Wednesday, June 15, 2011

Democratic Lawmakers Pass California Budget

The smoke is still clearing in Sacramento, after the Senate and Assembly each approved a plan to balance the state's budget for the upcoming fiscal year. As it became clear last week that the Republican votes for a "bridge tax" needed to implement Jerry Brown's proposed budget were not going to emerge, Democrats in the Legislature began cobbling together an alternative plan for a budget that they could pass with a simple majority vote. Since a two-thirds majority is needed for tax increases, this plan involved a mix of fee increases, spending cuts and accounting gimmicks to close the remaining $9.6 billion shortfall. Basically, the Dems in the Legislature got tired of waiting for Jerry Brown to deliver on getting the votes needed for his plan, and the budget they've sent to his desk is exactly the sort of nonsense he promised to avoid during last year's campaign. So what have we learned?

I'm still relevant! Really!

1. For once, Republicans actually did the will of the people in the Legislature. We'll set aside our distate for their lamentable defense of the state's redevelopment agencies, and give Republican lawmakers credit where it's due: they listened to public opinion polls that repeatedly showed California voters hating the idea of higher taxes. They took a ton of crap for refusing to go along with Brown's original plan to bring the tax hikes to a June ballot, and for holding up a plan to bypass the voters with the bridge tax. On behalf of the rest of California's weary taxpayers, we thank them for their stubbornness.

2. Jerry Brown has only Jerry Brown to blame for his irrelevance right now. We've gone over this territory before, but Brown's inexplicable refusal to turn to an all-cuts budget after his tax-extension plan collapsed in March is the biggest reason that a budget passed today without his input and against his wishes. He could, of course, veto the Legislature's plan, which honestly wouldn't surprise us at this point. More likely, he'll spend some part of the next 12 days continuing to negotiate on other features of his plan. But to the extent that his tax-extension plan is looking deader than Rasputin, it's hard to see how he'll get far with that.

3. Some good things happened in Sacramento today. As Dan Walters reports in the Sacramento Bee today, Brown's reputation was not the only casualty of today's legislative session: 11 awful bills went down as well. Proposals to require employers to provide paid sick leave and expand family and medical leave programs, proposed regulations of internet commerce and fuel consumption, a bill to expose technology employers to unlimited civil liability, a bill to allow unlimited fee and tax increases as part of cap-and-trade, and a plan to automatically adjust the minimum wage by inflation all died today. And all businesses in the state should be very happy for it.

4. We're still screwed. If this is the budget that becomes law, California's finances really are in awful shape. It includes a 0.25% hike in the local sales tax rate, a $12 hike in car registration fees, and a $150 fee imposed on residents in fire zones; these moves are expected to net the state $1.36 billion in revenues. It also includes $500 million in cuts to local law enforcement, $300 million in cuts to the UC and Cal State systems, and a $150 million cut to courts. Unfortunately, those are the only maneuvers that look reliable to us, from a revenue forecasting perspective; the rest is a mess. The Legislature also assumes $200 million in revenue from requiring online retailers like Amazon to collect sales taxes; since both Amazon and Overstock have threatened to drop California affiliates if this tax is imposed (with Amazon already doing so in Connecticut and Arkansas in response to similar laws), there's a good chance Sacramento won't see nearly that much money. Even worse: the budget includes a plan to defer almost $3.4 billion in payments to schools, community colleges, and the UC system, and to put off repayment of $750 million in old school debt. In other words, almost half of Democrats' solution to the budget hole is to default on payments; nicely done, folks. The state also assumes that it will get $800 million more in unexpectedly high tax revenues, that it will win a lawsuit allowing it to raid First Five funds to the tune of $1 billion, and that it will be able to sell 11 state-owned buildings for $1.2 billion. For those not keeping score at home, that means the Legislature's budget will only be balanced if it gets $3 billion that it doesn't currently have.

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