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A Bit on the Budget

June 26, 2011

"Not gonna do it."

Lots of California budget news in the past few weeks so, in case you weren’t paying rapt attention to the ever-so-interesting negotiations taking place in Sacramento, here’s a quick primer to bring you up to speed:

  • Last November, voters passed Prop. 25, which repealed the two-thirds supermajority requirement for budget passage in the California Legislature and provided that legislators’ pay would be docked if they did not pass an on-time budget.
  • Also in November, voters elected Jerry Brown, who promised to pass a budget without gimmicks (i.e. accounting maneuvers and other tricks that didn’t confront the actual structural problems) and “no new taxes without voter approval”.
  • A few months back, Jerry Brown proposed a budget that would close the deficit using equal parts spending cuts and temporary tax extensions and allow voters to decide whether to make the tax extensions permanent via an election.
  • All spring, Jerry Brown attempted to peel off the four Republican votes necessary to meet the supermajority requirement to both extend the taxes and place the tax measure on the ballot.
  • All spring, the Republicans maintained allegiance to their HJTA overlords and the No New Taxes pledge, refusing to allow Californians to choose what they think is the best solution to the budget crisis.
  • Last week, Democratic legislators passed a budget which closed the deficit but included gimmicks.
  • Later the same day, Jerry Brown vetoed that budget.
  • Also last week, State Controller John Chiang declared that he had the power to determine whether the budget was balanced, a requirement instituted by Prop. 58 in 2004, and the power to withhold legislators’ paychecks per Prop. 25 if the budget was not balanced.
  • On Wednesday, Chiang declared that the budget was not balance and said he would being to withhold legislators’ paychecks.
  • Now, there’s two parallel track negotiations taking place: one between Brown and a few Republican legislators who he is still trying to peel off and another between Brown and Democrats for a budget that meets Brown’s standards, although it may just be the later as some say Brown has given up on the Republicans.

Three points stand out:

  • Brown’s veto was courageous and principled. Budget gimmicks are essentially the same as the unsustainable borrowing Americans and the country as a whole has been engaged in for the past decade. They defer painful decisions till a later date and exacerbate the problems such that the consequences of those painful decisions will ultimately be worse. Californians need to decide whether they want a state with limited public services, underfunded schools, expensive higher education or to raise taxes, and the only way to compel them to understand that the choice is necessary is by showing what the current revenue levels can pay for.
  • Chiang’s declaration that the budget is unbalanced is likely unconstitutional. He supposedly draws his power from the 2004 ballot initiative that instituted the balanced budget requirement. However, as Mark Paul points out, that initiative explicitly made the Legislature the arbiters of whether the budget is balanced. The controller isn’t charged with making that decision, with good reason. If the Controller were from a different party than the legislative majority, he or she could use that power to improperly influence the Legislature’s decisions. Even though it’s a bit strange to have the Legislature deciding whether their budget is balanced, that’s what the California Constitution provides.
  • California’s government is dysfunctional. Democrats control the executive and legislative branches and the most likely result currently is an all-cuts budget passed with no Republican votes. It doesn’t get more backwards than that.
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