Does Budget Forum Portend Tax Hikes?

DEC. 9, 2010

By KATY GRIMES

In what appeared to be an event designed to prepare California for tax increases, Governor-elect Jerry Brown held a well-attended budget forum on Wednesday to discuss California’s precarious state budget and extraordinary deficit.

The charts and graphs handed out to participants were full of fascinating information, but the presentation left many asking if the budget information was complete.

One graph was titled, “Where Do State General Fund Dollars Go?” It depicted massive state budget expenditures — 30 percent allocated to kindergarten through 12th grade, with another 10.6 percent going to higher education. But strangely, the Health and Human Services agency was broken out separately, with 22 percent going to health and 10.8 percent to Human Services, totaling 33.1 percent.

The biggest shocker was how frequently “billions” was used in the state’s general fund expenditures: CalWORKS, $3 billion; state employee payroll, $9.2 billion (with 67 percent in corrections); and Medi-Cal, $17.6 billion.

The “General Fund Revenues vs. Expenditures” graph showed a steeply increasing expenditure line, even when state revenues were not. And while state revenues have dropped dramatically since fiscal year 2007-08, the expenditures have not dropped commensurately.

Even more more dramatic was Brown’s financial outlook presentation. Legislative Analyst Mac Taylor warned that because of the severe job losses during this recession, it will take eight years for the employment picture to recover to the level prior to the recession, more than three years ago.California’s unemployment rate is currently 12.4 percent, much higher than the rest of the nation, which just reached 9.8 percent.

There were plenty of comments from the audience, made up of legislators and local elected government officials. John Tavaglione, president of the California State Association of Counties, noted that counties have been making severe cuts, and any discussion about shifting services from the state to local governments will need to include local government officials as well as the funding to go with services. “We need to be at the table,” he said.

Brown assured Tavaglione that county officials would be involved in state discussions of “realignment.”

Democrats, in surprising moments of frankness, spoke about “revenue solutions”  — tax increases. Assembly Speaker John Perez, D-Los Angeles, brought up an old proposal for implementing an oil severance tax, stating that nearly every other state has one, and that such a tax could generate more than $1 billion for the state. “All solutions are valid for vetting,” he said.

Challenging the all-Democratic panel, Assembly Minority Leader Connie Conway, R-Tulare, said that taxes were not part of the budget solution. “I’m so glad we are not talking about raising taxes as a solution,” Conway said, mocking the use of the word “revenue.” Conway told Brown that over-regulations are a burden to California businesses, and suggested that legislators “do everything we can to help the economy recover.”

Brown immediately moved on to a question from another audience member without commenting on Conway’s suggestion.

One Sonoma County Supervisor was critical of the high cost of the administration of state agencies, and said that the Department of Child Services agency spends $700 million in administrative costs.

Brown talked briefly about the vehicle licensing fee as a revenue source. He said heo was critical when it was cut but spending was not commensurately cut.

Assemblyman Sandre Swanson, D-Alameda, said legislators should “go to the people of California and have them involved in the solution,” after questioning how the state would pay for deficit spending.

Senator Sam Blakeslee, R-San Luis Obispo, said he was concerned with California’s losing position in comparison to other states when trying to attract business, and was growing weary of the “lip service” given to bringing jobs back to California. Blakeslee said reducing regulations was the way to help businesses recover and bring jobs back to California.

A few new Assembly members offered comments. Roger Dickinson, D-Sacramento, suggested performance-based budgeting.

Assembly member Shannon Grove, R-Bakersfield, said her own business, an employment labor and staffing agency, had lost 400 employees after mere discussions of an oil severance tax. “We need to create revenue with job creation, and not taxation,” she said.

Assemblywoman Jean Fuller, R-Bakersfield, said she wanted to see specifics including actual numbers for costs per student in the state, as well as the costs of residents’ taxes, state employees pay and the like.

“We educate, medicate and incarcerate,” said Assemblywoman Mariko Yamada, D-Davis. “People don’t care what level of government you are from, they just want their services met.”

Then there was Assemblywoman Diane Harkey, R-Dana Point, who seemed skeptical of the whole forum. She said it was “enlightening to see the charts and graphs, but after two years of doing nothing but moving money around, the credibility of this house and governor has been diminished.”