UCLA report warns of overly optimistic deficit projections
UCLA economists have given a mixed review to Arnold Schwarzenegger’s performance as California governor, crediting him with crafting creative solutions to the budget crisis but asserting that the state remains at risk.
“This year, the actions of the Schwarzenegger Administration and the legislature were positively epic,” said Michael Bazdarich, senior eocnomist with the UCLA Anderson Forecast, which was issued Wednesday.
Bazdarich, in a paper titled “The Circus is Back in Town: More on the State’s Budget Crisis,” noted that the projections of rapid revenue growth along with reduced spending have cut the state’s deficit from $12 billion in November 2003 to $7 billion currently, but warned that the deficit will flare up again in the coming years.. He called the current revenue projections “optimistic” and warned that any shortfall will push deficits higher.
UCLA senior economist Christopher Thornberg also found little comfort from California’s budget situation, saying it is “still out of control.”
“All the financing done to make up the gap through borrowing is only taxes deferred, not taxes avoided,” Thornberg said. But he credited the governor for helping improve California’s business climate during his 15 months in office.
He also said showbiz employment will remain stable and that the industry will stay in Hollywood for the foreseeable future. Thornberg said the key showbiz elements — dealmaking, financing and marketing — will clearly stay put.
“Like a lot of other industries, show business production will continue to go to cheaper offshore locations, although the weak dollar may provide more incentive to stay home,” he added.
Thornberg said the number of Southern California entertainment-related jobs — which include the motion picture business, broadcast, performing arts and sports — will remain at 250,000 for the foreseeable future.