The Legislative Analyst is out with his review of the 2010-11 budget Arnold proposed last Friday. Some of it is very sensible, including recognition that eliminating CalWORKS and state subsidies for child care is fiscally stupid, and that we need new revenues. Some of it is quite reckless and nonsensical, including the call to eliminate the minimum funding guarantee for schools.

Overall it indicates the limitations of a purely numbers approach to the budget – further cuts to public schools would destroy the state’s economy for a long, long time to come – and suggests the LAO doesn’t truly understand the nature of California’s economic crisis.

Here’s what the LAO had to say on the proposed elimination of CalWORKS:

By eliminating CalWORKs and child care, the state would be foregoing major amounts of federal funding. In CalWORKs, the state would forego the annual $3.7 billion federal Temporary Assistance to Needy Families (TANF) block grant. Moreover, California would forego hundreds of millions of dollars in Emergency Contingency Funds (ECF) authorized by the 2009 federal stimulus package. (The ECF provides 80 percent federal financial participation in costs for cash grants, nonrecurring short-term assistance, and subsidized employment which exceed their corresponding costs in 2007.) Although the ECF is scheduled to expire on September 30, 2010, both the President’s budget and the Governor’s budget assume it will be extended for one more year.

In other words, Arnold’s cruel cuts will actually cost the state more money in the long run, in addition to the economic problems they’ll cause. The LAO proposes new revenues to close the gap:

Alternatively, some of the most severe cuts proposed by the Governor could be avoided by adopting selected revenue increases-from fee increases and other nontax revenues, changes to tax expenditure programs, delays in previously scheduled tax reductions or expirations, and targeted tax increases. We urge the Legislature to put these types of solutions in the mix.

Unfortunately, the LAO undermines the positive and sensible trend of their report by calling for a massive cut to public education funding – even after 30,000 teachers have been laid off, even after students are being packed 35 or 40 to a classroom:

Given the state budget situation, there is a real question whether California can afford to fund the current-law Proposition 98 minimum funding level. Rather than adopt strained legal interpretations of the funding guarantee, as presented by the Governor, the Legislature should forthrightly suspend Proposition 98 if the minimum guarantee is above the level of funding that the state can afford.

This is a ridiculous proposal. The LAO’s notion of what “the state can afford” is very, very deeply flawed. Is the LAO saying with a straight face that California cannot afford to properly educate its children?

Or are they suggesting that the only money we can use to fund education is whatever we take in from existing taxes? Because California can clearly afford to fully fund education under current Prop 98 rules – if we ask the wealthy and the corporations to pay their fair share.

The January 2010 PPIC poll found huge majorities support raising taxes to fund K-12 education. If such a proposition were to be put to voters, its chances of passage would be high.

But the LAO apparently dismisses this, out of a flawed approach that suggests we can’t “afford” those kind of revenues. That view is very dangerous to our state’s economic future. California cannot afford to destroy our schools through further budget cuts. Doing so will cause long-term economic distress, slow job growth, and ensure that high unemployment persists. Without an educated and trained population, new businesses won’t be created here, and existing businesses will look elsewhere to hire workers.

For California to have any meaningful economic recovery, we absolutely must increase education spending. For all the other good aspects of the LAO’s report, their reckless recommendations on education spending need to be rejected entirely if we are to avoid further economic and budgetary pain.