And In Other Capitol News...

July 31, 2008 · Filed Under CA Budget · Comments Off 

You mean there was other news today besides the governor's executive order on state employee pay?

* DON'T BORROW IT HERE: Chalk up another group that's ratcheting up the anger over possible plans to balance the budget by tapping into pots of money for other government programs. The League of California Cities launched a new website today to pressure legislators to leave local goverment funding alone. The site includes a way for users to see how much was borrowed from their own cities in recent years.

* GARAMENDI ANNOUNCES: The state's #2 elected official threw his hat into the ring today for the top job. Lt. Governor John Garamendi made it official that he's in the race for the 2010 Democratic gubernatorial nomination. But the timing of his news conference... just minutes before Governor Schwarzenegger was convening reporters to announce his state worker executive order, had more than a few Capitol folks wondering whether it was clever counter-programming... or the wrong day/time to try and compete head-to-head with the dominant political story of the day?

* CAMPAIGN CASH: And speaking of campaigning... today was the deadline for candidates and campaigns in the November election to report fundraising totals through the end of June. A few worth noting: money raised in 2008 for ($3.7 million) and against ($2.5 million) the gay marriage ban Proposition 8... the Schwarzenegger-led committee in favor of the redistricting initiative, Proposition 11 ($4.8 million this year)... and the governor's own political activity campaign, the California Dream Team, reported $5.2 million in contributions since January 1.

Guv's Pay Decision: Who, How, Ever?

July 31, 2008 · Filed Under CA Budget, The Governor · Comments Off 

Governor Schwarzenegger's signing of an executive order to delay full paychecks for tens of thousands of state workers, and to layoff temporary workers is now... old news. But there's more to the story.

To wit...

* ARNOLD VS. JOHN: It seems certain that if the governor really wants the minimum wage portion of his order to go into effect at the end of August (barring a -- gasp -- budget deal), he's going to have to take Controller John Chiang to court.

Chiang quickly wrote Schwarzenegger a "no thanks" letter today, making the case that the 2003 court ruling on the issue didn't actually decide that the appropriate pay level for employees in the absence of a budget is minimum wage, but rather found that it has to at least be minimum wage. Others, including attorneys for the Howard Jarvis Taxpayers Association (involved in the original case), seem to believe otherwise.

When asked today whether he'd take Chiang to court to enforce the order, Schwarznegger said this: "I'm here to make sure our state functions. And whatever it takes, I will do."

It's worth nothing that this is Chiang's biggest step into the spotlight since he became controller in 2006. Unlike numerous people who've occupied the office before him, the mild-mannered Chiang is not a publicity hound... making it hard for anyone who might seek to impugn his motives.

* SOME PAID, SOME NOT? Another interesting... and unanswered... part of the issue is whether some state employees can keep getting their full salary if others don't. The governor's top budget adviser, Mike Genest, said today that the executive order's exemption of "critical" employees will be sorted out by the heads of various state agencies within the next 24 hours. It certainly raises questions about whether the minimum-wage-only order would apply to... for example... highway patrol officers, firefighters, or corrections officers.

Controller Chiang says that kind of differering standard isn't supported by the 2003 court ruling. "I either have the authority to only pay minimum wage, or I do not," wrote Chiang in today's letter to the governor.

* BIPARTISAN DISAPPROVAL: It's not just Democrats who are taking aim at the governor's decision. "I understand what the governor is trying to accomplish with this action," said Assemblymember Greg Aghazarian (R-Stockton) in a written statement, "but I must respectfully disagree and urge the governor to reconsider his executive order." Most Republicans shied away from commenting directly on the action, instead focusing on the need to strike a budget deal soon.

* UMMM, NO THANKS: Senate Democrats plan to ask more questions about the governor's executive order in a hearing on Monday chaired by Sen. Dean Florez (D-Shafter). Florez has invited Schwarzenegger to testify; but gubernatorial spokesman Aaron McLear says the governor explained his reasons in today's event with reporters.

* AND ABOUT THAT PESKY BUDGET: Schwarzenegger and Democratic leaders both indicated today that there may be more to say about the budget as soon as next week. Assembly GOP Leader Mike Villines actually predicted a budget vote next week, though also said it could be a proposal Republicans won't be able to support.

Perata Attempts To Squelch Borrowing Buzz

July 30, 2008 · Filed Under CA Budget, People · Comments Off 

BUDGET DAY PLUS 29 -- The hallmark of a good horror movie is that just when everyone thinks they've stabbed, or strangled, or mutilated the monster to death... he rears up again, scaring the bejeebers out of everyone.

In budget terms, Senate President pro Tem Don Perata appears to be trying again to kill the ugly budget beast that is talk of raiding transportation funds.

In an emailed letter from his campaign this afternoon, the Oakland Democrat emphatically stated he is not on board with any plan to take money from the Proposition 42 and Proposition 1A transporation funding guarantees.

"Raiding these funds now would break faith with voters who joined us in supporting the plan to rebuild California," Perata writes. "I can't stop people from floating trial balloons in Sacramento, but I can sure shoot this one down before it gets very far."

This is not the first time Perata has rejected such Capitol budget chatter. And transportation groups are already growling at legislators, through a media campaign, to stay away from their money.

But still the talk persists, with more and more Capitol denizens seemingly braced for some kind of eventual deal that relies on borrowing -- a theory espoused today in a piece by Sacramento Bee columnist Dan Weintraub.

Of course, one could parse the words in Perata's letter and observe that his pledge to not borrow only specifies transportation funding, and not the myriad of other funds approved by voters in recent years. But on previous occasions, the pro tem has condemned talk of all such borrowing schemes... so perhaps he's still referring to the whole concept.

But as the budget impasse drags on, and Governor Schwarzenegger prepares to issue his minimum wage executive order tomorrow, today's promise from a leading Democrat only further confuses those of us watching the process as to how it'll all get resolved.

"I Think The Law Is Very Clear"

July 29, 2008 · Filed Under CA Budget · Comments Off 

It appears that it's full steam ahead for Governor Schwarzenegger's plan to issue an executive order on Thursday holding back all but minimum wage for as many as 200,000 state employees.

But Controller John Chiang, the guy who actually writes the checks, maintains he won't follow the order. Asked about that today (by, ummm, me) the governor said this:

"The controller has his opinion of what he wants to do. He's a constitutional officer and he runs his office his way. I think the law is very clear that he has to follow through and do exactly of what our executive order says."

The Elusive Budget Jackpot, Part II

July 29, 2008 · Filed Under CA Budget, CA Government · Comments Off 

BUDGET DAY PLUS 28 -- For more than a year, the California Lottery has been a tempting, and theoretical, treasure chest for lawmakers in search of a government cash infusion.

But there's no guarantee that the treasure chest actually has treasure in it.

In the second day of our in-depth look at the Californa Lottery on The California Report, we took a look at the most recent plan to use lotto cash -- Governor Schwarzenegger's proposal to ask Wall Street investors for a loan to the state, paid back over time with future lottery revenues.

Hear it here:

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This is actually the second lottery plan from Schwarzenegger, who last year considered leasing the 23-year-old operation to a private vendor in exchange for upfront cash to help fund his (ultimately ill fated) health care reform plan.

There are two main issues to consider about the lottery bond proposal: what will it take to pay off those bonds? And what are the policy and social implications of a major expansion of the California Lottery?

First, the bonds. Although legislators have voiced skepticism about the plan (more on that in a moment), the governor's budget team has continued its discussions with Wall Street bankers about a bond offering of $15 billion for budgetary needs, with $5 billion to be used this year.

But detailed projections from the Department of Finance reveal a much larger borrowing plan, almost $19.8 billion in total bond borrowing. Part of the extra cost is due to the governor's promise to maintain the lottery's current $1.2 billion contribution to public schools, while hundreds of millions of dollars in fees will be handed over for bankers to carry out the transaction.

Also worth noting: the bonds would not be paid back in full for 36 years, a time frame that appears longer than when the proposal was unveiled in May.

As to what it would take to pay off the bonds... lottery director Joan Borucki sent the governor's budget team a memo last month that outlines some of the ways the California Lottery would grow in order to pay back investors. The document, which has not been widely publicized, gives the most revealing look to date of what kind of lottery expansion and change is being contemplated. Some highlights:

* Lottery sales would have to double in the next five years and triple by 2018.
* 18 million Californians would need to be playing lottery games by 2011, which works out to more than six in every 10 adults.
* The instant winner "Scratchers" games would include $10 tickets by 2010 and $20 tickets by 2012, each offering larger grand prizes.
* More games would offer more winners, and more "second chance" ways to win.
* Parimutuel betting, which was mandated by a 1996 court ruling that banned fixed prizes, would end by next year... thus allowing lottery officials to return to publcizing the exact amount of prizes. And overall, the lottery reform plan calls for much, much more marketing.

The revenue projections for a lottery freed of the restrictions contained in the original 1984 initiative are optimistic. Perhaps too optimistic.

"The lingering uncertainty about what's going to happen to the economy over the next few years affects the ability of the lottery to achieve these optimistic sales growth assumptions," says Jason Dickerson of the Legislative Analyst's Office.

Economic issues aside, let's not forget that gamblers already have a of options in the Golden State, from card rooms to horse tracks to more than 50 Indian casinos. "There's a fierce competition for the entertainment dollar here," says lottery director Borucki.

Even if the assumptions do pan out, there have been concerns raised about the social effects of more people placing more money, and hope, on winning it big. "Lower income individuals spend a disproportionately high percentage of their income compared to higher income individuals on the lottery," says LAO researcher Dickerson.

And if that isn't enough, let's not forget the political hurdles to getting these lottery changes approved. The education community has been concerned, if not officially opposed, to almost every lottery reform plan over the years. While the gambling enterprise brings in less than 2% of education funding, it's been relatively reliable. And perhaps even more telling: lottery cash, unlike most all other education funding, comes without strings attached by Sacramento lawmakers. And according to data provided by the state Department of Education, almost 65% of the lottery money sent to the schools goes to educator salaries.

Word around the Capitol is that squeezing more cash out of the California Lottery is unlikely to be part of this year's plan to bridge the $15 budget gap... but that legislators could consider such a plan for future cash needs.

Of course, any changes must be approved by voters; and in a few short weeks, the last chance to get a lottery proposal on the ballot before June 2010 will have passed by.

No Pay Cut... For Now

July 28, 2008 · Filed Under CA Budget · Comments Off 

BUDGET DAY PLUS 27 -- Late word that Governor Schwarzenegger will not sign an executive order today to slash the pay of state workers down to minimum wage, but now intends to do so by week's end.

"Thursday marks the first day of the state pay period," said spokesman Aaron McLear in an emailed statement, "and Governor Schwarzenegger will use his executive authority on Thursday to prevent a cash crisis."

The governor has indicated his intention to suspend most of the pay for state workers until a budget is enacted is driven by estimates from Controller John Chiang that state government will run out of cash by late September without an August budget deal.

Chiang, however, remains adamant that he'll refuse to follow such an executive order, no doubt leading to a legal challenge over the constitutional obligations of both the controller and the governor. But that's a legal challenge that will wait... for now.

The Elusive Budget Jackpot, Part I

July 28, 2008 · Filed Under CA Budget, CA Government · Comments Off 

BUDGET DAY PLUS 27 -- With this year's budget negotiations continually coming back to some scheme, any scheme it seems, to extract money from the California Lottery, some context seems to be in order.

On this morning's edition of The California Report, we begin a two day examination of the Golden State's 23-year-old lottery... created by voter initiative and sold as a great way to help fund public education. But the lottery has never proved to be the goose that laid the golden egg for the schools; while last year it sent some $1.3 billion dollars to K-12 and higher education, that's pennies on the dollar for what it takes to educate California's kids.

In the meantime, the lottery has had dramatic turnover in leadership, has struggled to market itself, and over the past year has been called everything short of a failure by elected officials -- most notably, Governor Schwarzenegger.

Trouble is, almost every expert agrees that the lottery's real problems stem from the initiative approved by voters in 1984... an initiative that created the most regimented, and restrictive, revenue distribution system of any lottery in the nation.

The initiative mandates that 34% of all revenues must go to education. That guarantee sounds good, until you consider that it automatically also caps how much money can go back into prizes and jackpots. "The more that goes to prizes, the more that people buy lottery tickets," says Jason Dickerson of the Legislative Analyst's Office.

And therefore, the more money that would actually end up flowing into the schools.

"If all of the restrictions were gone today," says lottery director Joan Borucki, "in ten years from today I would [be able to] more than double the amount going to the good cause."

Other restrictions hindering the lottery's operations include legal rulings that have decreed new technology and guaranteed prize amounts for some games to be off limits; both limitations rarely -- if at all -- exist with any other lottery in the United States.

The governor's attempt to hike the lottery's profits, either through leasing to a private entity or this year's push to borrow against future lottery revenues, requires these restrictions to be lifted. And analysts have concluded that means going back to the voters.

“It's an asset that is underperforming," said Schwarzenegger at the news conference unveiling his revised budget in May. "And I think that as governor, or I think the legislators also, we have a responsibility to make sure that government performs at 100 percent.”

But those kinds of changes are frought with pitfalls, both political hurdles and larger, societal questions about government's role in encouraging more and more legalized gambling. Those issues are examined in tomorrow morning's report.

Audio from today's broadcast can be heard below.

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July 25, 2008 · Filed Under Uncategorized · Comments Off 

Look for updates on the budget impasse and more again next week. I'm out of the state visiting family for the weekend. Apologies, too, for the missing podcast this week...

Guv Ups the Budget Ante?

July 23, 2008 · Filed Under CA Budget, The Governor · Comments Off 

BUDGET DAY PLUS 22 -- If there was ever any doubt that Sacramento is a "company town," then all you needed to hear was the collective Munch-like scream this afternoon after news broke that Governor Schwarzenegger is considering an executive order to slash most state employees pay during the budget impasse to minimum wage.

And not the California minimum wage ($8 an hour)... the federal minimum wage ($6.55 an hour).

"We're angry," said Yvonne Walker, president of SEIU Local 1000, the union that represents a large number of state employees. Walker said both the governor and lawmakers need to get to work, and that Schwarzenegger shouldn't be picking on rank and file workers.

The governor's communications director, Matt David, confirmed by email that the idea is being considered "to make sure we have sufficient cash to cover our costs."

But the person who first issued the warning that the state could run out of cash in a couple of months if a budget deal doesn't come together next week, Controller John Chiang, took aim at the governor's proposal in a written statement:

"I have made it crystal clear that we have, and will continue to have, sufficient cash to make all payments, including state payroll, through September. Cutting workers' salaries will do nothing meaningful to improve our cash position or help us make our priority payments. This is a cynical attempt by a governor who has spent the past few weeks going up and down the state criticizing others for political posturing."

SEIU's Walker said union lawyers are examining whether Schwarzenegger would be inching out on a legal limb by taking such action, which would presumably be predicated on the California Supreme Court ruling that indicates all regular work hours in a budget impasse are only guaranteed to be paid at minimum wage.

Whether or not the governor's idea is real or a head fake, it nonetheless has reinvigorated the chattering class over the state of budget negotiations. Schwarzenegger sat down in several different private meetings with legislative leaders today.

And once again, it seems as though the ball is in their court.

Voters: Pols Not Up to the Task?

July 23, 2008 · Filed Under CA Budget, CA Politics · Comments Off 

BUDGET DAY PLUS 22 -- The old joke, in various forms, is that if a politician wants a friend, he or she should get a dog. That's good advice for state legislators and Governor Schwarzenegger if today's Field Poll is any indication.

Californians remain grumpy, as they have been for months, about the direction of the state and of the job performance of their elected officials. And the new survey is more of the same: even lower approval ratings for the guv (40%) and the Legislature (27%).

The budget standoff seems to be exacerbating things; not only do 68% of those surveyed think the $15.2 billion shortfall is "very serious," but 41% say they don't have much confidence in Schwarzenegger's ability to resolve it and 52% say the same thing about the 120 members of the Legislature.

No word on the opinions voiced by the dogs...

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