Budget +1: Lay of the Land

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Folks around the Capitol look well-rested this morning -- a somewhat superficial but nonetheless notable observation on this first day that California's state government operates without a legal spending plan in place.

It's such a common occurrence that perhaps the real news would be if the budget was a done deal.

Nonetheless, it's worth taking stock of where things stand as the fiscal fight heads into OT for the 18th time in the last 22 years.

Perhaps the best news as the impasse officially begins is that there are apparently now only two, not three, budget proposals in play. Democrats in the Assembly and Senate say they've joined forces after several weeks of presenting proposals that both spend and tax in different amounts (though both at a rate higher than the May proposal from Governor Schwarzenegger).

So what's in the plan? We only know some of the broad brushstrokes, which were confirmed yesterday by Democratic staffers speaking on background. The 'soft launch' of the Dem budget seems designed to both staunch the flow of 'Democrats Fighting' stories that have trickled around the news world of late, while also being just vague enough to prevent various interest groups from (for now) knocking down its less pleasant provisions.

No doubt the biggest detail confirmed -- financially and politically -- is that Senate Democrats have agreed to a higher funding level for K-12 education and community colleges than they'd originally backed... the $54 billion dollar projection advocated by Dems in the lower house. The state's most politically powerful education group, the California Teachers Association, has been beating up on Senate President pro Tem Darrell Steinberg lately; but the Democratic schools proposal would still need the blessing of Schwarzenegger. And it's a whopping $5.1 billion above what he proposed in May.

On taxes, Democrats are including new revenues in their plan by choosing to focus on a long-debated oil severance tax and the scrapping of soon-to-kick-in corporate tax breaks; those two together, say Dem staffers, amount to about $3 billion in this new fiscal year. Setting aside the expected fight with legislative Republicans, Democrats continue to believe these two revenue proposals are their best bet in negotiations with the Guv. Though he's given zero indication he'll move off of his opposition to a tax hike, the oil severance tax was briefly backed by Schwarzenegger in 2008; the cancellation of corporate tax breaks is listed as a possible budget fix in the governor's January budget should federal funds come up short.

And then there's budget borrowing. Democrats appear to be looking at a number around $4 billion to pencil in for some kind of "one time" solutions, which could include more fund shifts, loans, etc. There aren't any real details being offered, other than an acknowledgement by Assembly Democrats that their much debated beverage recycling fund securitization -- a singular $9 billion cash advance from Wall Street repaid over 20 years -- is no longer part of the plan to resolve this fiscal year's general fund deficit. Staffers reject any notion that the proposal is dead, instead saying they hope some smaller and modified version could still help fund job creation programs and repay long-term debts to local government.

And the budget cuts? "Not pretty," remarked one of the Democratic staffers who confirmed other outlines of the party's plan. No details were provided, but given the many cuts bandied about over the last few months, few will be surprising. Also not surprising: the fact that Democrats are adamant that they won't enact the governor's plan to eliminate social programs like CalWORKS.

The final point worth noting on Budget +1 is that there are going to be some interesting skirmishes on whether lawmakers should focus their efforts first on estimating revenues... or settling on expenditures. This may not seem like a big deal to outsiders, but deciding which side of the ledger on which to begin is important. Should lawmakers begin with the revenue side, then everyone will be forced to find a way to fit their program priorities into a 'pie' of a pre-determined size. But those who feel the state needs to focus on what it wants, not just what it has, are likely to balk at such an approach. And if that's the case, don't be surprised to see a lot more days fly off the calendar before the budget is signed into law.

Here's my story on the budget deadline from this morning's edition of The California Report:

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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.