LAO: Chances of Getting Arnold's DC Wish List "Almost Non-Existent"

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The Legislature's non-partisan cadre of analysts has weighed in on some of the big assumptions and proposals in Governor Arnold Schwarzenegger's new budget plan. And while many of the ideas are looked upon favorably, one glaring exception is the Guv's plan for a $7 billion fix to the state's budget problem.

"The chance that anywhere near all of the federal funds and flexibility sought by the Governor in his budget package is almost nonexistent," concludes the new report from Legislative Analyst Mac Taylor.

Taylor and his team say they believe there's a good chance that California will get some extra help from the feds to help balance the 2010-11 budget, but not as much as Schwarzenegger has written in to his projection of state revenues.

On the whole, the LAO report agrees with the governor on the size of the state's fiscal mess (though they pegged it at $21 billion in their November assessment). Still, there are some notable red flags that Analyst Taylor and his team are raising about the proposal.

First up: the administration's plan to reduce projected K-14 education funding by $2.2 billion. Taylor notes that there could be other interpretations of the constitutional school funding language -- yes, again, it's a Proposition 98 thing -- that would dispute whether the Schwarzenegger plan is following the law.

Another legal question raised by the new report is the governor's call for government workers to contribute an extra 5% to their pension funds, thus reducing a like amount now paid by the state. "It is quite unclear," says the report, "if the state can unilaterally— without agreements with its employee unions— increase required employee contributions for CalPERS pensions." Answering a reporter's question last week, Schwarzenegger seemed to say he would negotiate with legislators, and not public employee labor unions, on the package of worker savings (total: $1.636 billion).

But the state budget's interaction with federal funding is probably the big headline out of this LAO first glance at the Schwarzenegger spending plan. "The Legislature needs to operate on the assumption that federal government relief will total billions of dollars less than the Governor wants," says the LAO report. In an unrelated event this morning, Schwarzenegger said he will travel to Washington next week.

In fact, the gubernatorial plan includes other federal aid -- money outside the big $7 billion request -- that could prove problematic. For example, the Leg Analyst says, the governor is expecting a reinstatement of estate tax revenues for the state, revenues that have been scooped up by the feds in recent years. But as the LAO points out, Congress appears poised to reclaim those dollars... which would mean $892 million in state revenues counted on by Schwarzenegger would disappear. And, in a nod to last year's protracted saga of a different federal "trigger" of money vs. cuts, the Leg Analyst recommends any plan that enacts cuts in the absence of DC dollars should have very precise legislative intent, making the pulling of said trigger to be as clear, and "ministerial" as possible.

The report also slams Schwarzenegger's proposed constitutional amendment to ensure UC and CSU funding always be larger than that of the prison system. The LAO assessment? "It is a 'feel good,' but ultimately ill–conceived, autopilot budgeting measure that would unwisely tie the budgetary fates of two very different state programs."

But back to the budget... Legislative Analyst Taylor says that legislators must act quickly and enact many of the needed fixes by the end of March. That's because many of the policy changes, especially if the various social services cuts pitched by the Guv are accepted, will take several months to actually implement.

Two and a half months to sort all of this out? Perhaps. But that means an awful lot of concessions from all sides in the budget debate that, for now, aren't being talked about.

Update: Taylor just finished briefing reporters on his assessment of the budget. He said that lawmakers shouldn't assume more than about $3 billion from the feds, and not the governor's $7 billion estimate (actually $8 billion once all proposals are included). And Taylor didn't mince words about Schwarzenegger's higher ed-before-prisons proposed amendment to the state Constitution:

"There's something, also, I particularly don't like about pitting programs areas against each other. I mean, what's next? IHSS versus debt service? Or mental health versus the courts? I mean, that's not what budgets are about. Budgeting is about, every year, looking at your priorities and figuring out what you can spend on each of those."

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About John Myers

John Myers is Sacramento Bureau Chief for KQED Public Radio and "The California Report," heard daily on 23 public radio stations across the Golden State.
  • Stevefromsacto

    Mr. Taylor had an interesting comment about the proposed elimination of IHSS:

    “…the budget does not appear to include additional funding for long–term care costs which are also likely to increase when former IHSS recipients seek out–of–home care. We believe a cut of this magnitude (in IHSS) could result in increased long–term care costs which could exceed the estimated savings in IHSS.”

    It truly amazes me that the governor and his team seemingly do not take into account the consequences–fiscal and otherwise–of their proposals.

  • KWHIP

    Yes those individuals would more likely have to stay in a nursing home or upgrade to a board and care instead. The IHSS program keeps them at home longer.