State budget crisis shifts to critical phase
As chairwoman of the Budget Committee, former Santa Rosa city councilwoman Noreen Evans faces a budget deficit a thousand times bigger than any she encountered during her tenure in city government.
CHRISTOPHER CHUNG / Press Democrat photoPublished: Saturday, June 13, 2009 at 3:00 a.m.
Last Modified: Saturday, June 13, 2009 at 9:48 p.m.
The battle to solve California’s historic budget deficit enters a critical phase this week as the state draws ever closer to going broke.
A bipartisan budget conference committee presided over by Assemblywoman Noreen Evans, D-Santa Rosa, is expected to wrap up a month of hearings early this week on Gov. Arnold Schwarzenegger’s proposals to trim the state’s record $24 billion budget deficit, mostly through major cuts to state programs or eliminating them entirely.
The Legislature could begin voting on budget proposals later in the week. Lawmakers don’t have much time to attempt to work through their differences: the new fiscal year begins July 1 and state Controller John Chiang said California will run out of cash by July 28 if a budget is not in place and he is unable to secure loans to keep the state afloat.
In an ominous sign that things are starting to get ugly, Schwarzenegger late last week took steps to prevent Chiang from seeking high-interest loans to help ease the cash crunch. That followed the governor’s vow to shut down state government if the Legislature does not acquiesce to his demands.
The governor also on Friday dropped a last-minute bombshell on Evans’ committee by submitting a proposal for the state to borrow another $2 billion in property tax funds allocated to cities and counties and use it for the state’s beleaguered general fund.
Evans, whose exasperation with the governor has been apparent for weeks, accused Schwarzenegger during the public meeting of playing a “high stakes game of chicken” with the Legislature, and afterward said he was exhibiting “showmanship, not statesmanship.”
Budget bickering is nothing new in Sacramento, but with the stakes so high this time, emotions seem to be running particularly hot.
The 105 proposals submitted by Schwarzenegger would eliminate the projected $20.8 billion deficit for the budget year beginning July 1. However, program cuts and reorganization account for less than $13 billion, or 62 percent of the deficit measures. (An additional $3.1 billion in cuts is proposed to be taken from the current budget year which is just ending.)
The remaining $8 billion in deficit reduction would come by borrowing property tax revenue from local governments, taking sales tax revenues from local governments, diverting revenues intended for non-general fund programs, selling some state assets and generating billions of dollars in new fees and revenues.
Democrats, who enjoy majorities in the Assembly and Senate, have yet to coalesce around a budget plan of their own but seem united in pushing for revenues beyond what the governor is calling for to offset cuts. Senate President Pro Tem Darrell Steinberg called for funding welfare and college aid programs by tapping state reserves projected at $4.5 billion next year. Assembly Speaker Karen Bass would say only that her caucus, which meets behind closed doors, is deciding among numerous revenue-raising options.
Evans’ committee has delayed voting on most of the governor’s big-ticket cuts while awaiting more information or to package related proposals, leaving members a long day Monday and possibly into Tuesday to come to some final recommendations for the Legislature.
Evans predicted they would come to within a “few billion” dollars of the governor’s suggested cuts, but that rather than mothball entire programs, as the governor has suggested, she foresees significant cuts across many programs, including to CalWORKS, Healthy Families, in-home health support services and state parks.
Some Democrats have gone so far as to utter the T-word.
Democratic Caucus Chair John Perez of Los Angeles urged more taxes after he took the microphone at a rally held at the state Capitol last week to protest cuts in HIV and AIDS programs.
“It’s good for you to be here to protest these cuts, but you must stand with us in fighting for the taxes we need to keep these services,” he said.
Sen. Christine Kehoe, D-San Diego, echoed that sentiment, saying to the crowd of hundreds, “We cannot go back to the days when we raised money for social services in bars.”
But Democrats will have a fight on their hands if they seek new taxes.
“They need to get off the tax bandwagon and approve the cuts,” said Senate Republican Leader Dennis Hollingsworth, R-Murrieta. “Taxes are non-negotiable.”
Hollingsworth has called for transparency in the budget process, saying that negotiations between the governor and the top four Legislative leaders — the so-called Big Five — should be opened to the public. So far, he’s succeeded in getting them to agree to post their agenda and report any actions taken.
“That’s a vast improvement,” he said.
The Service Employees International Union began airing commercials last week in major media markets across California calling for more taxes. Eliseo Medina, national executive vice president of SEIU, said exit polling conducted by the organization following the May 19 special election showed support for taxes to help save programs.
"The only choice the governor is making is, ‘Do we cut, and by how much, or do we completely eliminate programs altogether?’ I think that’s a false choice,” Medina said.
Behind the scenes, Democrats have debated how best to respond to the governor’s proposals, with some advocating a more forceful stance. The tensions were apparent in several long Assembly caucus meetings over the past two weeks, according to one member who asked not to be identified because there is a gag order on these proceedings.
This member said that as a compromise, the caucus adopted the theme of “Fighting for Families,” which they hope will suggest Democrats have solutions and not just criticisms. This same Assembly Democrat said some members have been critical of Evans’ conference committee, saying it has delayed action on a counter-proposal to the governor’s plans.
“The whole reason we’re doing these long caucus meetings is because we don’t have confidence that the conference process is leading to solutions,” this member said. “It’s taken a lot of time, and in the view of many, it’s not time we have.”
Evans disagreed.
“The job of the Legislature is to take input from the public. If people are suggesting that delayed the work of the committee, I suggest they don’t understand the importance of that,” she said.
Assemblyman Jared Huffman, D-San Rafael, said Democrats have to do a better job of leveling with Californians about the true extent of the cuts he said are coming. He believes those cuts will amount to as much as $18 billion, $5 billion more than what the governor is proposing.
“If it’s only $13 billion in cuts, we’re really just kicking the can down the road,” said Huffman, who has a sign on his Capitol desk that reads “The Buck Stops Here.”
Huffman said the state could generate between $5 billion and $8 billion in new revenue by putting a tax on the taking of oil in California, raising gas fees, a one-year amnesty for people to pay back taxes without penalty and overhauling the rules for when commercial properties change ownership in order to collect additional property tax fees.
He envisioned possible support for two tax increases that would require Republican support: a tobacco tax earmarked for children’s health care programs, and a “modest” increase in vehicle licensing fees to generate $140 million, which is roughly equal to the budget for state parks.
Huffman, who is leading a working group among Assembly Democrats to overhaul state government, suggested a new law allowing local communities to pass tax measures with a 55 percent majority, instead of the current two-thirds, as one way of easing perennial budget problems.
“At a time when many rightly feel Sacramento is failing to meet their needs, let’s give them the tools to meet their needs,” he said.
During a budget hearing last week, Sen. Mark Leno, D-San Francisco, estimated that a 0.03 percent increase in vehicle fees would average out to about $9 per $30,000 vehicle. He was among committee members, both Republicans and Democrats, who voiced concerns about the governor’s plan to shut 220 state parks, including almost all on the North Coast.
Leno said he believes the looming fight will be over the reserve fund.
“The major debate, once we make an initial $10 to $12 billion in cuts, will be whether we further, and in some cases finally, dismantle basic government services,” he said.
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