The governor’s call for a special session of the legislature to deal with the budget problem served as a perfect backdrop for the budget panel at the Milken Institute’s annual state of the state conference yesterday in Beverly Hills.
The budget hole the governor and legislature have to deal with may get bigger if state Treasurer Bill Lockyer has his way. As reported on Fox and Hounds Daily yesterday, Lockyer said at the conference he would join Senator Dianne Feinstein to oppose the piece of the recently signed budget deal to securitize the lottery. That provision is supposed to provide $5-billion for the state coffers but must be approved by the voters in a special election that the governor will call next year. If it is defeated at the polls, the budget hole will be that much deeper.
The panel, moderated by Los Angeles Times columnist George Skelton, consisted of Republican Senate Leader Dave Cogdill, former White House Chief of Staff Leon Panetta, Senior Advisor to the Governor David Crane, newly appointed Legislative Analyst Mac Taylor, as well as Treasurer Lockyer.
Panetta, who is a leader of the California Forward project to reform the budget process, argued that the fundamental problem with fixing the budget was lack of leadership to make tough decisions. Panetta said that the way to reach a budget deal was to rebuild trust among the leaders. He recommended a two-year budget, providing a revenue source for any new spending programs, and budgetary performance standards. He predicted if reforms don’t come, voters will take matters into their own hands, like they did with the recall.
Crane said California had two budget problems. Besides the state budget he warned about concern for pension funds for state workers. Crane argued the pension funds system was a “moat” circling and protecting the taxpayers against future general funds having to meet these obligations. But with unrealistic benefit demands owed retiring public employees and the falling stock market the taxpayer protection is drying up.
The two-thirds vote to pass a budget was part of the discussion. Lockyer recommended ending it. Panetta said removing the two-thirds vote on the budget will do little good without removing the two-thirds vote on taxes as well. However, he also suggested as a compromise returning to the budget approval method that used to be in place in California: a majority vote on the budget up to a 5% increase and a two-thirds vote for a greater than 5% budget increase. I have blogged on this “Back to the Future” idea before.
Senator Cogdill would have nothing to do with tax increase proposals. He said California was one of the few places in the country where you heard calls for tax increases during these difficult economic times. He argued the budget fix was to grow the economy and analyze how the state spends its money to look for savings. He also supported selling excess state land, creating a hard spending cap and a tough rainy day fund.
Speaking of rainy day funds, Legislative Analyst Taylor praised the legislature and governor for creating a reserve fund in the recent budget negotiations and said he thought it would make a difference to help with future shortfalls.
Plenty of ideas flowed from the panel but there appeared little consensus on how to face the problem.
Lockyer suggested an idea that he thought all could agree with – getting money owed California from Washington. The treasurer said MediCal reimbursements owed California $9 billion and that California gets only 78-cents back for every dollar it sends Washington, down from 98-cents during the Clinton years.
He’s probably right that Republicans and Democrats in the legislature will agree with this idea – but Republicans and Democrats in the Congress probably won’t.