Same Old, Same Old in Budget Talks

John Wildermuth
Journalist and Political Commentator

“Until there’s a deal, there’s not a deal.”

      -Aaron McLear, spokesman for Gov. Arnold Schwarzenegger

When McLear spoke those words to reporters Tuesday morning, he didn’t realize what a prophet he was.

Two days of untoward optimism fizzled Thursday as the governor admitted that the budget talks, while not broken, are “stalled.” Stalled as in it wasn’t even worth holding a Big Five meeting on Thursday. While it’s likely that everyone will get together today, the governor wasn’t making any promises.

As usual, the governor talked a good fight, promising yet again that a budget deal is just around the corner.

“There’s a will there, in this building, of both parties to get it done,’’ the governor said in a brief news conference Thursday.

There would be a lot more room for optimism, however, if the governor and the legislators weren’t still fighting over many of the same issues that have plagued the negotiations for weeks.

While the Sacramento chatter is that there’s agreement on how much education will be cut, Schwarzenegger and Democratic legislators are fighting over how and when the state will repay the schools the estimated $11 billion that’s being taken from their Prop. 98 funds. And it’s still not clear whether everyone’s on the same page when it comes to making deep cuts in health and welfare programs.

Stop me if you’ve heard this before. Like since the day the May revise went out two months ago.

While everyone, including the governor, agrees that the schools should get their money back, the Democrats want a bill that sets that repayment plan down in stone, guaranteeing that now and forever schools always will get back any money taken by budget cuts.

The governor, on the other hand, says that’s the type of permanent change to the Prop. 98 rules that can only be made by a vote of the people, hence the stalemate.

But the promise to repay $11 billion brings up a simple question: When, exactly, is the state going to have extra cash to write that check to the schools?

When you add the possibility of borrowing/grabbing/taking temporarily another $2 billion from cities and counties, the state could be looking at a pretty hefty bill coming due in upcoming years.

There aren’t many economists suggesting that California’s financial troubles are going to magically disappear anytime soon. And last May, California voters emphatically rejected extending $16 billion in new taxes past the end of next year, which means the state also is going to have to find a way to replace that cash.

But nearly 62 percent of the voters also turned thumbs down on a plan to require the state to repay $9.3 billion to the schools, and that vote doesn’t seem to concern anyone.

Schwarzenegger’s own budget plan calls for about $8 billion in borrowing and other gimmicks that may close the 2009-10 budget gap, but really don’t solve the long-term financial problem.

Boosting the withholding tax on personal income, for example, brings in more cash right now, but it just has to be paid back next year, in the form of income tax refunds. And while, as Democrats have suggested, the state could save $1 billion in this year’s budget by moving the June 30, 2010, state payday one day into the next fiscal year, it would have to be done every year afterwards if the state doesn’t want to find themselves facing 13 monthly paydays some budget year.

What no one’s saying out loud, though, is that by pushing financial obligations down the road, there’s always the chance that the economy will improve, tax dollars will start pouring in and the good times will roll once again.

Of course, plenty of people will argue that that type of bet is more suited to Las Vegas than Sacramento. But when a budget finally does make its way to the governor’s desk, it will be interesting to see how much of the budget gap is filled, not with cash, but with an optimistic nod toward a more hopeful future.

John Wildermuth is a longtime writer on California politics.

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