15 months.

Paterson has repeatedly warned that if Albany’s legislative leaders don’t agree to structural spending changes New York “might end up like California.” Here’s what he means:

Gov. Arnold Schwarzenegger and the legislative leaders in California’s capital, Sacramento, have agreed to cut spending on schools, colleges, and public transportation while increasing some key taxes and borrowing against future lottery earnings. That seems pretty sound, no? (Especially that borrowing bit….)

Here’s what the LA Times learned: “The deficit would be wiped out with $15 billion in cuts; $14.4 billion in new and increased taxes on sales, vehicles, gasoline and personal income; $12 billion in borrowing against future profits from the lottery; short-term loans; and various accounting maneuvers.” And you thought Albany was bad.

The deal comes less than a week after Schwarzenegger forced more than 200,000 state employees to take an unpaid day off last Friday meaning almost all state offices and services shut down. That’s expected to happen twice a month for the foreseeable future.

And while New York is debating whether to raise income taxes on those making more than $250,000 per year and to tax sugary drinks, all Californians will face a 2.5% income tax hike, sales taxes that reach nearly 10% in Los Angeles, and huge spikes in car registration and gas taxes.

Most striking to New Yorkers is the proposed $8 billion cut to education. Schools in California, like New York, are one of the biggest areas of state spending and are therefore impossible to ignore. California spent more than $35 billion on education last year while New York spent roughly $20 billion. But while California appears ready to deeply slash education spending, Paterson’s proposal to increase school aid by “only” $1.5 billion has been met with howls of protest. And remember: New York already spends about 60% more per pupil than our friends out west do.

All of this has been cobbled together without including any Federal stimulus funds. When that pile of cash comes to California (and come it will — the House Speaker is from California and the state is a huge Democratic winner for Presidents) the plans will certainly change, especially as regards any borrowing. But at the end of the day California may get $10 billion from Washington and that’s just a down payment on their problem.

Fortunately it looks like Albany will be crafting it’s budget deals after DC doles out the stimulus dollars which will help to make the choices clearer. But nothing should chasten New York’s lawmakers more than what’s happening in California.

Sacramento has spent years failing to match government spending to tax revenues (largely because California voters love to approve propositions that mandate spending and those that mandate cutting taxes, but that’s a story for another day). Albany has done the same. The bill is due.