State budget alert: Where do we go from here?
Analysis from CSBA’s Governmental Relations Department
Published: March 30, 2011
Weeks of back-and-forth negotiations between Gov. Jerry Brown and five Senate Republicans, and later with Senate Republican Leader Bob Dutton, R-Inland Empire, ended with a thud yesterday.
Discussions revolved around how to get the necessary two Republican votes in each house of the state Legislature to put the question of temporary tax extensions before voters. Those talks broke down last week, only to pick up later in the week when Sen. Dutton began meeting on behalf of potential Republican votes. That stoked some momentary optimism that a deal could be made, but ultimately the governor and legislative leaders could not reach agreement on a 53-item list of Republican demands—including not counting new corporate tax breaks and a reduction of the proposed tax extensions from five years, under Brown’s plan, to 18 months under one Republican scenario.
The breakdown in talks unleashed a flurry of press statements from the governor and legislators.
“Each and every Republican legislator I’ve spoken to believes that voters should not have this right to vote unless I agree to an ever changing list of collateral demands,” Brown said. “Let me be clear: I support pension reform, regulatory reform and a spending cap and offered specific and detailed proposals for each of these during our discussions. While we made significant progress on these reform issues, the Republicans continued to insist on including demands that would materially undermine any semblance of a balanced budget. In fact, they sought to worsen the state's problem by creating a $4 billion hole in the budget.”
“The people deserve the right to vote on issues such as reforming the unsustainable public employee pension system and placing constitutional restraints on state spending growth, in addition to taxes,” Sen. Dutton said in his press release. “While compromise is needed to avoid an all-cuts budget, it involves more than the Republicans going along with the first, last and only solution of higher taxes offered by the Majority Party during this budget debate.”
$11.2 billion down, $15.4 billion to go
Last week the governor signed bills addressing $11.2 billion of the state's $26.6 billion deficit that included deep cuts to health, welfare and higher education, as well as internal borrowing and taking money from voter-created programs for mental health and child development. An additional $15.4 billion still must be cut in order to bring state resources in line with expenditures.
This begs the question as what options the governor and Legislature have to close the remaining gap. There are two main issues:
revenues: Are the tax extensions still on the table, and can this be accomplished without bipartisan support? Would the governor and Democrats try to peel off the four Republican votes for a tax extension that would be approved with a two-thirds vote of the Legislature only and not be decided by voters? Could they also extend some taxes with a simple majority vote, even though the amount raised would be far less and still require deeper cuts?
a cuts-only budget: Is California looking at another $15.4 billion in cuts? This would have a significant impact on schools. For starters, the Proposition 98 guarantee would drop by $2 billion, or about $350 per student without the governor’s proposed revenues. Many believe, however, that the actual cuts would be deeper. The Legislative Analyst’s Office has prepared a scenario under which the K-12 cut would be $4.8 billion—about $800 per student.
Presumably, the governor is meeting with Senate Leader Darrell Steinberg, D-Sacramento, and Assembly Speaker John Pérez, D-Los Angeles, to discuss next steps. CSBA’s Governmental Relations Department will provide further updates as potential plans emerge.