"The Budget Debate Is Over. Long Live The Budget Debate!"
A California version of the rally cry of the perpetual monarchy seems appropriate, as the constitutional clock on the extra special fiscal Armageddon emergency session has expired... and yet here we are still at it. Why? Because the ratified solutions, at this point, only amount to about 10% of the looming deficit.
The package of bills that was on deck in the Legislature earlier this week was scored as amounting to $5 billion in deficit fixes. But only about $3 billion of that cleared the Senate, and after a messy debate in the Assembly, only about $2 billion in solutions were actually sent downstairs to Governor Schwarzenegger's desk.
An examination of the agreed upon solutions finds almost half of all dollar savings attributed to two iffy proposals: $811 million in reduced spending by the federal court-appointed prison health care receiver and $182 million from Schwarzenegger commuting the prison sentences of undocumented felons. On Tuesday, that last proposal was officially, and substantially, downsized. And there's not been much success in the past few years of wringing savings out of the prison health care morass.
Bottom line: that 10% fix is already less than 10%.The biggest dollar savings still in limbo is the mind numbingly confusing "gas tax swap," a reworking of taxes collected on every gallon of gas that reportedly would close about $1.15 billion of the current budget gap. The proposal, which is also being sold as lowering gas taxes for consumers in the short run by a few pennies, faces a lot of challenges. Democrats don't like the governor's version; the Senate is trying to rework their counterproposal even though said proposal has already passed the Assembly; education leaders today expressed skepticism that Dems can find a version that doesn't lower guaranteed tax dollars for schools; and anti-tax crusaders are suggesting the whole thing might be illegal.
Also not quite cooked: a plan to enforce the state's tax laws on internet sales, dubbed by Capitol denizens as the Amazon Tax. Aides to the governor say Schwarzenegger vetoed virtually the same plan last year, and sources say there's now an effort underway to find some sort of middle ground, specifically centered on raising the income threshold for small online entrepreneurs who would be subject to tax collection.
If that wasn't enough unfinished business from the extra special fiscal Armageddon emergency session (okay, actually just the fiscal emergency proclaimed by the governor), there also remains a healthy fight over suspending corporate tax credits that were contained in last year's budget deal.For his part, the governor has spent the week avoiding the legislative back-and-forth, with a visit to the White House to talk about California's plight. That chat with POTUS 44 may not have produced any immediate help, but Schwarzenegger's advisers are touting news last week that the feds are handing out additional Medicare dollars, with California's share totaling about $675 million. The governor's office says this is much more than they calculated in their federal budget fix proposal, though a lot of the other expected dollars are still just that -- expectations.
(A sidenote to the Arnold DC tour: it's worth pointing out that the governor is again rejecting any suggestion that what California really needs is a Stimulus Part II. "I don't think that we need another stimulus," said the Guv on ABC's This Week, "as much as what we need is just to do what we have been talking about over the last two years, and that is rebuild America, because that will create jobs.")
And perhaps the biggest undercurrent in Sacramento right now is the lack of urgency compared to last year. That was certainly one of the elephants in the room this afternoon during another discussion in the Assembly Budget Committee, as Treasurer Bill Lockyer confirmed that his staff has postponed a planned sale of $2.5 billion in general obligation bonds, due to inaction by legislators on a bill to help guide the flow of cash during some lean months this spring.
So why the slow action? Part of the answer may be the fact that this year's hole isn't as deep. But part of it may also be this ever-so-slightly growing perception that springtime blossoms will come in the form of unexpected tax revenues. That perception is linked, in part, to news that year-to-date revenues are almost $1.3 billion ahead of expectations.
Such optimism, added to the fact that until April rolls around no one really knows what money is on hand, may mean that this part of Budgetpalooza isn't going to end anytime soon.