Legislature and Governor About to Set a Dubious Record

Thursday September 16 will be the 78^th day of the current fiscal year without a budget.

That’s just over two and one-half months, almost a full quarter, without a spending plan in place.

It’s also a record for California’s 160 years of statehood.

Previously, the longest budget stalemate lasted 77 days into the fiscal year. That record was set two years ago.

Several of the same participants in this year’s stand-off participated in setting the previous record. Among them: Senate President Pro Tempore Darrell Steinberg, a Sacramento Democrat, and GOP Gov. Arnold Schwarzenegger.

The state budget is the most important public policy utterance the governor and the Legislature make each year.

Depending on who one talks with, Republicans and Democrats have agreed on $15 billion worth of actions, more than half spending reductions, to close what Democrats view as a $17.9 billion budget gap. Schwarzenegger wants the budget to include a $1.1 billion reserve fund, boosting the size of the budget hole he says needs to be filled to $19 billion.

Of the $15 billion both sides agreed on, some $8.3 billion are spending cuts, another $4.1 billion is additional federal revenue for the state and the remaining $3.7 billion comes from finding new ways of funding programs or borrowing from other accounts to buoy the cash-strapped general fund.

Of the spending cuts, $1.5 billion is from less generous salary and benefit agreements with several state employee bargaining units.

Most of that $15 billion in solutions was agreed to in June, prior to the start of the fiscal year on July 1.

In theory, the actions on which Republicans and Democrats agree all could have been passed in June allowing several additional months of savings to accrue, perhaps reducing next year’s expected double-digit shortfall.

But Democrats didn’t want to acquiesce to distasteful spending cuts without Republicans agreeing to fill some of the remaining $3 billion to $4 billion problem with higher taxes.

Of the $4 billion remaining, approximately half will be closed by further reductions in state support for public schools, several sources say. Public schools have been shorted at least $14.5 billion already during the past two budget years.  The state has agreed to pay back $11.3 billion — over time.

Democrats want the final $2 billion in budget solutions to be taxes. Under a proposal floated by them and refined by the Legislative Analyst, state income taxes would increase – which can be written off against federal tax obligations – and the sales tax would be reduced.

Republicans vow not to support that.

Despite repeatedly voicing concern over the long-term fiscal health of the state’s pension system, Schwarzenegger has pitched closing $2 billion of the problem by borrowing from the pension fund against future savings from what the GOP governor calls “pension reforms.”

And while students awarded grants from the state to pay for college aren’t receiving them and businesses with state contracts aren’t getting paid, a deal does not appear imminent.

-30-