Friday, June 24, 2011

"Fuzzy Zone" Update: California's Budget Stalemate Drags On

We feel obligated to keep you posted on California's ongoing struggle to balance its budget before the new fiscal year starts on July 1. But truthfully, there's really not much to report; to borrow a turn of phrase from Governor Jerry Brown, there's a fuzzy zone here that's not yet been transcended.

Brown is still (at least publicly) continuing to flog his plan for five years of higher sales taxes, income taxes, and vehicle license fees, even as he acknowledges little progress toward making that a reality. He needs two Republican votes in each house of the Legislature to make that happen, and GOP legislators have said they're willing to allow taxes to go before the voters. Brown still predicts a war of ballot initiatives should his plan fail, and even suggested that weakening Prop 13's caps on commercial property taxes could be part of the reform. (For an analysis and explanation of why that wouldn't be nearly the bonanza people expect, see this analysis from Cal Watchdog.)

In a press conference held yesterday outside Brown's empty office (the Governor was speaking at the Moscone Center in San Francisco), Republican leaders reiterated their support for a November ballot on the extensions - possibly because voters are likely to reject them - and also their opposition to a bridge tax extending the hikes until the ballot. They also pointed to organized labor's opposition to pension reform and spending caps as a key factor in the impasse, which has been an underappreciated reason for the lack of traction Brown's plan has gotten. What's gotten even less attention is union opposition to making tax extensions dependent on voter approval; apparently they've seen the same poll data we have. In a separate speech, Assembly Republican Connie Conway brought up something we thought everyone had forgotten about: the "budget roadmap" released by the state GOP last month. Our analysis of the proposal is here. In general, since tax revenues have come in higher than expected, we're a little more sanguine about the proposal than we were in May: with a deficit of $9.6 billion to cover, the plan's more questionable maneuvers could be dispensed with.

Democrats, for their part, insist that the taxes are needed to preserve school funding. Which would be more compelling if they hadn't been proposing to reverse spending cuts without them, and if Jerry Brown weren't proposing a $12 billion jump in state spending next year. Also, Dem lawmakers are still pissed about Brown's budget veto and the subsequent loss of pay; Senate President Darrell Steinberg says Brown's budget plan is dead. Other than that, the majority party in the Legislature isn't offering much. Say what you will about the Republicans, at least they're making an effort to get their salaries back.

2 comments:

  1. California voters know that temporary tax increases have a nasty habit of becoming permanent, and of being so badly used that another tax is demanded to make up for it.

    Santa Clara county's VTA was so badly mismanaged they had to go back and ask for another 1/2-cent sales tax increase to pay for the previous 1/2-cent increase they squandered.

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  2. Agreed. I think that's at least part of why the tax extensions continue to poll so badly. It'd be one thing if Sacramento could be trusted to use the money to spend down its debt. But only an idiot would believe that the state isn't going to find new things to spend the money on.

    If I were a better blogger, I would've done a better job emphasizing that last paragraph: the people who want 5 more years of higher taxes from us are the same people proposing massively higher spending next year, and the same people who were talking about reversing billions in cuts before they even had a deal in place. Their credibility in asking for more money is zero at this point.

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