Commentary: What price has Schwarzenegger paid for budget reform?

When Gov. Arnold Schwarzenegger hands over the keys to the corner office, he will be leaving the next governor with his or her first mess: a budget that will be out of whack by billions.

Schwarzenegger came to office promising to end crazy budgeting and cut up the state's credit cards. Now, in one of his final acts, he has signed a budget that relies on borrowing and rosy projections.

It's hard to know the size of the coming deficit: $10 billion, $15 billion, maybe more. We won't know the depth of the problem for a few months. But it won't be pretty.

No doubt – this budget agreement contains some true achievements.

The governor persuaded lawmakers to roll back unsustainable pension payments. New workers will need to remain on the job until age 60, or 55 if they wear badges, before collecting full retirement benefits. That will help end abuses and reduce the state's long-term pension obligations, assuming future legislators don't pull a repeat of 1999 and jack up benefits during a fleeting moment of prosperity.

At Schwarzenegger's insistence, lawmakers also agreed to place before voters a constitutional amendment that would cap spending and increase the emergency reserve to 10 percent. Depending on the measure's final wording, that too could be an important long-term budget fix – assuming opponents don't attempt to kill it at the ballot box.

As for much of the rest of the budget? It is a mirage.

In a report issued on the day that Schwarzenegger signed the budget, the Legislative Analyst's Office cited "$2.7 billion of loans, loan repayment extensions, transfers, and fund shifts from special funds." Translation: All that must be repaid.

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