Review of the Budget Bidding

The Schwarzenegger administration now pegs the state’s budget disaster at nearly $15 billion this year and over $41 billion if nothing is done between now and June 30, 2010. 

If the administration’s estimates are correct and, given the state of the state’s economy, it’s well within the realm of possibility, that would mean a gap between revenue and spending commitments of close to 40 percent of the state’s $103 billion general fund. 

That eclipses the 33 percent hole former Gov. Pete Wilson faced in 1991 when the Cold War ended and California’s aerospace and defense industries augured in. 

The gap would easily be filled if the state stopped supporting public schools. They are receiving $40 billion this fiscal year. 

Or the state could stop giving the $12 billion it pledges to the University of California and the California State University system plus eliminate all $20 billion in health programs, much of it safety net care for the poor, and all $9.8 billion in social services. 

Revenue has plummeted so rapidly the state won’t have the cash flow to pay its bills by the end of February, the governor and others say. 

While the situation is at best dire and, to an outside observer, beyond catastrophic, based on activity so far there is a very real possibility that nothing will happen. 

Republicans have submitted a series of ransom demands that Democrats must meet before they will even agree to consider sullying themselves by backing a tax increase, the biggest of which in state history, by percentage, was called for by Gov. Ronald Reagan in 1967. 

Republicans are correct that the budget Armageddon, as Schwarzenegger calls it, is a by-product of economic calamity, triggered by bad debt but worsened by credit wariness that has spread like a virus across every major sector of employment in this state. 

The GOP says its ransom demands are simply actions the state should take to stimulate the economy such as ending the requirement employees get paid overtime past an eight-hour work day and similar ideas they have floated for years. 

The governor backs getting more Californians back to work by expediting spending on public works projects. 

Forget about jumpstarting new projects, existing ones are going to grind to halt — possibly within the next few weeks — because the state’s budget mess prevents California from selling bonds to replenish the account that loans money for construction of schools, roads, streets, highways and the like. 

It puzzling that contractors, builders, school district officials and other businesses are not camping out in the district offices of GOP lawmakers to give them the following message: 

“What you’re trying to do by improving the businesses climate is laudatory but we’re not going to able to collect on a tax credit for hiring out-of-work Californians if our business folds. 

“It’s imperative that you act now, in some responsible way, to help keep the projects under construction going so those persons building them can stay employed and me, the employer, not file Chapter 11.” 

Republicans released a list of $22 billion in spending reductions, over the next 18 months to show the budget can be balanced without raising taxes. Of the $22 billion, much of it comes from freezing cost-of-living increases in social programs and nearly $8.65 billion of the total comes from limiting state support of public schools to the legal minimum. \

Gov. Schwarzenegger’s frustration over the Legislature’s inaction is understandable. However calling them kindergarteners, players-of-chicken and posturers is not exactly helping things. 

 “What is amazing about all of this is that the Legislature acts as if we have $30 billion of surplus,” Schwarzenegger said at a recent press conference. “They met, they debated, they postured and they did nothing.” 

The press conference showcased the unveiling of a digital clock that shows the state losing $470 each second, $28,000 each minute, $1.7 million every hour and $40 million each day. 

The clock, beneath a banner proclaiming, “Legislature’s Failure to Act,” is mounted on the wall of the state Capitol to the right of the governor’s office. 

Previously, the location housed a non-partisan pitch by First Lady Maria Shriver for Californians to volunteer – a far more appropriate message in a building paid for with taxpayer dollars. 

While the governor blames the Legislature for inaction, often singling out his supposed GOP allies, Democratic lawmakers wonder rather vocally when the Republican governor might be able to round up a single Republican vote – for anything, let alone a budget or a tax increase.

 This is a bad place for California to be. And indefensible. 

Democrats will say they can’t agree to cuts first and do revenue increases later because the Republicans won’t keep their word. Vice versa for the Republicans, none of who shows any appetite for raising taxes at all.

Why should they?  Republicans did so well shaking down the Democrats in the longest delayed budget signing in California’s 158=year history they don’t feel scared, they feel emboldened. 

Democrats rolled over so easily that the California Chamber of Commerce didn’t even need to go public with its preferred method on how to raise taxes. 

So what if the state grinds to a halt and workers are fired. These would be workers who are also members of public employee unions, the folks who bankroll much of the Democrats’ political efforts. Bummer about the pink slip, dude. 

There is merit to what Senate President Pro Tempore Darrell Steinberg, a Sacramento Democrat, is doing by making all 40 members of the upper house th4e Senate’s Budget Committee. 

Potentially, the more each member learns about the ugliness, the chances of speedier action improve. 

What’s needed is the proverbial first step of the 1,000-mile journey. Various suggestions on revenue raisers have been made here previously.  But here’s one that both Republicans and Democrats should be able to get behind. 

Boost vehicle license fees. That’s right, the evil car tax the corner office’s current occupant whose opposition to the in lieu property tax was central to his 2003 recall campaign. Who can forget Count CarTaxula? 

Upon taking office, Schwarzenegger reduced the fees from 2 percent of a vehicle’s value to .65 percent. In November, the Legislative Analyst recommended increasing it to 1 percent. 

Like state income taxes, much of the fees are a federal tax deduction so the feds subsidize some of the expense. 

Democrats would much rather raise the fees than deeply whack state government. While raising taxes is antithetical to Republican lawmakers, backing a license fee increase would be a nice flip-of-the-bird at Schwarzenegger who would likely sign the measure to partially staunch the state’s red ink hemorrhaging. 

And, as the Legislative Analyst suggests, the revenue – about $.6 billion – could be used to finance a transfer of mental health and criminal justice programs from the state to local government, generating further state savings. 

Every side gets a win. 

Hurry up. The clock’s ticking.

 

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