Brown, Leg Conjure Up Phantom Budget

JUNE 28, 2011

By KATY GRIMES

In the shadow of the 2009 tax increases set to expire this Friday July 1, Gov. Jerry Brown and the Democrat party leadership announced Monday that a majority-vote budget deal had been reached. There was no Republican involvement or support.

Based largely on the hope of $4 billion more in projected tax revenues, Brown said, “Going forward, we do expect more revenues in the budget year coming up, but in case that’s overly optimistic, we do have severe trigger cuts that will be triggered and go into effect. And those are real.”

But if that increase in tax revenue is not realized, there will need to be an additional $2.6 billion in spending cuts, to be determined by the Department of Finance, as early as January.

What a far cry Brown’s 2011 budget is from his days during his first term as governor in the 1970’s, when he was described as a “fiscal conservative” and supportive of the Balanced Budget Amendment.

Brown had been massaging Republican votes for several months in order to hold a statewide election to approve the extension of the 2009 tax increases. Now, he said, because his original budget proposal was not passed, lawmakers will end up using the ballot initiative process for the future tax increases which they say are necessary to the budget.

Assembly Speaker John A. Pérez said Democrats “have not wavered in our belief that new revenues are essential” for a balanced budget. “The conversation has been started and we will keep that conversation going as we move to the ballot next year.”

No Reforms

But there were no reforms in the Brown/Democrat budget — no spending cap, no pension reform and no regulatory reform.

“While Democrats may still use legally questionable maneuvers to raise taxes, the simple truth is because of Republicans’ resolve, temporary tax increases will expire this Friday and the average California family will save nearly $1,000 per year,” Assembly Minority Leader Connie Conway, R-Visalia, said in a statement.

Other Republicans criticized the “hope” for revenue projections. “Californians deserve better than the ‘Hope without Change’ budget the Democrats announced today,” said Senate Republican Leader Bob Dutton of Rancho Cucamonga immediately following the majority-vote budget deal announcement. “This latest budget is based on the hope that $4 billion in new revenues will miraculously materialize, but does absolutely nothing to change government as usual.”

Sen. Bob Huff, R-Diamond Bar, vice chair of the Senate Budget Committee, said, “$4 billion of that is phantom money that may never materialize. That’s a wand Harry Potter would be proud to wield.”

The budget includes even more cuts to higher education, in addition to the $500 million already cut by the University of California and California State University systems. This budget will even include cutting seven days from the K-12 public school year. And this budget is full of carryovers into future years, making it unbalanced.

On top of the gross failure of the Court Case Management System costing taxpayers $2 billion, this budget is cutting another $150 million from the already-stressed court system.

Some in the media have said that with Republicans working for months to block the tax increases, they also lost a chance to implement reforms.

But that is not entirely accurate. The office of Sen. Tom Harman, R-Huntington Beach, one of the “GOP Five” who attempted to negotiate the budget deal with Brown, reported that Republicans’ attempt to block taxes was solely based on tax increases being the only option put before voters.

Other Reforms Shelved

The five Republicans wanted to include pension reform, regulatory reform and a spending cap on the same ballot as Brown’s tax extensions-increases. Harman’s office confirmed that the GOP Five wanted the reforms as part of the solution, if voters for were also going to vote on tax extensions.

Republicans tend to trust the voters to vote on reforms and tax increases, whereas it is apparent that Democrats did not want the tax increases or reforms to make it to the ballot.

Legislators will keep the vehicle licensing fee in the budget, primarily because it has been labeled a “fee.” But the 2009 sales tax increase and the personal income tax increase will expire July 1.

As for the source of the revenue Democrats are hoping will be coming in, many are wondering if Brown and the Democrats are finally admitting that with the tax increases expiring, California residents will have a little more money to spend, resulting in increased tax revenues to the state.

The Senate and Assembly are scheduled to vote on the budget Tuesday. And if they pass the plan and the governor signs it, expect to see happy legislator faces in anticipation of receiving paychecks, which had been suspended by Controller John Chiang, pending a signed, balanced budget.

In the governor’s budget plan, government grows by nearly 27 percent over the next three years.  And while state revenues are expected to be $7.4 billion higher than anticipated, Harman pointed out, “The Governor and Democrats have made no accommodations for that revenue windfall other than to spend it…. Where is the austerity in that?”

What really needs to happen is a blend of massive cuts to the state’s gargantuan social spending programs, a spending cap put in place, and a balanced budget — one without accounting tricks, carryovers into future budgets or “realignment” games. Until lawmakers can produce a legitimate budget that doesn’t rely on revenue hopes, tax increases and the ongoing government growth and expansion, California voters won’t believe a word they say.