Author: Joel Fox

Governor Jerry Brown reveals his revised budget today. The
Republican Assembly offered a blueprint for a no-tax budget last week. Budget
negotiations appeared to be non-existent for over a month. The new dynamics,
especially reports of increased revenue, could kick-start the budget
negotiations with new thinking from the governor. There is another factor
shadowing the budget process — the soon to be announced new legislative
districts.

The Los Angeles Times reported
over the weekend that the governor will reduce his income tax increase
proposal. The question is will that be enough to bring Republicans to the
table?

Reports suggested a deal was close in March that would put
tax extensions and spending and pension reforms before the voters. However,
nearly every poll has indicated that the reforms would likely sail through
while the taxes, at best, had a 50-50 chance of passing. Public unions,
concerned that the tax increases would not pass, changed focus to pressure a vote
on taxes in the legislature. Negotiations broke down.

The Republican Assembly members put forth a logical plan to
close the budget deficit this year with no increased taxes. Whether the plan
can get past political hurdles is another matter. But, the plan deserves due
consideration.

Chief among the criticisms of the plan are three points. 1)
Too much reliance on new, unanticipated revenue; 2) Cuts in the government
costs of 10-percent; 3) Seeking a vote of the people to move revenues from
ballot initiative-created early childhood education and mental health programs
when a similar effort was rejected by voters two years ago.

Taking the critiques one at a time, the first issue is
probably the most difficult because it relies on a bit of the unknown. The
state certainly has new revenue in the bank that wasn’t expected when the
governor presented his budget last January. The new revenue amounts to about
$2.5 billion. Republicans are projecting another $2.5 billion above anticipated
revenues will be available in the next fiscal year.

This morning the Assembly Republicans presented a budget roadmap that contained no new taxes, funds education at its current level and requires government to help balance the budget by reducing state employee costs.

The six-point plan was formally presented to Assembly Speaker John Perez in a letter from Minority Leader Connie Conway. You can read the letter here.  You can read more from Conway in her Flash Report column here.

A take on the plan from Kevin Yamamura of the Sacramento Bee is here. He points out that some features of the plan would require voter approval to move special funds to the general fund that voters rejected in the past.

The Legislative Analyst issued
a report yesterday slamming California’s High Speed Rail project. The
analyst cited a number of problems including uncertain funding, conditions
attached to federal funds and poor management of the project. While the analyst
recommended some changes that might help the project, I wonder if the voters would
like a second crack at voting on high-speed rail. Cut their loses before things
get worse.

The huge $9-billion bond voters approved as Proposition 1A
in 2008 passed with 52.6% of the vote with pretty much all the money spent in
the campaign on the Yes side. (Full Disclosure: I participated in a number of
debates representing the No side.) Ultimately, the cost of the huge project is
pegged at $43-billion.

Day one of the “State of Emergency” protests by the teachers’ union and others has come and gone and the earth didn’t move. Protests were moderate by capitol standards. The arrests amounted to a sideshow.

Where there was movement was a shift in the policy debate because of the unexpected $2.5 billion that now sits in the state treasury. Republicans in the legislature are proposing to use that revenue to offset proposed education cuts. I expect every teacher who visits a Republican legislator during the protest week will hear that refrain.

What is the teacher’s response? No thank you? Hard to imagine.

The real question about this revenue surge is does it continue? Tax experts I talked to yesterday think it very well could. Remember the deficit that the governor is trying to close is for this year and next year. If the revenues continue to uptick next year then the deficit shrinks further and the governor’s current proposal of $10 billion in yearly new (or, in the governor’s language: extended) taxes will be seen as overkill.

It was never going to be easy for Governor Jerry Brown to
get the legislative votes to get his tax proposals on the ballot, never mind
have them passed by the voters. But, new circumstances make the effort more
difficult: Increased revenue is flowing into California’s treasury and the
reported coming "occupation" of the Capitol by those who demand more tax
revenue.

The revenue surge of over $2.5 billion dollars brings with
it the question of how deep the deficit really is. Will the revenue surge
continue? Will tax increases undercut the economic growth that is behind the
surge? Legislators and voters considering the answers to these questions may
not be so eager to support new taxes.

On Friday, reporter and Fox and Hounds blogger Daniel
Weintraub co-authored
an article with Michael Gardner on HealthyCal.org about the revenue
increase. While acknowledging that there was no certainty that the revenue
surge will continue, the authors pointed to hopeful signs that the economy is
rebounding.

The White House wasn’t happy last week when ace San
Francisco Chronicle political reporter Carla Marinucci videotaped a protest at
the president’s San Francisco fundraiser. Marinucci was part of the reporter
"pool" that witnessed the fundraising event and was supposed to report back on
the proceedings to reporters who were not in the room.

Marinucci, who often videos political events and presents
them on the web under the title Shaky Hands Productions, caught supporters of the
accused provider of documents to Wikileaks, Bradley Manning, singing a protest
song to the president.

The White House insisted that only pen and paper
transcription of events was authorized for pool reporters. According to the Chronicle,
the White House threatened to end Marinucci’s privilege of covering presidential
events and even threatened to bar other Hearst newspaper reporters.

The White House denied the threats.

Speaking to an audience gathered in Santa Monica last night to commemorate the life of late political consultant Kam Kuwata, U.S. Senator Dianne Feinstein concluded her praise for her long time friend with a surprise announcement. She said she had to keep a lot of secrets as the chairwoman of the Intelligence Committee, but she added, she was going to share one secret. At 7:30 pm tonight, she went on, the president is going to come on television to announce Osama Bin Laden had been killed.

There were gasps from the audience, and after another sentence or two from the senator, applause. About 200 people attended the event including a number of state and local officials such as Former Governor Gray Davis and state Controller John Chiang.

Her announcement actually occurred a little after 7:30 pm by my watch, but the president would not get to make his speech for another hour or so.

I
suppose I shouldn’t be surprised at the Economist Magazine’s series of articles this
week upbraiding California and the initiative process. You can look back over
the years and find the Economist’s disdain for Proposition 13. What is
surprising is how unbalanced the articles are. Hardly any supporters of the
initiative process were given a chance to speak and some of the outlandish
comments against the process were left unchallenged.

Here’s a
prime example: The article quoted former Assembly Speaker Karen Bass saying,
"any billionaire can change the state constitution. All he has to do is spend
money and lie to people." In elections just the past few years, ultra-rich
individuals T. Boone Pickens (Prop 10, Alternative Fuels, 2008) and Stephen
Bing (Prop 87, oil severance tax, 2006) and free spending companies PG&E
(Prop 16, two-thirds vote for public energy provider, 2010) and Mercury
Insurance (Prop 17, discount auto insurance, 2010) all failed to change the law
with their money. Yet, not a word to counter the inaccurate picture Bass paints
in that article.