Now What?

 

The state’s budget plot sickens.

April income tax and corporate tax collections fell nearly $2 billion short of expectations – and voters seem poised to reject three key propositions on the May 19 special election ballot, adding $5.8 billion to an already serious problem.

Given the sorry state of the state’s economy, the gap between revenue and spending commitments is only going to get bigger – the consensus being double digit billions for the foreseeable future.

So what will Governor Arnold Schwarzenegger and the Democrat majority Legislature do on the morning of May 20, assuming current polling trends hold?

 First will come the mandatory, flat-footed dance macabre: Rounds of obligatory teeth-gnashing and garment-rending over how draconian spending cuts will devastate the most vulnerable among us – that would be the Democrats —  and, from the other guys, how hard-working Californians will be crippled by stealing more of their livelihood through higher taxes to feather the nests of  soul-less bureaucrats.

Then what will really happen?

There are basically only three ways to balance a budget – increase revenues, decrease spending or a combination of both. A combination of both would seem the most rationale strategy – but don’t look for that to happen.

 In February, Democrats were able to lure a handful of Republicans into voting for a budget that temporarily increased taxes by more than $12 billion, including a 1-cent boost in the sales tax that took effect April 1. Those tax increases will be in place for this and next fiscal year, even if Prop. 1A, which would extend the taxes two more years, loses on May 19.

 The price tag charged by GOP senator Abel Maldonado for his vote – in the dead of night – included allowing a statewide vote on a constitutional amendment to allow open primaries; getting rid of an increase in the gas tax in the budget; and placing Prop. 1F on the May 19 ballot prohibiting lawmakers from receiving salary raises in ugly budget years.

Because Democrats blithely paid his ransom, they effectively set a new floor. Now, similarly minded vote-traders will raise the extortion bar far higher. High enough that even Democrats eager to strike a deal, any deal, may find the price too dear.

Some Republicans, like several members of the Assembly, voted for the budget without any political quid pro quos, earning the ire of their party and, in two instances, recall attempts.

Senate Republican leader Dave Cogdill of Fresno lost his post when a majority of his caucus opposed the taxes he had negotiated in the budget. They replaced him with Dennis Hollingsworth of Murrieta who has repeatedly voiced his refusal to lend Republican support to any further tax increases.

The GOP governor has gotten over his pledge not to increase taxes but legislative Republicans simply don’t fear or even respect him and would be more likely to do the opposite of whatever he says – just as, in most cases, they have already.

So if the chances of Republicans voting again to jack up taxes are slim to none – and slim left town – that means further ratcheting down of state spending.

So where would the cuts fall?

Mostly on public schools. The budget signed by Schwarzenegger in February gives schools 43 percent of the state’s $92 billion general fund. Like Willie Sutton, who robbed banks because that’s where the money was, budget cutters turn first to the biggest ticket item, irrespective of numerous speeches by lawmakers and the governor about education’s importance.

Second biggest call on general fund revenues is health and human services programs like welfare and Medi-Cal, the state’s health care program for the poor. Those programs comprise 34 percent of general fund spending for the fiscal year beginning July 1.

Higher education is 13 percent; prisons are 11 percent.

Democrats are not eager to cut further into state spending – some $15.7 billion was axed in the current budget. Their leadership has also been snubbed by some of their most generous givers – public employee unions who were angered by this year’s spending cuts.

 So, as they have in the past, Democrats likely will try to close some of the budget gap through “fees” which can be approved by majority vote, rather than general taxes, which require two-thirds.

The Hail Mary play would be what the Democrats threatened to do in December – pass a “revenue-neutral” majority-vote budget that cuts out the ability of the GOP to influence it.

Cities and counties fear that, as it has in past fiscal crises like 1991, the state will transfer some of its responsibilities to reduce state expenditures. This time, though, cities and counties worry all that will come their way will be responsibilities and no cash to pay for them. 

If passage of this most recent budget – and the previous one, which set a record for tardiness – are any indication, rigid Republican lawmakers, unfettered by a governor capable of reining them in, are going to hold what Willie Brown calls the “whip hand” until California ditches its two-thirds vote requirement. 

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