State's Ongoing Nutty Budget Battle

The following first appeared in the City Journal California.

JUNE 20, 2011


Watching the California budget drama unfold reminds me of the Seinfeld” episode in which George Costanza pretends he has to sign papers on a house he’s leasing in the Hamptons as a way to skip a meeting of a foundation started by the parents of his late fiancée. The parents know he has no such house, and George knows that they know. Yet they all decide to make the two-hour drive to see it. “Once you get in that car, we are going all the way . . . to the Hamptons,” George says. “All right, you wanna get nuts? Come on. Let’s get nuts!” Well, California’s budget situation is about to get nuts.

Just how nuts became a little clearer on Thursday, when Governor Jerry Brown vetoed a gimmick-laden budget that seemed to exist solely to ensure state legislators would get paid. “Unfortunately, the budget I have received is not a balanced solution,” Brown wrote in his veto message. “It continues big deficits for years to come and adds billions of dollars of new debt. It also contains legally questionable maneuvers, costly borrowing, and unrealistic savings. Finally, it is not financeable and therefore will not allow us to meet our obligations as they occur.”

Brown’s veto is further proof that piecemeal reforms aimed at forcing legislators to behave in a fiscally prudent manner are mostly a waste of time. The legislature faced a June 15 deadline to approve a budget. Under Proposition 25, a good-government initiative that voters approved last November, legislators may pass a spending plan with a simple majority, rather than a two-thirds vote, as long as the budget doesn’t include tax increases. Prop. 25 also includes a provision, intended to appeal to rising populist sentiment in the state, which would permanently strip legislators of their per diem pay for every day they fail to pass a budget on time. This caused real consternation in the capitol. According to one Democratic legislator I spoke with, 80 percent of lawmakers live paycheck to paycheck. Any deal, even an atrocious one, had to be better than foregoing a salary, apparently.

Bogus Projections

Richard Rider, chairman of the San Diego Tax Fighters, described the failed budget as “a particularly imaginative piece—a disjointed combination of bogus revenue projections, even more accounting gimmickry, illegally passed tax increases and sources of revenue that this same Legislature was bound to reject when the follow-up bills came before them (such as selling state government properties). Brown did the only possible thing he could—he vetoed the mess.” Some of the “imaginative” elements included a legally dubious increase in the vehicle-license fee; the deferment of $3.4 billion in state payments to community colleges and universities; an effort to take $1 billion from early-childhood-development commissions; and an “Amazon tax” aimed at collecting use-taxes from online retailers, which may not pass legal muster. The budget also would have raided the state’s reserve fund and cut money from the state courts.

The budget package did include two trailer bills that would put an end to, or at least significantly curtail, redevelopment agencies and save the state $1.7 billion. Both bills passed with some Republican support, and Brown might sign them separately. But no other silver linings came out of the legislative budget effort.

While the governor slammed the Democrat-created budget monstrosity, he reserved his harshest words for Republicans, who continue—in his view—to deny Californians the right to vote on a series of tax extensions that lie at the heart of his fiscal plans. “If they [Republicans] continue to obstruct a vote,” Brown said Thursday, “we will be forced to pursue deeper and more destructive cuts to schools and public safety—a tragedy for which Republicans will bear full responsibility.” As recently as last week, it looked as if the governor might persuade enough Republicans to back a vote on extensions. But the widely rumored deal, always denied by Republicans, fell apart over the Democrats’ insistence that the GOP support a “bridge”—the continuation of the higher taxes until the special election takes place this fall. That proved a bridge too far for Republicans.

No Reform Ballot

The governor refuses to place any reform measures on the same ballot. Apparently, the public has a sacred right to vote on tax hikes, but not on anything else. Republicans are rightly frustrated about that stubbornness. “Senate Republicans provided Governor Brown and the Democrats a pathway to a bipartisan budget solution that would have allowed voters to decide on taxes, meaningful pension reform and a hard spending cap,” said Senate Republican Leader Bob Dutton after the veto. “On March 25, Governor Brown said no and broke off budget negotiations with Republicans. Senate Republicans will continue to fight for reforms that will heal the economy and put unemployed Californians back to work.”

Even if the governor gets his vote on tax extensions, there’s little chance that they will succeed with voters, who have shown a waning appetite for them. A recent Field Poll found slightly more than half of respondents favored Brown’s tax proposals—down from more than 61 percent in March. Even some of Brown’s labor allies sound skeptical about the governor’s special-election plans. “It’s my members’ money,” explained David Kieffer, executive director of the Service Employees International Union California State Council, in an interview last week with the Sacramento Bee. “And if I went to my members and my board and said we can either play heavily and do good politics in 2012, or we can lose an election with this money, I think I don’t even have to pose the question to get the answer.”

It’s hard to see where California’s budget mess will end, but it’s a fair bet that things will get nuttier before they get better.


Write a comment
  1. GSL
    GSL 20 June, 2011, 10:10

    Nice. Our write-up on where things stand is here.

    We found it interesting that S&P weighed in very quickly on the veto. Lest anyone forget, the rating agencies are watching all this closely.

    Reply this comment
  2. ggswede
    ggswede 20 June, 2011, 12:43

    Nothing new,just the same old nonsense that has taken root in our capitol.

    Reply this comment
  3. Sol
    Sol 20 June, 2011, 14:15

    “According to one Democratic legislator I spoke with, 80 percent of lawmakers live paycheck to paycheck.”

    If they can’t even handle their own finances how on earth can they handle the finances of a state with in excess of 30 million people?

    The truth is nearly all of them are liars and thieves and incompetent criminal clowns!

    Reply this comment
  4. Sol
    Sol 20 June, 2011, 14:33

    For their effors let our illustrious rulers eat this, especially if they want to prove how “green” they really are…they’ll be green alright…heck, in a few years they will probably mandate this for everyone but themselves…

    Reply this comment
  5. Bob
    Bob 20 June, 2011, 17:49

    According to the Mecury News/AP, AB 1X-26 and 1X-27 have not been transmitted to the Governor.

    “…two bills that would eliminate some 400 redevelopment agencies and allow creation of new agencies were passed but not transmitted to the governor.”

    This raises the following questions: Who is holding it up (Perez)? And is the expiration – i.e. what is the deadline for the Gov. to sign it?

    Reply this comment
  6. Skep41
    Skep41 20 June, 2011, 18:24

    The Dems in the legislature arent afraid of the state going bankrupt but they are afraid of losing their paychecks? What a bunch of greedy, crawling nematodes! Short-sighted nematodes at that. Do these Dems realize that if Jerry fails this state could go the way of Michigan or Wisconsin and throw their pathetic butts out? You think its impossible, given the tragically low level of education in the state, the mass delusions about the environment common among the herd, and the completely comatose state of the California Republiclowns but this trainwreck is going to happen and even in this state a Greece-like crash will open a few eyes. Brown never quite gets to the deal that will save the bacon because of his union bosses. Look what a storm union reform set off in mellow, rural Wisconsin. Imagine the mayhem in this state the day the unionoids discover the cupboard is bare.

    Reply this comment
  7. Ron Kilmartin
    Ron Kilmartin 20 June, 2011, 22:27

    Solution: cut CARB 90%; Energy Commission 100%; Prisons 40%,Department of Education 100 % and transfer it to the schools. Cut other state offices 30%. In order to create employment in California, we need to drastically cut government staff in Sacramento – the regulators have to go before they do more direct damage to the state economy.

    Reply this comment
  8. F. Stephen Masek
    F. Stephen Masek 22 June, 2011, 16:09

    “According to one Democratic legislator I spoke with, 80 percent of lawmakers live paycheck to paycheck.” That seems like headline news. Clearly, these people need to be replaced. Of course, we also need a part-time legislature composed of people from a wide variety of backgrounds – engineers, plumbers, farmers, small business owners, mechanics, accountants, etc., not mainly lawyers.

    Cut – welfare of all sorts, including “corporate welfare” to zero. Many departments, bureaus, agencies, boards, and commissions – zero. And the big one – sell off all of the schools, colleges, and universites, as they would provide far better education at far less cost if they were private.

    Reply this comment

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