A new report from the Legislative Analyst's Office says in its introduction: "The state’s revenue collapse is so dramatic and the underlying economic factors are so weak that we forecast huge budget shortfalls through 2013-14 absent corrective action." The only hope the state has, the report says, is to "begin laying the groundwork now." The report does suggest some solutions (click on the headline to read them here). The LAO on Nov. 11 also issued an assessment of the governor's proposals.

Yesterday's Legislative Analyst's Report suggested these "keys to balancing the budget." They include a look at how the state operates.

"As we advised the Legislature last week, closing the current budget gap will be a monumental task. As the Legislature crafts a plan to bring the 2008–09 and 2009–10 budgets into balance, there are some key components that should be part of the approach:

Early Action. If the Legislature has any hope of developing a fiscally responsible 2009–10 budget, it must begin laying the groundwork now. Solutions often need early action in order to get a full year’s worth of savings in 2009–10. Actions now will also ensure that the state can continue to meet its cash flow demands.

Balanced Approach. The magnitude of the budget shortfall is too great to close on only one side of the ledger—base spending must be decreased and revenues must be increased.

Long–Lasting Solutions. With little prospect of a quick economy recovery, the state’s budget problems demand long–term solutions. The Legislature should focus on actions that have ongoing impacts.

Rethink State Operations. While demanding many difficult choices, a budget crisis is also a good opportunity for the Legislature to rethink the way the state operates. For instance, duplicative programs and nonessential services can be eliminated, ineffective programs can be restructured, and which level of government is responsible for service delivery can be reconsidered. Some of these types of changes can take months or even years to implement. With huge budget shortfalls expected for the next five years, however, now is an ideal time to put these types of changes in motion.

No New Borrowing. The state faces $18 billion in outstanding budgetary borrowing from decisions reached in balancing budgets earlier this decade. Engaging in additional borrowing that simply pushes the budget problem into 2010–11 or beyond would only worsen the situation in the out–years.