On this week's Capital Notes Podcast, we take a look at this week's prediction of a $20.7 billion budget gap and what that means for lawmakers once they return to Sacramento.

Capitol Weekly's Anthony York and I also discuss the staffing changes inside the governor's office, and what it might mean for Arnold Schwarzenegger's last year in office.

But deeper inside the new in-depth analysis of the Legislative Analyst's Office are examples of a government budget system that's evaporating faster than the polar icecaps.

Legislative Analyst Mac Taylor and his crack fiscal staff have set the marker for the next great deficit debate at $20.7 billion -- $6.3 billion in the current fiscal year and another $14.4 billion gap in the year beginning next July 1.

And Taylor, who's quickly gaining a reputation for telling the ugly truth to power, makes it clear that the current problem really lies at the feet of 120 legislators and Governor Arnold Schwarzenegger. "The vast majority" of the current year problem, says his new summary, "can be attributed to the state's inability to implement several major solutions in the July 2009 budget plan."

Of course, the real question is whether anyone actually thought those solutiuons would ever be implemented, or were the result of a bipartisan unwillingness to make enough tough decisions.

The LAO report says more than $3 billion of the current year problem -- almost half -- is due to missed budget solutions. That includes $1.4 billion of prison spending that wasn't slashed; $900 million for Medi-Cal programs that budget writers thought could be saved, in part, through federal funds; and more than $800 million lawmakers wanted to borrow from public transit funding... denied by the courts. And that doesn't include the highly suspect plan to raise $1 billion by selling off part of the state's workers compensation insurance fund, a plan now all but officially dead.

However, not all of the red ink can be blamed on elected officials. In another example of mysterious ballot initiative workings, the LAO report says the state's shrinking revenues actually translate into an extra $1 billion for public schools, thanks to the complicated system created by voter-approved Proposition 98. In a nutshell: Prop 98 ties school funding, in part, to year-to-year changes in state revenue. But the year-to-year changes projected by this year's budget deal ended up being wrong, making it seem as though revenues are growing faster than projected, thus guaranteeing schools more money. Remember, this is contrary to reality, where revenues are actually declining. Nonetheless, you can expect education advocates to demand that $1 billion ASAP, given the budget reductions to schools over the past two years.

And it's also a bleak future being painted by Legislative Analyst Taylor. His report projects $20 billion deficits for the four years after a new state budget is crafted next year, peaking at $23 billion in 2012-13 when Sacramento lawmakers must find a way to pay back local governments for the tax revenue borrowing in this summer's budget deal.

So what do such big budget holes mean? Here's one example: the report says the projected deficits in the next few years at the $20 billion level assume a freeze of most state worker salaries for another six years (after last being raised in 2007).

As for the budget debate that will begin in January, the Legislative Analyst reports there will be even fewer options than in years past. That's largely because federal stimulus dollars, vital to keeping California afloat, require state funding of education and health care at levels that are pegged to budgets of the past -- funding that Sacramento lawmakers can't cut if they want to keep getting DC dollars.

There's no doubt the winter and spring budget debate of 2010 will be fierce. Look for both liberals and conservatives to demand that now is the time to either tax, or cut, more.

Others will demand a revisiting of costly deals of the past. On Tuesday, California Teachers Association President David Sanchez told reporters that the cuts have to end. "There is no more to cut from our schools," said Sanchez. Instead, he argued lawmakers need to reexamine billions of dollars in tax credits, including some of the credits made available to big business in last year's budget deal. (His comments came before the apparent $1 billion in owed school funding mentioned above.)

"Large companies must pay their fair share," said the CTA leader. And the politically powerful CTA could, if it so chooses, make that point at the ballot box; two separate ballot measures are now on the table to nix some of those business tax breaks, which are worth a few billion dollars a year in lost tax revenues. And the teachers union also has submitted a couple of proposed initiatives to modify the iconic Proposition 13, allowing higher property taxes on commercial property.

[Look for an updated post later with reaction to the LAO report as it comes in..]

Last night, he zeroed in on Rep. Jackie Speier (D-San Mateo), the veteran California state legislator who won a seat in Congress last year. For those of us who covered Speier here in Sacramento, watching her skateboard with Colbert was... priceless.

Better Know a District - California's 12th - Jackie Speier www.colbertnation.com

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]]> http://blogs.kqed.org/capitalnotes/2009/11/18/skateboarding-with-speier/feed/ http://blogs.kqed.org/capitalnotes/2009/11/13/podcast-were-back/ http://blogs.kqed.org/capitalnotes/2009/11/13/podcast-were-back/#comments Fri, 13 Nov 2009 08:01:36 +0000 John Myers http://blogs.kqed.org/capitalnotes/?p=3153 Not that you missed us.

Our hiatus has come to an end for the Capital Notes Podcast, and we're back with our mostly snarky, occasionally thought provoking weekly dish on politics.

This week: a look back on the big water deal, the guessing game of who gets to be California's next "lite guv," and the tempest over recording phone calls at the office of the Attorney General.

(Capitol Weekly's Anthony York and I mention in this podcast transcripts of those recorded phone calls, which can be read here.)

If you love politics, it's a great story.

Gavin Newsom's announcement that he is abandoning his race for the Democratic gubernatorial nomination came, like any political bombshell, on a Friday afternoon.

"With a young family and responsibilities at [SF] city hall," said hizzoner's emailed statement at 3:02 p.m., "I have found it impossible to commit the time required to complete this effort the way it needs to — and should be — done." Newsom, who became a first time dad a little more than a month ago, went on to thank his supporters and to pledge to keep fighting the good fight.

Was it surprising? Yes and no. No, in that the campaign had struggled to find the needed cash for such a huge race. Campaign finance reports through June 30 show the Newsom gubernatorial effort had raised $1.7 million but already spent almost $1.6 million; records since then, though incomplete, continued to paint an uphill climb in the battle for bucks. And yes, Newsom may be feeling the tug of family and his still demanding job running the city by the Bay.

Worth noting is what now seems to be a telling moment: Newsom's campaign guru, Garry South, was quoted yesterday by the Los Angeles Times as offering a seemingly full-throated endorsement for Republican candidate Tom Campbell. Did South know his horse was pulling out of the race?

Still, the news did come as a surprise given that the charismatic pol seemed to have thrown himself full tilt into the race; he now has more than 1.2 million followers on Twitter, and has used social networking aggressively in his courting of younger voters. And let's face it, those of us in the political press relished the generational guv storyline of Newsom battling the iconic Jerry Brown, the two-term governor/presidential candidate/Oakland mayor/attorney general.

For his part, Brown wasted no time in releasing his own statement, which said simply: "Mayor Newsom is a talented public official and I believe he has a bright future. I am sure this was not an easy decision."

Of course, Brown isn't technically a candidate for his old job. In the longest running cat-and-mouse game in recent political memory, the 71-year-old with a name ID maybe only second to Arnold Schwarzenegger (maybe higher!) refuses to yet call himself a candidate... going only so far as to create an "exploratory" campaign.

Newsom's decision leaves Jerry Brown in the driver's seat -- not just for the Democratic nomination but, according to the polling, for the whole enchilada. And, in a case of truly awkward timing, the Newsom story broke on the single worst day of the Brown-as-attorney-general era, as the AG's office scrambled to explain why a top aide was recording conversations with journalists without consent -- something even us journos know is illegal in California.

And now, a brief departure into the squishy gossip of this story... namely, that Newsom may be interested in running for lieutenant governor next year. The idea has been knocked down a thousand times by those close to the San Fran mayor, and by Newsom himself. "Spare the speculation," tweeted Newsom adviser Jason Kinney tonight. Fair enough, but consider this: if Brown should run and win, he would be 73 just three months after taking office. Would he really run for a second term at 77? Or might he step aside in 2014, leaving the job to... well... a seasoned and high-profile lieutenant governor?

And for that matter, what would a John Garamendi victory next Tuesday in his race for Congress do to this game? Governor Schwarzenegger would get to appoint an interim 'Lite Guv,' but Dems in the Legislature would have to give their blessing. Garamendi's chances look good; would the GOP guv appoint a placeholder? Would he appoint a Dem? If so, would that Dem want the job in next year's election? Would all of that finally silence the Newsom for LG chatter?

That's just a bit of the parlor game, mind you. But for political junkies, this story isn't going anyway anytime soon.

Just after 9:30 pm last night, Governor Schwarzenegger released a statement that ended the long-running saga over a deal on water issues, and whether lack of said deal would trigger a mass veto of legislation worked on all throughout the year.

"Over the past few days we have made enough progress in our negotiations that I am calling a special session on water," Schwarzenegger said in the statement.

The idea of a special session on water issues -- the apparent seventh this year alone -- has been bandied about ever since the Legislature failed to send proposals to the Guv's desk by the end of the regular session last month. Since then, Schwarzenegger and his advisers had remained coy about calling one, probably in part because it was worth seeing whether a deal was, or was not, imminent. After all, while the rest of the world may consider a "special session" a declaration of urgency, Capitol watchers know that the timelines for actually convening and acting in special session are, no pun intended, fluid.

A governor may be able to call attention to an issue by asking the Legislature to show up, but that's about as far as it has to go. And don't forget, there are already pending special sessions on tax reform and education issues.

The announcement, of course, means one of two things: that a deal truly is close, in which case a special session is likely needed to push through the actual legislative proposals... or... the details were still so messy by Sunday night that there was no way to finish in time to avoid the veto massacre Schwarzenegger had promised... but perhaps wasn't so thrilled with carrying out, considering the acrimony it would have created with legislators. Comments from Republican legislative leaders yesterday seemed to indicate the latter.

(As it's been pointed out, that acrimony would have been largely with Democrats, as the vast majority of bills in limbo had Democratic, not Republican, authors.)

And so Schwarzenegger's Sunday night release of what could be called legislative hostages -- hundreds of bills that the governor had earlier promised to can in the absence of a water compromise -- will no doubt set tongues wagging about what, if anything, the water poker game accomplished.

As of this morning, documents from the governor's office show he acted on 685 bills Sunday, signing 456 into law and vetoing 229. While there were a few big legislative policy issues the governor decided to endorse with his signature -- solar energy mortgage crisis fixes to name two -- there were a few proposals which most might have expected a veto, and which instead received an autograph. Most notable are two the governor publicly lambasted this summer as examples of the Legislature taking its eyes off the ball: a bill establishing a new commission on blueberries and a bill banning the cutting (or "docking") of cow tails. Such reversals are, predictably, already leading some to wonder what all the fuss was about.

Still, the governor vetoed some bills with a clear sign he didn't like the Legislature's collective priorities. A great case in point: the veto message for a bill to encourage the sterilization of high school wrestling equipment in an effort to battle staph infections. Schwarzenegger vetoed the measure because, according to his veto message, there are no impediments in existing law to sterilize wrestling equipment But he also used the occasion to jab (with puns, no less) both the author, Sen. Dean Florez (D-Shafter), and the Legislature in general:

The Legislature needs to wrestle with whether it will continue to pass bills like this one, that current law sufficiently addresses, or whether it will go to the mat on pressing issues such as water infrastructure, tax reform, and federal education funding.

But back to the issue of water: the real question is whether the broad veto gambit paid off for Schwarzenegger, or California as a whole, on resolving the never-ending saga over the state's water supply.

(Note: Not many more bloggings until November folks, as I remain on paternity leave. This one took an awful long time to write while dealing with both a newborn and a toddler's morning needs! --JM)

There will hopefully be a few bloggings and Twitter posts during that time, overnight feeding schedules allowing. Thanks for your patience...

Meg-a Problem? Former eBay CEO Meg Whitman gave a somewhat lackluster speech to the state Republican convention Saturday afternoon. She touched on all her usual themes -- cutting taxes and regulation, staying tough on crime, etc. But one thing she didn't mention was her personal voting record.

In the past, she's acknowledged that she "missed a few elections" but this week's Sac Bee article reported that Whitman didn't register for 28 years and even missed some elections after registering in 2002.

Whitman faced the media mob after her luncheon remarks -- and it wasn't pretty. She tried sticking to the answer she's given before about her voting record. "It was wrong. I should have voted more often," etc. But she declined -- despite repeated questions -- to say why she hadn't bothered to vote. As the questioning went on Whitman became more agitated -- pointing a finger at a pesky reporter who pushed her to answer a question, saying "I will, just give me a chance, OK?"

Is this the case of another CEO realizing that in politics, you don't get to call all the shots without being questioned? Or just a political neophyte getting her sea legs?

CAMPBELL'S SOUP: Tom Campbell was billed as the featured speaker at Friday night's dinner at the GOP convention in Indian Wells. But Campbell, introduced by party chair Ron Nehring as "the nicest guy in California politics" -- paging Leo Durocher -- was left to cool his heels as three other speakers (including Governor Arnold Schwarzenegger) preceded him.

The odd part was who the party had speak before him. Bill Mundell, chairman of ZBB Energy, gave a quirky, rambling speech calling for "an economic revolution" centered around selling off public assets, including the DMV. Mundell rambled on for 30 minutes, leaving the audience checking their Blackberrys and giving each other looks of despair and disbelief.

By the time Campbell spoke, there were dozens of empty seats in the room and the energy had completely gone out of the dinner. Not the introduction he was looking for.

By the way, the stage where Governor Schwarzenegger spoke was decorated with no fewer than eight framed pictures of Ronald Reagan -- and none of Arnold. It's still the party of Reagan.

-- Scott Shafer

Is a little Whitman piling on happening? As Poizner tries to ride "not voting-gate" -- Governor Schwarzenegger is dismissing the former eBay CEO's promise to delay implementing AB 32 regulations if she becomes governor.

And what better place to announce you're suing Jerry Brown than the GOP convention? Sen. George Runner (R-Lancaster) has called a press conference for tomorrow at the Esmeralda Resort where he'll reveal he's taking Brown to court over the ballot title and summary the AG wrote for an initiative now being circulated for signatures. Conservatives are still fuming over Brown's revision of the summary for Proposition 8 -- the anti-gay marriage measure -- a revision pointing out that Prop 8 would remove a right to marriage for same sex couples.

Morning: The fall GOP Convention is getting underway down in Indian Wells and the talk will be on keeping the governorship in Republican control. But as the curtain raises at the posh Esmeralda Resort and Spa, some state party activists are buzzing about progress toward tossing one Republican out of office.

Conservative blogger Jon Fleischman, chair of the party's southern California efforts, says 50,000 signatures have now been gathered to recall state Assemblymember Anthony Adams (R-Hesperia), one of three Republican assemblymembers who joined with Dems to pass a state budget earlier this year. The budget included nearly 13-billion dollars in temporary tax increases -- placing a giant bull's eye on the San Bernardino Republican's back. A special election to bounce him out of office could happen as soon as January.

It's getting hot down here in the desert. Now where did you say the pool is? --Scott Shafer