Doubling Down on Budget Reform
There is no longer any doubt about one thing in California politics: Gov. Schwarzenegger is willing to die on the cross of budget reform.
My conversations with people inside and outside the administration, and a review of news leaks in advance of his revised budget proposal this afternoon, make it clear that he is doubling down on budget reform. For a man with a reputation for twisting with political winds, he is doing the opposite here. He is so determined to pursue his budget reform (a spending-side proposal based on a rainy day fund and more power for governors to make mid-year cuts) that he is risking what’s left of his governorship.
One piece of the approach is undeniably smart. As the Sacramento Bee reports, he’s pulled back from his proposal for including education in his cuts and is proposing to meet the Prop 98 minimum on education. Schwarzenegger’s cuts might have been more fiscally responsible–but they were politically poisonous to his project of budget reform. By dropping the unpopular education cuts, he is making a strategic move that shows the depth of his commitment to budget reform — or bust.
It’s déjà vu all over again
To paraphrase Yogi Berra, "It’s déjà vu all over again". It was just a little over four years ago, in March 2004, that the legislature placed on the ballot and the voters approved Propositions 57 and 58. Proposition 57 authorized $15 billion in bond financing for the deficit at that time and Proposition 58 was supposed to end deficit spending "forever".
But here we are today, again faced with a budget deficit of at least $15 billion. Many in the legislature during the budget debate two years ago warned that the housing market was going to bust, the economy was going to slow, and that state revenues were going to drop. In fact, clearly prescient predictions of $15-20 billion deficits were made, but little attention was paid to the warnings. This year’s budget deficit should not have been a surprise to anyone.
We have a Tax and Spending Problem
"We don’t have a tax problem , we have a spending problem!" We in California have heard this sold brilliantly from our Governor and economic and business leaders for 4 years. It makes a great "sound byte", but hoping those visiting Fox & Hounds have slightly more depth than viewers of Fox or CNN,
I would like to say that this is both wrong and wildly simplistic.
We have BOTH a tax and a spending problem. We rely on tax revenues that fluctuate and are unfair to the middle class. Yeah, remember the middle class, the largest group of working Americans neither dems or repubs seem to champion?
We offer some truly unfair tax breaks, like the yacht tax credit — other than Senator Dick Ackerman and a few hundred yacht owners, who cares! We don’t put enough revenue aside each year in our "rainy day fund", so on a big declining revenue year like now, we are royally screwed.
Can the Democrats Achieve a Veto-proof Senate or Assembly in November?
Nothing gives the state legislature’s Democratic leadership — and the Republican governor — more headaches than the constitutional requirement for a two-thirds vote to pass a state budget or any tax increases.
To achieve a two-thirds vote requires the unanimous support of the Democratic members of both houses plus two additional Republican votes on the senate side and six additional Republican votes on the assembly side.
The budget battle in the state Senate last year so infuriated Senate Pro Tem Don Perata that he spent over $1 million to qualify and fund a June 3rd recall campaign against Republican Senator Jeff Denham.
But, for whatever reason, Perata abruptly announced last week that he is abandoning any further funding of that effort, making it highly unlikely that the Denham recall will be successful.
Time for California Government to Ride into the Sunset
With the preliminaries now over, the annual California Budget Goat Rodeo will kick-off this week with the unveiling of the fabled and eagerly awaited Governor’s May Revise. I don’t know about you but I’m as nervous as a long-tailed cat in a room full of rocking chairs in anticipation of what the new deficit number will be. $10 billion? $15 billion? $20 billion?
We will soon hear the cries against cuts to programs grow louder from one side of the Building and the line in the sand statements of "no new taxes" from the other side.
But the one thing you probably won’t hear is "how about eliminating some programs?" That is a concept that seems to be foreign to the Legislature.
I don’t mean indiscriminately taking the budget ax to a particular program or agency, but review the program to see if it is still effective and necessary. You can’t tell me there are not things we are currently funding that don’t need close scrutiny and could be eliminated.
Enter the Sunset Commission.
Study: California Recession More Severe than Rest of U.S.
California will suffer a more severe recession than the rest of the U.S. economy according to a report issued by the Milken Institute. The report, The Economic Outlook for the United States and California, Slow Growth or Recession?, by Ross DeVol, director of regional economics at the Milken Institute with assistance from Armen Bedroussian, summed up its analysis this way: "If the U.S economy has the sniffles, California’s economy has a full-blown cold-with all the associated aches and pains."
However, DeVol points out the recession will be mild by historical standards.
The report says California’s economy will be hit harder by the housing market correction, depressed consumer spending, and slowing imports. Also, California’s economy, especially in the L.A. area still feels the effects of the Hollywood writers’ strike. The report claims that California will face a net job loss in 2008 with the unemployment rating hitting 6.6 percent in the fourth quarter.