California has a sorry history of shortsighted state budgets, leading to periodic crises when revenues fall short of matching spending due to economic slowdowns or fanciful expectations. The current budget, enacted in June, is one example.

Three years ago, Gov. Gavin Newsom proclaimed that the state had a $97.5 billion surplus, based on what turned out to be revenue projections about $40 billion a year higher than reality. The phantom surplus spawned big increases in spending that could not be sustained.

The 2025-26 general fund budget has an actual $20 billion gap between income and outgo that’s being covered by dipping into emergency reserves, accounting gimmicks and on- and off-the-books borrowing. Moreover, both administration and legislative budget advisors believe that a “structural deficit” will be felt indefinitely.

The tools and tricks being employed to close the current budget’s gap come from an inventory of techniques that fiscal insiders have developed over several decades and given monikers, such as double-flip, triple-flip and ERAF, that only veterans of the Capitol’s incessant money battles understand.

ERAF stands for Educational Revenue Augmentation Fund and was created 33 years ago, during Republican Gov. Pete Wilson’s first term, to help him and legislators deal with a recession-caused budget deficit. They diverted billions of dollars in property taxes from local governments to school districts through the augmentation fund, thereby reducing the state’s constitutional obligation to finance education and closing the state budget deficit.

Although local governments had to eat a major reduction in revenue, Wilson and legislators later made it up — more or less — with proceeds of a new sales tax, although restricting the money to police and fire services.

Similar maneuvers have been used to cover subsequent budget pinches, including one that newly elected Gov. Arnold Schwarzenegger employed in 2004 to help fill a major hole in the budget he inherited after Gray Davis was recalled by voters.

The 2004 scheme included shifting another $1.3 billion in local property taxes to schools and eliminating local governments’ historic share of vehicle license fees. In return for giving up license revenue, local agencies would receive annual payments from the state calculated on a formula based on property tax growth.

In essence, these property tax and vehicle fee shifts are loans. Local officials have complained for years that the state’s promises of repayment have fallen short of covering the lost revenues by many billions of dollars.

The ongoing conflict entered a new phase last month when San Mateo County sued the state, alleging that it had been shorted the money it should have received from the 2004 license shift due to a quirk in the way San Mateo’s school districts are financed.

Several of the county’s school systems are designated as “basic aid,” meaning they receive only token amounts of state funds because local property taxes completely finance their operations, thanks to having high taxable property values. That, San Mateo contends, unfairly bent the formula used to calculate its vehicle license reimbursement.

The county pegs the shortfall at $38 million, and says it would have been even higher under the state’s original calculation but was partially modified after complaints.

“These funds are owed to San Mateo County and our 20 cities,” County Executive Mike Callagy said in a statement. “And instead of living up to its obligations, the state wants us to absorb the cost.”

While the amount at stake in the suit is relatively small, it represents the much larger rift between state and local officials, and exemplifies the convoluted ways the state has continued to paper over its shaky finances rather than squarely face them.

Dan Walters is one of most decorated and widely syndicated columnists in California history, authoring a column four times a week that offers his view and analysis of the state’s political, economic,...