Mac Taylor does not mince words
In the course of explaining how and why California still has a daunting budget deficit – $25.4 billion for the current and next fiscal years – Legislative Analyst Mac Taylor delivered some numbers-free straight talk:
On patching over deficits:
“Too often, discussions of California’s budget situation are framed in extreme terms: the state about to go “bankrupt,” debt-service payments hypothetically poised to default, the state government on the verge of collapse. None of these scenarios is remotely likely to occur. History tells us that the state can find ways to temporarily “patch over” its annual budget problems in ways that prove sufficiently palatable to policy makers of both major parties. Periodically, large influxes of capital gains allow for temporary relief, and this too aids in patching over the state’s now-recurrent budget challenges. The Legislature and the new Governor will be tempted in the next few years to continue patching over the budget problems with temporary fixes. Unless plans are put in place to begin tackling the ongoing budget problem, it will continue to be difficult for the state to address fundamental public sector goals—such as rebuilding aging infrastructure, addressing massive retirement liabilities, maintaining service levels of high-priority government programs, and improving the state’s tax system. Accordingly, the state faces a basic choice: begin to address today’s huge, frustrating budget problems now…or defer the state’s budgetary and policy problems to future Californians.”
Will the 2011 Budget include tax increases?
The election of Jerry Brown brings to the policy mix his commitment to submit tax increases to a public vote. The passage of Proposition 25 gives to the Democratic majority in the Legislature, and Governor Brown, the ability to shape the next state budget to meet their vision and priorities, without the need to seek votes from the Republican minority.
If the Governor or his legislative allies want to achieve their budget goals in part with new taxes, how could they do it?
First, voter approval could only be obtained by calling a statewide special election, which itself is certainly not unusual. California voters have participated in three special elections between 2003 and 2009. Some observers believe that the most likely date would be May 17, which coincides with the Los Angeles mayoral election. This date is convenient because it lands just shy of a month before the beginning of the fiscal year, by which time the Legislature must approve a budget or forfeit their pay.
25 + 26 = ?
OK,
maybe I was wrong. In fact, after much careful thought, I’m sold.
I’m willing to take Darrell
Steinberg at his word. And Speaker John
Perez. And Treasurer
Bill Lockyer. And top Democratic lawyer Lance
Olson. And the President
of the California Federation of Teachers. And the Los
Angeles Times and San Francisco Chronicle and other wise
editorialists advise me to relax and not worry. I now believe them all.
Their
conclusions: Prop 25 will not lower the legislative vote requirement for tax
increases from 2/3rds to a simple majority. And Prop 25 will not undermine
the
people’s recourse to a referendum.
Indeed,
the proponents helpfully point out that a Court
of Appeal ruled that ”nothing in (Prop 25’s) substantive provisions
would allow the Legislature to circumvent the existing constitutional
requirement of a two-thirds vote to raise taxes."
So
where does that leave us?
LA Times Thinks (Incorrectly!) that Business is Undertaxed
In the run-up to the election, the Los Angeles Times
An editorial followed
The basis of this pseudoanalysis seems to be this truism: voters don’t like "corporations." With that as a premise, any analysis will do.
Green for thee, but not for me
If a developer trumpeted his commitment to a "green community," promised to scrupulously abide by environmental processes, and then snuck a provision in the state budget agreement in the dead of night to get an exemption from those laws, then editorialists would thunder, politicians’ would fume, and environmentalists would be hiring lawyers.
But substitute "state government" for "developer," and all is silent.
Gimmicky Budget — but Real Reform
The conventional
Nobody can deny that the next Governor will be faced with an extraordinary challenge to balance his or her first budget. After all, the Legislative Analyst has said
Blow Up This Box Before It’s Built
You
can tell when the substantive arguments run out of gas – the name-calling
begins.
That’s
happening now in the debate over the California Health Benefit Exchange,
proposed by SB
900 and AB
1602, which would create a brand new bureaucracy with extraordinary powers
to implement a new entitlement program.
Far
from spreading "fear-mongering falsehoods," the California Chamber of
Commerce and former state Director of Finance Michael Genest are flagging
legitimate concerns about how this Exchange will function: its
accountability to the Legislature and the Governor, and its ability to obligate
new state spending without any recourse by elected officials.
How to Pass a Budget and Tax Increases by a Majority Vote of the Legislature
The Legislature may
vote on a legitimate (if not balanced) budget proposal in the next
couple weeks. Or it may not. But in any event the lack of a budget for
nearly the entire first fiscal quarter should not prevent us from
war-gaming the budget for the next fiscal year.
Jerry Brown has said on many occasions that he would only raise taxes with a vote of the people. At a recent editorial board he floated the idea of a special election next spring (Joel Fox predicted
May 17, 2011, to coincide with the LA mayoral election) to "tee up
some key decisions," presumably meaning voter approval of tax increases
tied to a budget. If Prop 25 passes in November, the Legislature could approve a budget by a simple majority vote. But
wouldn’t he still need a two-thirds vote to place a tax increase on the
ballot?
Maybe not.
If The Recession Ended Months Ago, Why Won’t It Leave?
The
National Bureau of Economic Research announced that the recession that began in
December of 2007 ended in June of 2009. While the economic contraction lasted
only 18 months, job losses in California have lasted for twice as long.
The
peak of California employment was in July 2007. Through August of 2010, total
nonfarm employment continued to drop, although the major losses seem to have
abated since last December.
Referendum, RIP
Joe
Mathews unearthed
a nugget Thursday – turns out the 99-year-old referendum power in
California may have a more distant provenance than we thought, older than even
the state itself.
That
news could be bittersweet, though, because a measure on the November ballot would effectively
prevent the referendum from celebrating its centenary.
On
its surface, Proposition 25 is fairly simple – it reduces the vote
requirement to pass a budget from two-thirds of the Legislature to a simple
majority. However, Prop. 25’s language also eviscerates the
referendum, one of Governor Hiram Johnson’s great reforms enacted to
counteract the power of special interests, and a critical check that voters
have on the actions and power of the Legislature.