In Search of Budget Dénouement

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If ever a process was in need of someone who, as Kenny Rogers would sing, would "know when to hold 'em, know when to fold 'em," it's probably the 2011 budget saga. Even so, it looks like we're going to have to keep waiting.

"We'll know the deadline when we've passed it," said Governor Jerry Brown this afternoon.

Brown was (shockingly!) mobbed by reporters after wishing a rainy crowd well on the Capitol steps who had gathered to celebrate Ag Day, and offered a fairly daunting assessment of budget talks -- in a way that only he could.

""Whichever way I look, I see bears in the forest," said the governor.

(At the risk of taking the metaphor too far, the Guv may want to consult the many websites that offer advice for those facing a menacing bear. "Even if the bear bites you, continue to play dead," says one. Make out of that what you will.)

Brown was careful to neither confirm nor deny Tuesday's widespread chatter that he's now thinking of going around legislative Republicans in his quest for a 2011 statewide election on $11 billion in additional tax revenues to balance the budget. The conventional wisdom, until yesterday, was that the governor could throw a Hail Mary by placing the matter before voters in June via a majority legislative vote. Now, it appears he's at least pondered something even more unusual: the idea of having supporters circulate an initiative on the taxes for a November election.

As tempting as that storyline may be, it's fraught with pitfalls, according to a few smart politicos who I've spoken to on background the past couple of days. For starters, Brown would need his allies to pony up big bucks for a super-fast circulation of an initiative that doesn't even (publicly, at least) exist.

Then, assuming someone on the left-of-center side of the political spectrum would finance that (a big assumption, say insiders) there's the matter of how to then craft the 2011-12 state budget due on July 1. Could it include a revenue estimated predicated on November taxes, or would Wall Street lenders laugh state officials out the door? (See below.) Would it require an 'all cuts' budget which the voters would be told could be rolled back if the taxes pass? That seems a bitter pill to swallow for Dems in the Legislature. And would the taxes even pass, given they would now definitively be a tax increase as opposed to Brown's proposed extension of taxes set to expire in statute on June 30?

Those are huge leaps of faith, and the governor likely knows it. But today, he artfully dodged an acceptance or rejection of any path forward. "There's no final decision," Brown told reporters as he hustled up the Capitol's west steps. "You can take that to the bank."

That being said, the one musing the governor did seem to quash today is one being talked about in a lot of circles: ditching the election and trying to just find four GOP votes -- two in each house -- for the actual taxes themselves. Some Dems lament that all of this may be for naught, given the polling that suggests voters may nix the revenue plan.

When I asked him about it, the Guv seemed to summarily dismiss the idea. "I know there are some people holding that out," he said. "It's a non-starter. 'A,' I promised to go to the people. And 'B,' the Republicans have told me that there's no way they're going to do that."

And so we wait for the dénouement of these budget talks, as elections officials wring their hands about timing, legislators carry out the more mundane parts of their weekly duties, and those of us in the press remain camped out in front of the governor's door, searching for some hint of what's to come.

Addendum: The state's top investment folks say that the only way a November election would fly on Wall Street is if it comes on the heels of an enacted budget with some $26 billion in cuts. Tom Dresslar of the state treasurer's office says there would be almost no way the state's cash flow loans could be sold with a budget "balanced" on the presumption of November voter-approved revenues. Dresslar points out that such a precariously balanced budget would also delay as much as $6 billion of infrastructure bonds planned for sale in the fall -- thus actually putting some projects in jeopardy of shutting down. So the message to the folks in the Capitol: if it's going to be a November election, assume you're passing an "all cuts" budget.

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About John Myers

John Myers is senior editor of KQED's new multimedia California Politics & Government Desk.  He has covered California politics for most of the past two decades -- serving previously as Sacramento bureau chief for KQED News and, most recently, as political editor for KXTV News10 (ABC) in Sacramento. He moderated the only gubernatorial debate of 2014, and was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.
  • Mark

    I like Jerry Brown and even voted for him. But I don’t think he has (or is able to given his network of support) faced the big issues that California needs to succeed. We are the 6th highest per capita taxed state in the country but desperately need a huge amount of additional revenues to balance the budget. The only way to force reform through this legislature is to make them live within our means. I voted for Jerry because I thought he would do that. The best thing for California and Brown is to refuse him the taxes he seeks. What happened to pension reform? Prison reform? Does anyone think any real reform will happen if the taxes are passed?

  • hello

    @Mark: The reforms (transferring responsibilities to the counties) will happen whether the taxes are extended or not. The Realignment has been voted on and has passed. The only outstanding question now is whether the counties will be given the money (tax extensions) with which to keep cops on the street, firefighters fighting fires and teachers in schools. The counties are taking over–funds or no funds. The only question now is: when you pick up the phone and dial 911 will anyone answer?

  • Mark

    @hello, I guess you can choose your definition of the “reforms” but they are not the holistic ones I was talking about. I know that California taxes are 6th in the nation per capita, that public workers can retire after 30 years (at age 50 or 55) with 80%-120% of their salaries escalated for inflation for their lives, that our cost per inmate is the highest in the country, that we have 1/3 of the nation’s welfare recipients, onerous business regulations, the worst business climate in the nation (according to a number of surveys–would you start a manufacturing business in CA?) and 12.5% unemployment. California will continue to become poorer unless it changes the way it works and starts to welcome and reward private enterprise. Raising taxes and moving some money around in the budget (and calling them cuts) is not really the answer to our problems. (And maybe if we actually attempted real reforms we could spare some of the cuts on the least fortunate.) I heard one legislator in the last week bemoaning the fact that they expected a $125 billion general fund by this year and can’t believe it will only be $85 billion.

    As Brown said when he was elected there is a lot of skepticism about CA government. He says he is old enough to do the right thing but so far to me it doesn’t look like he is tackling any of the hard issues that affect his base. He says he may tackle them later but if the taxes are passed, I suspect there will be no reform of the CA government which actually causes it to spend significantly less and actually lower taxes towards the US median.

  • hello

    @Mark–Well, you can’t cut $14B out of a budget without real cuts. And real cuts have been made. The structure for shifting responsibilities for providing services to the counties is in place and is awaiting Brown’s signature. The only issue that’s outstanding is whether Californians will be willing to pay $260 on average (that’s the price of two nice dining room chairs) per tax-payer per year to keep teachers teaching, prisoners behind bars, cops on the streets, and fire-fighters fighting fires. I don’t know what you’re on about with the pensions. I know the police can retire at 50 but hey, if you want a 70-year old answering that 911-call, you will be able to get that next year. And California (if you take all the states’ taxes into account) is actually in the middle in terms of taxation. Our income taxes are higher but our property taxes are way lower and there is a lot we don’t tax.

  • Mark

    @ hello, I know we not going to agree here but some of your facts are just not correct. About taxes, CA is 7th in per capita state and local taxes amongst the states($ rising 47% per capita from 2002-2008), not the middle. We have close to the highest income taxes, the highest sales tax rate in the nation and 14th per capita property tax (the rate is not important and fluctuates wildly in the states based upon the assessed value but our property taxes per person were 14th in 2008.) So my fundamental problem is with taxes high what is being done to change the government system so it encourages business formation and becomes more efficient. How come our taxes have to go up when we pay way more than average and don’t get better services than any other state. Nothing fundamental is being changed. The legislature will be there to restore every cut and more if revenues grow in the future. As for the police pensions the formula was corruptly and retroactively changed by Davis and the legislature first for the prison guards in 1999 then other safety workers to move the retirement age down to 50 while the percent per year of service went from 2 to 3%. That’s w/o all the spiking that also goes on. No one in the private sector gets a pension like that. A very generous formula is 1.5% at 60 years. Yes, I agree, police and fire are very important to society and should be allowed to retire earlier than others but 3% at 50, escalated for inflation is scandalous. No one is talking about 70. How about 2% at 55 which is what is was before this past decade. Are we suddenly so rich here in CA now that we can afford retroactive pensions 100% higher than they were (based upon the changes to age and percent per service year)?

  • hello

    RE Taxes: “According to them (the Tax Foundation), as of 2008 (the most recent year analyzed) state and local taxes in the average state came to about 9.7% of the annual state economy.” (http://www.marketwatch.com/story/the-truth-about-california-2010-11-22?pagenumber=2 ) We’re average if you take our tax burden as a whole.

    RE Pensions: Look, Brown proposed having police retire at 55. I personally do not agree with that proposal. It sounds good but I am related to a couple of policemen and I think that as the bad guys get worse, it becomes more important to have young men on the job. The other day this relative of mine had to chase an armed suspect down a very long street. And not just run down the street; he had to climb fences, in and out of people’s houses–the works. To tell the truth I am not entirely comfortable with a 50-year old doing that. Now yes, I know Jerry is quite fit so maybe he could do it. But most people at 55 can’t. That’s just the bottom line. As for the rest of the argument–you’re right in that public employee pensions offer more protection after retirement because of the deferred compensation package that had been negotiated. And you’re right in that most provate firms don’t offer a deferred compensation package. However, because they have to compete with the public sector they are forced to offer higher wage jobs (i.e., higher pay) up front. Without the public employees everyone would see lowered wages (IMO). Having said that, I do agree that firefighters and police make too much. You will never convince me that it is more dangerous to patrol Oakland than Iraq–and our police make way more than our soldiers over there.

  • hello

    PS: Regarding police… I am given to understand that a cop on the beat needs to phone in when he/she is going to use the rest room. That makes sense–the dispatcher needs to know who is available. Trouble is, that as we age a lot of us need tp use the rest room more frequently–hence the policeman’s availability while he/she is on duty decreases as they age.

  • Mark

    I’m looking at taxes per capita with CA at $5085 in ’08 which is 7th highest. I guess we are both right using different denominators. As for police and fire, I’m all for them but the present pension system is outrageous, they and the elected leaders who allowed them should be ashamed. That has to be changed.

    Thanks for the dialogue.