There was only one thing wrong with Senate Budget Committee Vice-Chairman Bob Huff’s analysis of how Gov. Jerry Brown produced a “balanced” budget by magically assuming an extra $4 billion in revenues. Said Huff, a Republican from Diamond Bar: “That’s a wand that Harry Potter would be proud to wield.”
The problem is, Huff got the wrong wizard.
This was sorcery of a much higher order than a mere Hogwart could conjure. No, this was a job for a wily wise man who understood the theological and cosmological weaknesses of his adversaries. Or, as Gov. Gandalf himself described trying to bargain with the Republicans: “I thought we were getting close, but as I look back on it, there is an almost religious reluctance to ever deal with the state budget in a way that requires new revenues.”
And so Brown, after some heavy seance sessions and pot-stirring with Senate President Pro Tem Darrell Steinberg and Assembly Speaker John Perez, cooked up exactly what he said he would not: the all-gimmicks “balanced” budget that could be approved by Democrats alone and signed by him.
The Magic Budget maintains $150 million cut to the University of California and California State University, $400 million cut to community colleges, $150 million cut to state courts, $200 million in Amazon online tax enforcement, $2.8 billion in deferrals to K-12 schools and community colleges. Also: $300 million revenue from a $12-per-vehicle increase in DMV registration fees, $50 million from fire fees for rural homeowners, $1.7 billion from redevelopment agencies, and higher tax receipts worth $1.2 billion from May and June.
Brown tossed out some of the items from the Steinberg-Perez budget that he voted last week, including $1.2 billion from selling state buildings, $900 million from raising a quarter-cent local sales tax and $700 million in federal funds for MediCal errors.
The truly fancy wand-waving came by way of adding $4 billion in higher projected revenues in 2011-12; a sales tax swap that redirects money to local governments for Brown’s “realignment” plan; moving about $1 billion in child care programs; lowering the guarantee and cutting $71 million from the Department of Justice.
What makes the whole thing work, however, is the big honking assumption of $4 billion in additional revenues that simply weren’t assumed until about five minutes ago.
Brown spokesman Gil Duran referred questions to the Finance Department—which is like Richard Nixon saying, “Hey, you want to know about invading Cambodia, talk to the Defense Department.”
His best argument: “Trigger” cuts are built into the budget that would go into effect if revenues don’t meet projections. Brown called these prospective cuts “serious.”
According to Brown adviser Steve Glazer, the projection of additional revenues was based on $1.2 billion in unexpected tax income collected in May and June. But if revenues don’t meet projections by January, prisons and the University of California and California State University systems would each lose another $100 million. Programs for the sick, disabled and poor would be cut by twice that. Moreover, K-12 schools could face a $1.5-billion cut and be forced to shorten the school year by seven days.
Once conditional budget cuts are approved, the Legislature could restore the funding later. But according to Glazer, those restorations would be subject to a veto by the governor.
H.D. Palmer of the Department of Finance notes that this isn’t the first time prospective cuts would be used, based on projected revenues: It was done in February 2009, leading to $680 million in cuts to MediCal, CalWorks, trial courts and higher education funding when previously assumed federal stimulus money didn’t materialize in the spring.
Glazer said the newly projected revenue—assuming it comes in—will balance the coming year’s budget. But it won’t address other problems Brown was hoping to solve by negotiating with the Republicans: the structural deficit (about $5 billion, down from $20 billion when Brown took over) and the state’s long-term “wall” of debt of about $35 billion.
Gov. Gandalf and the Democrats got some help on Tuesday from Treasurer Bill Lockyer who pronounced the budget “financeable.” The budget, Lockyer said, “reduces the need for external cash flow borrowing by as much as $2 billion, saving significant borrowing costs. Perhaps more significantly, this budget, for the first time in recent years, honestly and clearly balances revenues and spending.”
Republicans tried to claim a victory for having prevented Brown and the Democrats from raising taxes. “The simple truth is, because of Republicans’ resolve, temporary tax increases will expire this Friday and the average California family will save nearly $1,000 per year,” said GOP Assembly Leader Connie Conway.
But the Reeps clearly failed to use their minority veto power to win pension reforms, regulatory relief for business or a spending cap—all items that had been bargaining chips as long as Brown was seeking their votes to extend taxes and/or place a tax measure on the ballot.
Look now for the Republicans to launch ballot measures seeking drastic changes to California’s pension plans, a hard spending cap, and who knows what else they can come up with, to distract money and attention from the public employee unions who may seek to alter Proposition 13 as it affects commercial and industrial property. Or impose an oil severance tax or whack the wealthy. Or, who knows, maybe even push a measure to allow local jurisdictions to raise taxes by majority vote. (Democracy? Gasp!)
Which serves as a reminder that back in March, Gov. Gandalf told George Skelton of the Los Angeles Times that if there was no two-thirds vote for extending taxes that he would put up an all-cuts budget, that the Democrats would “put in gimmicks” and he would veto that, and “then everybody sits there until we run out of money. It’s not going to be a pretty sight. It’s like one-two: No tax, all cuts, gimmicky budget, veto, paralysis. It’ll be a war of all against all.”
This may be the Republicans’ only play. And just for the record, earlier this month, we referred to Brown as “a great seer, with nothing up his sleeve.” Who knew Gandalf was hiding $4 billion up there?
Former Mercury News editor Trounstine and former San Francisco Chronicle editor Roberts publish CalBuzz, where this article first appeared.