A State Without a Budget, A Government Without a Clue

The Return of ‘A State without a Budget, A government without a Clue’: BIG MIDYEAR HIT FOR PROP 98 LIKELY + DEEPER CUTS TO STATE BUDGET EXPECTED + Addl Coverage + smf’s 2¢

2011-11-17T17:14:00.001-08:00

INT. CLASSROOM – DAY
smf: In budget cycles past, 4LAKids broke out the California Budget Debate from the rest of the Education mess and placed in in a separate blog: “A state without a Budget, a government without a Clue”. 4LAKids was trying to keep the recession separate from recess – and to avoid depression altogether.

This past year the state got a budget early, and after an initial hiccough got a another, “final” budget; close enough to on-time to escape a tardy slip. There was no “State without a Budget, Government without a Clue.”

Except, of course, it unraveled just like the Schwarzeneggerian budgets previous: Those rose-colored glasses and fanciful projections ran afoul of reality and the towering house of cards came tumbling down like a pre-Field Act elementary school in Long Beach in 1933.

The May Revise comes in December this year; pink slips and holiday cards will be in the mail. And charter schools and school districts will go into bankruptcy and/or receivership.

So we’re back right back where we started – deeper in debt, mired in the shortfall, tangled in the great expectations and the Reform®; Tested, Assessed Value-addled+Data-driven to Distraction.

“Cut, cut, cut!” say the Republicans.

”Cut!” says the director.
”Places” says the A,D.
“…Roll Camera.”
”…………Speed.”
“………………Scene 2011, Take Three. Marker.”
”…………………………And…. ACTION!”

Big midyear hit for Prop 98 likely: LAO foresees $3.7 billion state shortfall

By John Fensterwald - Educated Guess | http://bit.ly/uwgWIX

11/17/11 • The first shoe fell with a thud Wednesday, when the Legislative Analyst’s Office predicted that a $3.7 billion state revenue shortfall this year would result in $2 billion in midyear “trigger” cuts, including $1.5 billion in Proposition 98 funding and $100 million each to the University of California and California State University.

The other shoe will drop next month when the state Dept. of Finance issues its own revenue estimates and then sets the midyear cuts based on the rosier of the two projections.

The LAO is predicting a $13 billion state deficit next year, even after $2 billion in midear cuts this year, declining gradually over five years. Click to enlarge.>>

The expected cuts, which will bite into services for the disabled as well, follow dreary revenue reports for the first four months of the fiscal year, and so should come as no shock. The repercussions were felt immediately Wednesday, with CSU trustees approving a 9 percent tuition increase for next year unless the state increases funding by at least $138 million next year. The $100 million midyear cut will put CSU that much more in a hole and wipe out the system’s reserves.

Under the budget passed last year, the shortfall also will lead to a $10 per credit community college fee increase, and will compound problems for K-12 districts, especially those that, hoping against hope, didn’t build in sufficient reserves or don’t have contingencies for negotiating additional staff furlough days this spring. Under the worst-case scenario, some of those districts, the LAO said, may run right out of cash by year-end and have to seek a state emergency loan.

The $1.5 billion in Prop 98 cuts would include the $248 million in home and school transportation payments – more than half of funding for the program – and $1.1 billion in standard revenue limit funding for districts. The latter equals a cut of $180 per student, about 3 percent of state tuition payments.

The transportation cuts, an average of $41.60 per student, will disproportionately affect rural and poor urban students, according to a breakdown by Stephen Rhoads, a lobbyist with Strategic Education Services in Sacramento. In rural Humboldt County, the cut amounts to $113 per student; in Mariposa County, $346 per student; for low-income students, the cut would average $49 per child, compared with $23 in wealthier districts. If students stop attending school regularly after bus routes are cut, districts would see a further erosion in revenue.

The Legislature made contingencies for cuts when it shifted $2 billion in sales tax revenue from Prop 98 to pay for transferring prisoners to county and local jails. Rather than immediately cut education, the Legislature assumed that the state would take in an extra $4 billion in revenue – a deal it cut with the California Teachers Association that in the end turned sour.

CTA President Dean Vogel, commenting on the LAO report, called for fixing the state’s “unfair tax structure and corporate tax breaks” in order not to shortchange education.

“It’s time to put a fair and equitable tax system in place so that our students and the most vulnerable Californians don’t have to continue to do without,” he said.

Looking ahead to a sluggish economy and an unemployment rate that will likely remain above 8 percent for another five years, the LAO assumes that the midyear cuts won’t be restored for years. Even with the midyear cuts, the LAO is predicting that the state will end this year $3 billion in the red, and the deficit will grow to $13 billion next year, and will remain above $5 billion per year through 2016-17.

If there’s good news for schools, it’s in the LAO’s projection that the funding obligation for K-12 and community colleges will rise $4 billion next year. But more than half of that will be simply part of what the state owes the schools: restoring Prop 98 to the level before the $2 billion in sales tax money was diverted and then partially repaying for the lost $2 billion this year ($400 million per year for five years).

With unemployment beginning to drop next year, per capita income will rise 4 percent, resulting in an increase of nearly $1 billion in the Prop 98 obligation. But, with the Prop 98 increase contributing to the $13 billion deficit, the LAO suggested that the Legislature would have to consider suspending Prop 98 – and how to do it.

It added two more cautionary notes: Even though an upsurge in revenue may enable the state to fund Prop 98 an average of $2.5 billion a year beyond the minimum guarantee from 2013-14 to 2016-17, it will still end up owing education $10 billion in past obligations. And it will not have begun to pay down CalSTRS’ unfunded pension liability. “Addressing the unfunded liabilities of just the teachers’ retirement fund probably will require billions of dollars of additional payments annually over the coming decades,” the report said.

Deeper cuts to state budget expected: Lower-than-forecast revenue means automatic reductions will likely kick in. A shorter K-12 school year could result.

By Anthony York and Nicholas Riccardi - Los Angeles Times |

http://lat.ms/vLwyTN

Students and parents rallied against education cuts outside Millikan Middle School earlier this year. (Kirk McKoy / Los Angeles Times)

November 17, 2011 - Reporting from Sacramento— Sluggish state revenue is likely to trigger a new round of spending cuts that could mean a shorter school year and millions of dollars slashed from public universities, child care programs and services for the disabled, the Legislative Analyst's Office says.

California's coffers will be $3.7 billion below what lawmakers and the governor assumed in the budget they crafted last summer, said Mac Taylor, the analyst whom legislators look to for nonpartisan financial advice. The new reductions were built into the spending plan, to kick in if state income fell short.

A final decision will be made next month, when Gov. Jerry Brown's Department of Finance releases its own forecast for the rest of the fiscal year, which ends June 30. Taylor said the projections could still change enough to ward off some of the deepest cuts. But his announcement Wednesday was the first official confirmation that reductions are likely.

The grim news prompted outrage from education officials who have already sharply pared their budgets. But it was no surprise to economists who had criticized Brown for balancing the budget by anticipating an extra $4 billion in revenue after he failed to secure Republican support for a ballot measure to raise taxes.

"Short of aliens landing on the planet with a big bucket of cash," said Christopher Thornberg, a founder of Beacon Economics, "there's no way we're going to make [Brown's] revenue projections."

If the economic picture does not improve in December, the new cuts would include a $1.4-billion reduction in public school funds that would even force state-provided student buses to be mothballed. Such severe cuts had Los Angeles schools Supt. John Deasy publicly contemplating defiance Wednesday.

"What comes to mind is we simply won't do it," he said in an interview.

At the urging of teachers unions, legislators barred districts from closing the money gap by laying off teachers. Rather, they would have to cut expenses elsewhere. The state gave them permission to trim up to a week from the school year if they agreed with their local teachers unions to do so.

Kevin Gordon, a lobbyist for several school districts, said he believes it would be almost impossible for local authorities to win permission from labor to curtail the academic year and the Legislature would have to revisit the issue.

"There will be a reshuffling of the deck entirely if it appears schools will have to shoulder the magnitude of cuts" that the Legislative Analyst's Office projects, Gordon said.

In addition to reductions in K-12 education, the University of California and California State University systems would each lose $100 million. Fees at the state's community colleges would increase by an additional $10 per unit.

Counties, already struggling to accommodate more inmates under Brown's current budget, which shifts responsibility for some offenders from the state to local governments, would lose $72 million that pays for the housing of serious juvenile offenders.

Funding for home health aides would be cut by 20%, and services for the disabled would be slashed by $100 million — on top of deep reductions already made in those programs.

That could be the last straw for Michelle Franklin, 45, of Stockton, who receives just under $800 a month from the state to care for her schizophrenic son and an elderly neighbor. If her payments drop by 20%, she said, she may have to commit her child to a state mental hospital.

"I love my son dearly and it's going to break my heart, but if they cut my hours I may have to make the decision to let my son go," Franklin said. "That's going to end up costing the state a lot more in the long run."

Administration officials and Democratic legislative leaders urged calm, holding out hope that December's forecast would be better and enable the state to dodge the automatic cuts. They stressed that the state's finances are in better shape than they have been for much of the decade-long budget crisis.

"California's budget gap is the result of a decade of poor fiscal choices and a global recession," said Brown spokesman Gil Duran. "This year, we cut the problem in half. Next year, we'll continue to make the tough choices necessary until the problem is solved."

But Taylor's analysis shows little relief in sight. It predicts that even with the new slate of cuts, the state will face a $13-billion shortfall in the next fiscal year. That gap would be so severe it would be difficult to close without going below the minimum funding that state law guarantees for K-12 education.

The good news, Taylor said, is that the annual deficit is expected to gradually dwindle into the range of $5 billion by 2016, a better long-range picture than he has seen in years.

The cuts will become official Dec. 15 if the projections don't improve, then be phased in over subsequent months. In September, Brown vetoed a bill that would have allowed the Legislature to reconfigure the cuts, saying it would be reckless to alter them. On Wednesday, Taylor said it would be "unwise" to do so.

A bevy of interest groups are trying to change them anyway.

Jean Hurst, a lobbyist with the California State Assn. of Counties, said her members would ask the administration to reconsider taking $72 million in juvenile lockup funds from them. She noted that the move would come as counties implemented Brown's "realignment" plan by keeping inmates who would have otherwise gone to prisons.

"To pull additional funds out of our base of safety services is a huge challenge," she said.

Social service advocates and unions representing home health workers vowed to sue to stop what they described as "devastating" cuts to services for the disabled. They joined labor groups and many Democrats in calling for tax hikes to be placed on the 2012 ballot to stave off more reductions.

Both university systems have said they believe they can absorb their potential cuts, though this year's austere budget led Cal State trustees to approve a 9% fee hike Wednesday.

Full coverage from google news

Most school districts may weather midyear cuts, but worry about future

San Jose Mercury News – Nov 17, 2011

California's anemic tax revenues may trigger steep budget cuts on Feb. 1, but with most school districts anticipating them, they won't set off drastic changes in the school year. That doesn't mean the cuts, estimated to be $180 per ...

Calif. budget cuts could shorten school year

San Jose Mercury News - Nov 17, 2011

SACRAMENTO, Calif.—Millions of California parents and schoolchildren face a direct hit from the state's latest financial woes—the prospect of fewer school days that would make California's school year among the ...

Fitch: Effect of California Trigger Cuts to Vary for State & Schools

MarketWatch (press release) - Nov 17, 2011

NEW YORK, Nov 17, 2011 (BUSINESS WIRE) -- Underperforming revenues will likely prompt the State of California to lower its near-term revenue outlook and implement some mid-year trigger cuts contained in its 2012 fiscal budget, a scenario that will have ...

Calif. faces $13B deficit, faces midyear cuts

BusinessWeek - Nov 17, 2011

California faces $2 billion in automatic spending cuts at the first of the year that will reduce funding for public schools, higher education and a range of state services, according to a nonpartisan fiscal analysis released Wednesday. ...

State fiscal nightmare: deep cuts on horizon

San Francisco Chronicle (press release) - Nov 16, 2011

Rich Pedroncelli / AP California faces deep midyear cuts to its universities, community colleges, social service programs and public schools - which may have their year shortened - because the state will collect billions of dollars less in revenue than ...

All 81 related articles »

Blogs

New California budget report triggers old partisan arguments

Sacramento Bee (blog) - ‎Nov 16, 2011‎

Fresh off a new Legislative Analyst's Office report that paves the way for mid-year cuts in education and social services, Democrats called for additional taxes and Republicans said lawmakers must rein in spending. The report also pegs the state's ...

BUDGET Analyst projects revenue $3.7 billion short

Press-Enterprise (blog) - ‎Nov 16, 2011‎

By PE Politics on November 16, 2011 11:25 AM California would face $2 billion in midyear cuts to schools, universities and other programs under an updated revenue analysis by the Legislature's nonpartisan fiscal analyst. State revenue is on pace to be ...

LAO Predicts Trigger Pulled On Budget Cuts

Capital Notes (blog) - ‎Nov 16, 2011‎

The annual fiscal forecast of the Legislative Analyst's Office is always interesting to budget wonks, but never so consequential to the services used by millions of Californians as it is this year. That forecast, released this morning, projects the ...

All 8 related blogs »

United States

Californians Dislike Cuts as Revenue Projected to Trail Budget

BusinessWeek - Nov 16, 2011

Nov. 17 (Bloomberg) -- Almost three-quarters of Californians say the state doesn't spend enough on higher education, according to a new survey, even as revenue forecasts raise the likelihood of more cuts to colleges ...

Sharp Decline in Revenue Is Forecast for California

New York Times - Nov 16, 2011

A report released by state budget analysts on Wednesday forecasts a sharp decline in revenue for this fiscal year, which could set off more than $2 billion in new cuts in state spending in January, including a seven-day reduction in ...

All 97 related articles from United States »

Sacramento, CA

LAO: Calif. Budget Triggers Likely, $13 Billion Deficit Next Year

Capital Public Radio News - ‎Nov 16, 2011‎

It now looks even more likely that California will have to make mid-year “trigger” cuts to the state budget, according to a new report by the state's nonpartisan legislative analyst's office. By Ben Adler This year's budget relies on an extra $4 ...

California Budget Facing Billion Dollar Deficit

KCRA Sacramento - ‎Nov 16, 2011‎

SACRAMENTO, Calif -- California's nonpartisan fiscal analyst projected the state to have a $13 billion budget shortfall over the next 18 months. That likely means Gov. Jerry Brown and state lawmakers will have to make another round of spending cuts. ...

Analyst: State Faces $13B Deficit Next Year

KCRA Sacramento - ‎Nov 16, 2011‎

California's nonpartisan budget analyst says the state is projected to face a $13 billion budget shortfall next year. By The Numbers The Legislative Analyst's Office on Wednesday released a gloomy state fiscal outlook. It says tax revenue will fall ...

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STATE BUDGET BATTLE GEARING UP

2010-02-10T06:32:00.001-08:00

Op-Ed by Thadeus Greenson/The Times-Standard [Eureka/North Coast]

Posted: 02/10/2010 01:31:30 AM PST

Anyone questioning the severity of California's budget woes needs only to look at some recently considered proposals to generate revenue for a rebuke, and a glimpse into just how dire things really are.

Recent months have seen cash-strapped California seriously consider proposals to sell naming rights to its state buildings, to legalize and tax marijuana, to keep marijuana illegal but tax it anyway, to privatize the state's prisons, to build and operate state prisons in Mexico and to sell off surplus state vehicles autographed by the governor.

The latest proposal comes from the governor, and is looking to convert overhead freeway displays -- historically used for public service announcements and to warn of road hazards -- into electronic advertising billboards.

While the proposal isn't likely to gain much traction, it further underscores the bleak reality that California is in the throes of budget problems the likes of which haven't been seen in a long, long time. It's also an indication that the state isn't taking its problems as seriously as it should, according to Ryan Emenaker, an assistant professor of political science at College of the Redwoods.

”We are in a desperate situation, and I think this is another thing in a line of us pretending that the situation isn't that dire -- that we can fix it with a gimmick,” Emenaker said. “It's the idea that we can avoid making hard choices and find the magic bullet to fix all our problems.”

But, Emenaker cautioned, there won't be any magic bullet and the only answer will be a long-term reshaping of the state's budget and tax systems.

In the short term, however, there's a budget to bring into balance.

With the state having issued $32 billion in budget cuts in the last year, most believe California has long since run out of easy answers. Now, facing a pending $20 billion deficit for the next fiscal year, and projected shortfalls of about $20 billion in each of the next five years, the budget battle is gearing up again.

”Our budget is seriously out of whack, and it's becoming worse by the day,” said state Sen. Patricia Wiggins, D-Santa Rosa, in a statement.

This week, legislative committees will continue chewing over Gov. Arnold Schwarzenegger's budget proposals, with the familiar refrains: Democrats calling to protect education and health and human services, and Republicans pledging not to raise taxes. All the while, state finance officials are warning that lawmakers must act quickly to avert another cash crisis.

To make up for a drastic drop in tax revenue and plug a $20 billion deficit, Schwarzenegger is proposing further cuts to health and human services, welfare programs, prisons, transportation and environmental programs.

He also seeks to raise money by rolling back recent corporate tax breaks, expanding oil drilling off the Santa Barbara coast to provide $140 million for state parks, and demanding more money from the federal government.

In his proposal, Schwarzenegger banked on almost $7 billion in additional federal funds -- money he claims the state is owed. But the federal budget proposal President Barack Obama recently released only includes a fraction of that amount -- about $1.5 billion.

The governor's proposal contained a contingency plan in the event that Obama didn't offer up what Schwarzenegger asked for, and it includes the elimination of some of the state's social service programs, including in-home care for frail seniors and the disabled, the Healthy Families program that provides health care for millions of children of the working poor, and CALWORKS, the state's main welfare and work-training program.

Many have their doubts about the proposed cuts, saying that they come with huge moral and fiscal ramifications.

The California Budget Project -- a nonprofit, nonpartisan organization -- warned that the proposed cuts come at a time of growing need.

A recent report released by the project indicates the state has about the same number of jobs it had 10 years ago, when the state's population had about 3.6 million fewer working-age individuals. More than 2.2 million Californians were out of work in December, and the state's jobless rate was 12.4 percent. Additionally, the report states that more than 1.5 million Californians were underemployed in December, working part time “involuntarily.”

Things are so bad, the report states, that the CALWORKS rolls increased by more than 86,000 over the last two years and the number of Californians enrolled in Medi-Cal increased by more than 450,000. Almost 1 million more Californians were receiving food stamp assistance in October 2009 than in October 2007, according to the report.

In light of all those numbers, California Budget Project Executive Director Jean Ross warns that the governor's proposed cuts could exacerbate the state's problems.

”The governor's proposed budget will batter a struggling economy and make life tougher for millions of families already struggling in the face of double-digit unemployment rates,” Ross said in a statement. “... He's proposing cuts to the Healthy Families program, which will lead to more uninsured children. He's slashing the In-Home Supportive Services Program, which will increase demand for costly nursing home care. At a time when the governor is talking about the importance of 'jobs, jobs, jobs,' he's proposing deeper cuts to the CALWORKS Program, California's highly successful welfare-to-work program.”

But, nobody disputes that something has to give, and that the bleak state of California's finances necessitate some very tough choices, in both the short and the long term.

In a presentation to the Assembly Budget Committee last week, State Controller John Chiang issued a stark warning. Not since July 2007 has California actually had cash on hand, Chiang reportedly told the committee, adding that, since then, the state's relied on external and internal borrowing from various special funds to pay its bills.

Chiang told the committee that, in the short term, the state faces a cash crunch in March. An influx of tax revenue is expected in April, but much of that will reportedly be quickly diverted into repayment of short-term loans, leaving the state cash-strapped by the July 1 start of fiscal year 2010-2011. The state encountered a similar situation last year, prompting the issuance of IOUs, widely considered a national embarrassment.

To address the short-term issue, Schwarzenegger proposed a plan to give the state Department of Finance unprecedented authority to delay almost any state payments at any time over the next two years, which critics argue would leave a host of entities, including local schools, people expecting tax refunds and CalGrant recipients on the fence, unsure of when they would receive state payments.

”Sadly, it's just another power play,” said Assemblywoman Noreen Evans, D-Santa Rosa, in a post on her budget blog. Evans is currently running for the First District state Senate seat currently held by Wiggins, who has announced she will not seek re-election in November.

Assemblyman Wesley Chesbro, D-Arcata, also took issue with the governor's plan, saying in a statement issued Friday that he finds it unacceptable to give Schwarzenegger's administration that kind of blanket authority.

”The governor has a responsibility to present his deferral proposals to the Legislature so that there can be a hearing and public testimony, followed by a vote of the membership,” Chesbro said in the statement. “The people of California have a right to learn about his proposals and participate in this process. Government must be open and accessible to the constituents it serves.”

However the state bridges the gap in the short term, Chiang warned that the way the state balances its budget for the next fiscal year will dictate what California looks like for years to come.

”Your actions can make the difference in setting this generation on the right fiscal path,” Chiang told the assembly committee, according to a report in the California Progress Report. “For too long, when people don't make tough choices, students, the aged, disabled and taxpayers all end up suffering.”

Wiggins said she and her colleagues in the Senate have been going over the governor's proposals and crafting counterproposals with a sense of urgency. But, she cautioned, the Legislature needs to find some common ground.

”Budgeting requires a balancing act, but it's darn near impossible to achieve a balance if some of the players refuse to make compromises,” she said, adding that while Democrats have conceded to tens of billions in spending cuts, Republicans refuse to budge on tax increases.

For his part, Chesbro said he knows difficult choices lie in his future.

”With our current financial situation, the Legislature will be facing tough choices. But, these choices need to make sense financially and provide real budget savings,” Chesbro said in the release, adding that he believes many of Schwarzenegger's proposals would prove more costly in the long run by pushing the elderly and disabled into nursing homes.

Emenaker said he thinks the Legislature will continue to face similarly difficult choices until the economy rebounds, because the structure of the state's budget and tax systems necessitate them. Because the state's revenue base is so dependent on sales and income tax revenues, Emenaker said the state is assured to see revenues dip in down economies. Conversely, Emenaker said demands for state services increase in a down economy, when more people find themselves in need of assistance and relying on state programs for the poor.

”We've set up a system where we always have the least amount of money coming in when we have the most amount of need,” he said. “Structural changes need to be made.”

GOVERNOR’S BUDGET PLAN LIKE WATCHING ‘GROUNDHOG DAY’

2010-01-11T22:37:00.001-08:00

Written by California State Association of Counties | PublicCEO.com

January 11, 2010 -- The Governor’s proposed 2010-11 state budget released today is based on unrealistic assumptions, significant risks and cost shifts to counties, according to the California State Association of Counties (CSAC).

“This plan is a retread budget, not a reform budget,” said Tony Oliveira, CSAC President and Kings County Supervisor. “Unfortunately, it’s based on a number of failed ideas taken from past years.”

The budget proposal will blow a huge hole in an already frayed safety net, said Paul McIntosh, CSAC Executive Director. “There are recommendations to cut more than $2.9 billion from social service programs. This action alone will further push families into poverty, putting them in a dire situation from which they may never recover. That’s not the California Dream.”

Elimination of these programs will, in turn, impact other areas as well, including our criminal justice system, the homeless population and counties’ general assistance roles, McIntosh said.

The proposal to rely on $6.9 billion in additional funds from the federal government has county officials very concerned. If the Governor’s attempts to secure these funds fail, critical programs will be eliminated. “The Governor is holding vital social programs – and the people they serve -- hostage,” McIntosh said. “It’s a risky gamble to balance the health and safety of millions of Californians on a Hail Mary to the federal government.”

CSAC officials called the Governor’s proposed spending plan a “job killer.” At a time when the Governor is calling for the creation of new jobs, the budget plan could eliminate hundreds of thousands of jobs that provide vital services to the sick and disabled. Elimination of the IHSS and CalWORKs programs alone would put nearly 450,000 Californians out of work.

“Instead of the ‘jobs, jobs, jobs’ the Governor talked about in his State of the State address, it’s no jobs, no jobs, no jobs,” commented McIntosh.

The Governor’s plan will also reduce future jobs tied to transportation projects. CSAC officials are concerned that the alternative funding proposal for transportation will impact the system long term. While appreciating that the budget plan does not call for the reduction in revenues for local streets and roads, counties point out that it will eliminate the sales tax on gas, a source of future revenue growth.

“The state will be trading a revenue source that is projected to increase with one that is projected to decrease,” Oliveira said. “This budget maneuver will hinder future investment in California’s transportation system.”

“While there is little to like about this budget, California counties are strongly supportive of assuring that California gets every dollar from the federal government for delivering essential services. We look forward to working with our state and federal partners in furthering this goal,” Oliveira said.

The Governor’s proposal also includes cost shifts for counties. For example, it calls for a savings of $291.6 million by sending certain felony offenders to county jails rather than prison. Jails in many of California’s 58 counties are already overcrowded, and 32 are operating under a population cap.

“The Governor’s theme this week has been teamwork and fairness. This budget does nothing but undermine the partnership the state has with California Counties and the 38 million people we serve,” McIntosh said.

The California State Association of Counties (CSAC) is the voice of California’s 58 counties at the state and federal level. The Association’s long-term objective is to significantly improve the fiscal health of all California counties – from Alpine County with a little more than 1,200 people to Los Angeles County with more than 10 million – so they can adequately meet the demand for vital public programs and services. CSAC also places a strong emphasis on educating the public about the value and need for county programs and services.

SCHWARZENEGGER: "Dear Santa:" …with a cc: to Uncle Sam

2009-12-26T14:33:00.001-08:00

from various newsfeeds

Schwarzenegger Seeks Obama's Help for Deficit Relief

BusinessWeek - Michael B. Marois, William Selway - ‎Dec 24, 2009‎

Dec. 24 (Bloomberg) -- California Governor Arnold Schwarzenegger, anticipating a $21 billion state budget deficit, ...

Schwarzenegger Presses US for More Aid for Needy California

New York Times - Randal C. Archibold - ‎Dec 23, 2009‎

LOS ANGELES — Gov. Arnold Schwarzenegger has taken advantage of the holiday lull before the next state budget storm to serve notice ...

Schwarzenegger to seek federal help for California budget

‎Dec 23, 2009‎ - Los Angeles Times

Two Ways to Play: California May Ask for Bailout

Minyanville.com - Terry Woo - ‎Dec 24, 2009‎

Specific details aren't out yet but California Governor Arnold Schwarzenegger may ask President Barack Obama for a bailout ...

No happy new year for California budget

‎Dec 22, 2009‎ - Reuters

Health care plan may cost too much for California

‎Dec 21, 2009‎ - abc7news.com

Broke, Schwarzenegger begs President Obama for $8 billion. Is a California ...

LA Weekly (blog) - Jill Stewart - ‎Dec 23, 2009‎

Wow, Governor Arnold Schwarzenegger just continues to flounder and flub and flim-flam his way through one of the worst ...

Healthy Families/SCHIP: U.S. QUESTIONS CA’s HEATHCARE PLAN FOR CHILDREN OF WORKING POOR

2009-12-15T07:16:00.001-08:00

http://bit.ly/6bwjJ0

Program passed by the Legislature in September to keep 700,000 children from losing healthcare coverage may not meet regulatory guidelines, federal health officials say. Eric Bailey in the Los Angeles Times -- 12/15/09

“U.S. health officials say the plan adopted by the state during the final days of the legislative session in September and signed into law by Gov. Arnold Schwarzenegger may not meet regulatory muster.

“As a result, children's health advocates are warning that by the end of next year, hundreds of thousands of poor youngsters could lose their coverage -- even as the Obama administration continues its push for universal healthcare.”

CALIFORNIA DEBT SERVICE TO SURPASS $10 BILLION, SCHWARZENEGGER NAMES ANA MATOSANTOS FINANCE CHIEF

2009-12-14T22:38:00.001-08:00

links from Rough & Tumble

California debt costs to surpass $10 bln-Treasurer

-- California, the largest borrower among U.S. states, may see its debt interest costs nearly double to over $10 billion in 2020, the state treasurer reported on Monday. Lisa Lambert Reuters -- 12/14/09

Schwarzenegger names new finance director

-- Matosantos, currently chief deputy, will take over the Department of Finance helm days before Schwarzenegger delivers his final budget proposal in January, expected to be a cuts-heavy plan to deal with another severe deficit. Kevin Yamamura in the Sacramento Bee Shane Goldmacher in the Los Angeles Times -- 12/14/09

LAUSD BUDGET SHORTFALL NEEDS SOLUTIONS NOT BATTLES

2009-12-10T21:05:00.001-08:00

EASTERN GROUP PUBLICATIONS Editorial | Eastside Sun / Northeast Sun / Mexican American Sun / Bell Gardens Sun / City Terrace Comet / Commerce Comet / Montebello Comet / Monterey Park Comet / ELA Brookyln Belvedere Comet / Wyvernwood Chronicle / Vernon Sun

December 10, 2009 -- The first signs of what promises to be a war of words, shouts and picketing has taken place this week in the Los Angeles Unified School District.

The LAUSD school board has adopted a budget the District hopes will help it close a projected $1.2 billion deficit through 2012.

This budget calls for the furloughing of at least 5,000 district personnel. It appears that this time around the threats of layoffs will actually come to fruition. Last spring, LAUSD threatened to layoff as many as 8,000 teachers, but through a combination of cuts in other areas and the use of stimulus dollars, that threat never came remotely close to being acted on.

It doesn’t seem that will be the case this time around, however.

But if it is, and the District really has no plans to layoff workers, then they should not be causing so much uncertainty among District employees and even greater mistrust by the public in the school board’s budget proposals.

Clearly, however, if the budget is anywhere near the dismal financial reality being painted by the District, tough compromises will have to be worked out between the District’s unions and District negotiators. Hopefully it won’t come down to a standoff that will just disrupt our schools and not solve anything.

There comes a time when we all have to accept the inevitable and start working together to come to the least disruptive solutions. Any less, is a disservice to the teachers, students, and the District.

CITY OF L.A.’s CREDIT DOWNGRADED: L.A. credit rating takes a hit in light of grim budget outlook + L.A. Council will get briefing on finances, a day after city's credit rating is downgraded

2009-11-25T10:23:00.001-08:00

L.A. credit rating takes a hit in light of grim budget outlook

by Phil Willon at L.A. City Hall | LA Times/LA Now!

November 24, 2009 | 6:15 pm

Los Angeles is about to pay a price for its financial woes.

The city’s credit was downgraded today by Fitch Ratings on $2.94 billion in debt, meaning that borrowing money will become more expensive for Los Angeles as it grapples with a $98-million current-year budget shortfall and faces the prospect of graver fiscal woes in the years ahead.

The financial ratings service credited Mayor Antonio Villaraigosa and the City Council for taking aggressive action to whittle down the budget gap, but added it wasn’t enough and that the ratings outlook for the city remains negative. Fitch Ratings, in a statement released today, said the “city’s economic decline, as evidenced by high unemployment, sales tax weakness, assessed value losses and high home foreclosure ... will impede financial recovery."

Tomorrow, Santana is scheduled to brief the council on the downgrade, as well as the city’s financial status.

Council President Eric Garcetti said the rating downgrade shows that the city still needs to make sweeping structural changes to its $7.05-billion budget. Even after winning concessions from city unions, including pay cuts and an early retirement program, the city still faces a $98-million shortfall in the current budget year and a $408-million budget gap next year.

L.A. Council will get briefing on finances, a day after city's credit rating is downgraded

by Phil Willon at L.A. City Hall | LA Times/LA Now!

November 25, 2009 | 7:29 am

The Los Angeles City Council today will get what is expected to be a sober briefing on the city's financial condition, a day after L.A.'s credit rating was downgraded.

The city’s credit was downgraded by Fitch Ratings on $2.94 billion in debt, meaning that borrowing money will become more expensive for Los Angeles as it grapples with a $98-million current-year budget shortfall and faces the prospect of graver fiscal woes in the years ahead.

The financial ratings service credited Mayor Antonio Villaraigosa and the City Council for taking aggressive action to whittle down the budget gap but added it wasn’t enough and that the ratings outlook for the city remained negative. Fitch Ratings, in a statement released today, said the “city’s economic decline, as evidenced by high unemployment, sales tax weakness, assessed value losses and high home foreclosure ... will impede financial recovery."

“It signals that we have some very difficult choices to make in the future," said Administrative Officer Miguel Santana, the city’s top budget official. “We simply cannot be spending at the rate that we have in the past."
Council President Eric Garcetti said the rating downgrade showed that the city still needed to make sweeping structural changes to its $7.05-billion budget. Even after winning concessions from city unions, including pay cuts and an early-retirement program, the city still faces a $98-million shortfall in the current budget year and a $408-million budget gap next year.

Photo: Mayor Antonio Villaraigosa. Credit: Los Angeles Times

RED INK IN THE GOLDEN STATE

2009-11-20T16:41:00.001-08:00

Letters to the LA Times 11/20

Re “State facing $21-billion budget gap,” Nov. 18
While California drowns in nearly $21 billion of red ink, its educational system goes to hell and its tax base keeps shrinking as businesses flee, the morons who run this state busy themselves by regulating big-screen TVs.
As for Los Angeles County, its imbecile district attorney bathes himself in self-aggrandizement and political posturing over Roman Polanski -- a case that even the victim wants no part of -- and medical marijuana clinics while real crime festers.
Is it any wonder that the citizens have given up on the once-Golden State?
Michael Seawell
Santa Monica

::
The eighth-largest economy in the world, the once great state-nation -- California -- is being run like a banana republic.
In the words of Cicero: "O tempora! O mores!"

●●smf's Hollywood High School Latin pays off!: "Alas for the times and the manners!"

M.T.Gyepes
Pacific Palisades

::
The news doesn't get any better for education with the announcement that California is looking at a budget shortfall of more than $20 billion next year. The Los Angeles Unified School District has already cut teachers and support staff, increased class sizes and eliminated many vital programs. Now there is talk that employees are facing a pay cut as high as 12%. Still, educators will be required to increase test scores and improve student learning.
When will we realize you get what you pay for in life? If we continue to shortchange education, we will continue to shortchange our future.
Tom Iannucci
Los Angeles
The writer is assistant principal, Paul Revere Charter Middle School.

CALIFORNIA FACES A PROJECTED DEFICIT OF $21 BILLION: "Less than four months after California leaders stitched together a patchwork budget, a projected deficit of nearly $21 billion already looms over Sacramento" …and so it continues

2009-11-19T08:10:00.001-08:00

The legislative budget analyst's projection, to be released Wednesday, threatens to send Sacramento back into gridlock and force more broad cuts to state programs.

Gov. Arnold Schwarzenegger will present his next proposed budget in January. Republicans vow to block new taxes; Democrats say they are through with cuts. (Eric Paul Zamora / Associated Press)

Chart: Projected deficit of $21 billion

LAO REPORT

2010-11 Budget

California's FISCAL OUTLOOK

By Shane Goldmacher reporting from Sacramento | LA Times

November 18, 2009 - Less than four months after California leaders stitched together a patchwork budget, a projected deficit of nearly $21 billion already looms over Sacramento, according to a report to be released today by the chief budget analyst.

The new figure -- the nonpartisan analyst's first projection for the coming budget -- threatens to send Sacramento back into budgetary gridlock and force more across-the-board cuts in state programs.

The grim forecast, described by people who were briefed on the report by Legislative Analyst Mac Taylor, comes courtesy of California's recession-wracked economy, unrealistic budgeting assumptions, spending cuts tied up in the courts and disappearing federal stimulus funds.

"Economic recovery will not take away the very severe budget problems for this year, next year and the year after," said Steve Levy, director of the Center for Continuing Study of the California Economy.

In fact, after two years of precipitous revenue declines, the new report projects relatively stable tax collections for the state, said those who were briefed. But that won't stop the deficit from climbing to nearly $21 billion.

Gov. Arnold Schwarzenegger, who will present his next proposed budget to Californians in January as he begins his last year in office, started sounding the alarm last week.

"I think that there will be across-the-board cuts again," he said at a San Jose news conference.

The task in 2010 could be even harder than it was this year, when record deficits and cash shortfalls drove California to issue IOUs for only the second time since the Great Depression. Lawmakers have already cut billions from education, healthcare and social services while temporarily hiking income, sales and vehicle taxes.

"I can't think of any good solutions," said Assemblywoman Noreen Evans (D-Santa Rosa), who chairs the lower house budget committee.

The current budget year accounts for $6.3 billion of the deficit, the nonpartisan analyst projects. Prisons spending will outstrip what has been budgeted by more than $1 billion, and K-12 schools were underpaid by $1 billion under the complex formula that governs education funding, the report says.

Another $14.4 billion of the deficit is for the fiscal year that begins next summer, say those briefed on the report. The governor's next budget will have to account for both years.

The state Department of Finance in August predicted a shortfall of at least $7.4 billion for fiscal 2010-11. But California's financial picture has darkened considerably since then, largely because the shaky summer budget pact relied heavily on borrowing, fiscal tricks and overly optimistic projections.

It assumed receipts of nearly $1 billion from the federal government for Medi-Cal that the analyst questions. Another $1 billion was assumed from the sale of a quasi-public workers' compensation agency that has stalled.

Next year's budget fight is expected to be as contentious as this year's. Republicans vow to block new taxes; Democrats say they are through with program cuts.

Powerful interest groups are already girding for battle.

"There is no more to cut from our schools," California Teachers Assn. President David Sanchez said Tuesday. "There is no more meat on this bone. . . . The next step is amputation."

In higher education, Chancellor Charles Reed of the Cal State University system said this month that he will plead for $884 million in funds from Sacramento next year. The University of California will ask for $913 million more for its 10-campus system, President Mark Yudof has said.

"If ever there was a time to fight for and invest in the institution best positioned to power this state from recession, now is that time," Yudof said in a statement. UC students, meanwhile, are coping with a staggering 32% fee hike.

California's finances have been so bad that the governor's finance director, Mike Genest, told a budget forum in Washington last week that back in February he had combed through the U.S. Constitution to research whether California could legally declare bankruptcy -- or revert to some kind of territorial status. (Neither was realistic, he determined.)

The state's financial problems predate the current recession and the gimmicks used to paper over the deficit, experts say. Year in and year out, state government spends roughly $10 billion more than it collects in tax revenue.

Political divisions in Sacramento, where support from both parties is necessary to pass a budget, have repeatedly stymied efforts to plug that hole. The task probably won't be easier next year as various interests try to muscle one another to the sidelines.

Some have even drafted potential ballot measures to aid themselves in the budget fight and are preparing to collect signatures in an effort to place the initiatives before voters.

Among the ideas: raising tobacco taxes, curbing public pensions, repealing corporate tax breaks passed thisyear and last, splitting the tax rules for commercial and residential property, reducing the legislative votes needed to pass a budget and strengthening the firewall around local government and transportation money.

"There's a lot of people putting chess pieces on the board right now," said Jon Coupal, president of the anti-tax Howard Jarvis Taxpayers Assn. "The question is which of those chess pieces will be moving."

___________________________

California's budget woes will continue for years, report says

Tax receipts have leveled off, but revenue won't bounce back until the 2014-15 budget year, according to the chief budget analyst. Near term, the state faces a nearly $21-billion deficit.

By Shane GoldmacherReporting from Sacramento | LA Times

November 19, 2009 - Despite an economy on the mend, California's budget woes will drag deep into the next decade, according to a report released Wednesday by the state's chief budget analyst.

Tax collections have leveled off after one of the most precipitous drops since the Great Depression. But revenue is not expected to fully bounce back until the 2014-15 budget year.

State government faces a nearly $21-billion deficit over the next year and half, according to the report by nonpartisan Legislative Analyst Mac Taylor. Sacramento will be forced to muddle along, he says, unable to reverse the deep cuts that officials have made to K-12, universities, healthcare and social services.

A major reason the recovery will take so long, say many experts, is California's place at the epicenter of the real estate slide and the resulting foreclosure wave. Moreover, "the mess in Sacramento is going to affect the California economy," said Jerry Nickelsburg, senior economist at UCLA Anderson Forecast, "and not in a good way."

Californians must get used to a state that offers fewer services -- and has higher taxes -- than before the real estate boom, Taylor's report suggests. But it remains to be seen how much residents will accept.

On Wednesday, at least 14 people were arrested in a raucous protest as a University of California regents panel approved a 32% student fee hike. A day earlier, the president of the California Teachers Assn. had likened further K-12 cuts to "amputation."

"We cannot afford now what we're spending," said Taylor, whom both Democrats and Republicans look to for fiscal advice. More cuts and more taxes will be necessary to balance the books, he said, calling all the options "painful choices."

Budget shortfalls have reemerged less than four months after lawmakers and Gov. Arnold Schwarzenegger struck a summer deal, which contained accounting gimmicks and rosy assumptions that have failed to pan out.

"The thing about smoke and mirrors is they are usually short-term solutions, and they come back to bite you the next year," said John Ellwood, a professor of public policy at UC Berkeley.

Schwarzenegger, who last week predicted more across-the-board budget cuts, must unveil his plan to address the projected $20.7-billion deficit in January. Taylor urged that officials begin tackling the red ink "as soon as possible."

The deficit is expected to be worse in the years beyond 2011, as temporary taxes expire and raids on local government funds must be repaid by Sacramento. Taylor projected a $21.3-billion deficit in fiscal 2011-12 and a $23-billion shortfall in fiscal 2012-13.

Even those numbers could be conservative. They assume no raises for state workers and no cost-of-living adjustments for government programs. They also assume that California will win all pending court cases in which billions of dollars in service cuts are being challenged.

Republican lawmakers have vowed to block new taxes, which many Democrats advocate to balance California's books. Assembly GOP leader Sam Blakeslee (R-San Luis Obispo) issued a statement Wednesday calling on the Democratic-dominated Legislature to instead change the state's "punitive regulatory and tax climate that is driving jobs away."

The bleak numbers have also spurred calls to Washington, D.C., for help, as much of the federal stimulus package that somewhat blunted this year's state cuts is set to expire. Jean Ross, executive director of the California Budget Project, which advocates for low-income residents, said the state "needs a second round of federal aid as we face record unemployment and continuing economic weakness."

That may be a hard sell in the nation's capital, where conservatives have questioned the success of the first package.

"California clearly has mismanaged its fiscal house," Nickelsburg said. "It seems to me it would be very difficult to convince states that have not mismanaged their own fiscal house to come to the aid of California."

Lead line in Tucson TV story about the Arizona state budget” "At least we're not as bad as California".

2009-11-12T21:39:00.001-08:00

At least California's budget problems are worse

KGUN TV9

12 NOV -- How doses his grab you as a new state motto: "At least we're not as bad as California."

Don't like it?

Brace yourself: when it comes to state budget deficits, the motto fits.

A new pew center report labels our state's budget mess as second worst in the nation.

Arizona's budget is about two billion dollars in the red.

Homes are still being foreclosed, people still can't find work and the state is gasping for breath trying to find money.

Republican state representative frank antenori told us these problems were handed down by the former democratic governor.

"We had a governor who failed to realize the revenue was dropping. She continued to spend," Antenori said.

democratic state senator Linda Lopez agrees with antenori in one sense but disagrees on who's to blame.

There was no debate from either side on the pew study. Lopez and Antenori agreed that Arizona is in big trouble.

That means, more cuts are coming.

You can probably expect a tax increase too.

Antenori's plan would create a flat fee property tax.

Instead of determining the fee by a home's value.

"Some property taxpayers will see an increase in property tax. Some may see a decrease," Antenori said.

Lopez wants to help pass a one cent sales tax increase and also create a whole new tax.

So what does the governor think about all of this?

We called Jan Brewer and left a message. Our call was returned but we were told she wouldn't be available to talk to us today (Thursday)

That would still leave about $1.5 billion unaccounted for they would have to deal with when the regular session starts in January.

The Arizona legislature is expected to cut the budget deficit down by $500-million during a special session this month.

SCHWARZENEGGER WARNS OF MORE ACROSS-THE-BOARD BUDGET CUTS

2009-11-11T07:31:00.001-08:00

Michael Rothfeld in Sacramento for the LA Times

November 10, 2009 | 2:29 pm -- Gov. Arnold Schwarzenegger today predicted a new round of budget cuts, as the state’s finances remain shaky despite large spending reductions made by the governor and lawmakers in July.

Schwarzenegger, at a news conference today and at the Fresno Bee’s editorial board Monday, estimated that the current fiscal year’s budget is $5 billion to $7 billion in the red, on top of the $7.4-billion deficit projected by his aides for the fiscal year that begins in July.

The governor said he would reveal his specific plans to deal with the problems in January. But he said that, as in the past, no program would be immune to the budget knife. A wide spectrum of programs were cut as state leaders closed a deficit exceeding $20 billion over the summer.

“I think there will be across-the-board cuts again,” Schwarzenegger told reporters today in San Jose, after signing legislation that is part of the water deal he reached last week with lawmakers. “We are not going to go and pick and choose" between programs. "I think that we always have to go and cut across the board."

Schwarzenegger downplayed the impact on state finances from the water deal’s proposed $11-billion bond issue, which will go before voters next year. He said the state would not borrow much of the money for several years, after it has paid down some of its current debt.

The governor said that though there are signs of a recovery in the housing market and strength in the green technology sector, “the economy is not coming back yet the way we want it.”

In a bit of positive news, California Controller John Chiang announced today that tax revenue for October was $285 million above projections, although for the current fiscal year it is still short by $854 million.

CALIFORNIA DEBT BINGE SHAKES UP MUNI BOND MARKET: Interest on state bonds up from 2.48% to 4% in two weeks. Rising market yields also devalue older fixed-rate muni bonds.

2009-11-10T21:37:00.001-08:00

by Tom Petruno | Money & Co. | LA Times

November 10, 2009 | 8:48 pm -- The municipal bond market’s message to California: Enough with the borrowing already!

Over the last seven weeks the state has sold more than $21 billion of short- and long-term debt for budget-related reasons and to finance voter-approved infrastructure projects.

That flood -- in a period when muni bond yields nationwide already were rebounding after diving in summer -- has helped to boost yields more than they might otherwise have risen, some analysts assert.

"Yields are higher because California has so much paper in the market," said Matt Fabian, who tracks muni bond trends at Municipal Market Advisors in Westport, Conn.

The state has been its own worst enemy: Its borrowing costs have risen with each bond deal, which means taxpayers will bear a bigger hit to service the debt over time.

Rising market yields also have the effect of devaluing older fixed-rate muni bonds. If you own a California muni-bond mutual fund, chances are its share price has been sliding since the end of September as the market has suffered indigestion from the supply of new bonds.

In California’s latest offering -- a sale Tuesday of nearly $1.9 billion of bonds maturing in June 2013 -- the state had to pony up for a 4% annualized tax-free yield to lure investors to the deal.

Less than two weeks ago the state paid a yield of 2.48% on a bond with a similar maturity.

Investors’ ability to squeeze 4% out of the state in this week’s deal "is an expression of saturation of the market" by California, said George Strickland, a muni bond fund manager at Thornburg Investment Management in Santa Fe, N.M.

Demand for the bonds sold Tuesday also may have suffered because the deal stemmed from one of the gimmicks concocted by the Legislature and Gov. Arnold Schwarzenegger in July to close the state’s huge budget deficit: The proceeds will repay local governments for the $2 billion in property tax revenue that the state is borrowing from them to plug the budget gap.

The bonds become part of the state’s overall debt burden, but they’re a step below so-called general obligation issues, which have an iron-clad repayment guarantee in the state Constitution.

Treasurer Bill Lockyer obviously knows that he has dumped a lot of debt on the market this autumn. He didn’t have much choice, given the budget fixes ordered by the Legislature, and given the backlog of infrastructure bonds California has to sell.

The state’s borrowing plans had been put on hold for much of this year because of the deepening budget crisis. "We had a lot of work to do to get our financing program back on track" this fall, said Tom Dresslar, Lockyer’s spokesman.

Of course, for investors with money to put to work, rising muni yields are welcome.

Ken Naehu, who manages bond investments at Bel Air Investment Advisors in L.A., believes the state’s budget woes are far from over, which Schwarzenegger acknowledged Tuesday. Still, a 4% tax-free yield on a bond maturing in less than four years was too good an opportunity to pass up, he said.

"We gave them a large order," Naehu said.

-- Tom Petruno

Field Poll: VOTERS SUPPORT REFORM …BUT WHICH ONES?

2009-10-14T12:51:00.001-07:00

By Lisa Vorderbrueggen from POLITICAL BLOTTER: Politics in the Bay Area and Beyond

Wednesday, October 14th, 2009 at 10:32 am in constitutional reform.

New Field Poll figures released this morning at a constitutional change conference in Sacramento show voters like the idea of reforming the way they govern themselves.

But they are reluctant to make the kinds of reforms that have been discussed such as reducing the two-thirds voting threshold to pass a state budget or raise taxes, modifying or eliminating term limits and altering the California tax system.

“The rub is, what are we going to reform?” said Field Poll director Mark DiCamillo. “It’s going to be a tall order to put a package before voters that they will support.”

Kimberly Nalder with Cal-State University compared it to the person who hires a trainer but says he will not exercise or east less. Then six months later, he complains about his trainer.

“That’s California voters,” she said. “They are confused.”

The poll was commissioned for today’s “Getting to Reform: Avenues to Constitutional Change in California,” sponsored by UC-Berkeley’s Institute of Governmental Studies, Stanford’s Bill Lane Center for the American West and California Stat’s Center for California Studies. Pollsters surveyed 1,005 registered voters between Sept. 18-Oct. 5. The margin of error was plus or minus 3.5 percent for the full sample and plus or minus 4.5 percent for subsets.

The daylong conference is being held at the Sacramento Convention Center, and I’m here all day.

The poll’s key findings:

51 percent believe the state needs to make fundamental changes to its constitution.
48 percent prefer to see a single package of reforms on the ballot rather than a piecemeal manner like the initiative process. 40 percent like the individual measure process.
51 percent support a reform process that uses a constitutional convention rather than a commission appointed by legislators and the governor.
63 percent support the appointment of a broad range of people to rewrite the constitution, including average voters, elected officials and experts.
60 percent would be willing to consider serving on a constitutional reform delegation.
If California is going to reform its constitution, 59 percent prefer limiting its scope to issues of governance and exclude social issues.
52 percent oppose a recent state tax commission proposal to flatten the personal income tax.
65 percent oppose a replacement of the corporate income and sales taxes for a broader tax.
52 percent oppose the elimination of the two-thirds voting threshold in the Legislature to adopt a budget. That figure goes even higher among Republicans — 69 percent.
69 percent reject the elimination of the Prop. 13 mandate that new taxes require a two-thirds vote. Among Republicans, that figure is 86 percent.
52 percent oppose splitting the tax roll, which would allow the state to increase taxes on commercial properties at a rate higher than that imposed on residential properties.
66 percent support the imposition of a requirement that ballot initiatives identify the source of funds for new programs.
56 percent would support requiring a two-thirds vote on all ballot initiatives that change the state constitution.
57 percent believe the state could continue to provide current levels of service without new taxes if it would strip waste, fraud and abuse from government.
49 percent disapprove of the idea of merging the Assembly and Senate into a single legislative body. 35 percent like the idea.

FIELD POLL: Schwarzenegger+Legislature hit new lows

2009-10-13T06:30:00.001-07:00

from SacBee CapitolAlert

13 October -- Approval ratings of Gov. Arnold Schwarzenegger and the Legislature have hit new lows, according to the results of a Field Poll released today.

The governor's approval rating among voters dipped to 27 percent, according to a telephone survey of 1,005 registered voters conducted Sept. 18 to Oct. 5.

That marks Schwarzenegger's lowest approval ratings since he took office in 2003 (and puts him second only to Democratic Gov. Gray Davis when it comes to low job performance reviews for governors who served over the last 50 years).

Results were even more dour for the Legislature.

Just 13 percent of voters approve of the job lawmakers are doing. Job performance for both houses has been on a downward trajectory since it fell below 20 percent approval ratings for the first time last September.

The rate of voters who disapprove of the Legislature's performance -- 78 percent --is the highest recorded by The Field Poll in results dating back to 1983.

Well, they must be doing something right in the eyes of the electorate... right?

Voters surveyed by The Field Poll were keen on one thing: the governor calling the Legislature into special sessions for two front-burner issues: water and taxes.

The poll found that 73 percent of respondents favored a special session on water supply issues and 62 percent were behind bringing the Legislature back to face tax reform issues.

Here are the statistical tabulations for the Field Poll, prepared exclusively for Capitol Alert, on California voters' opinions of the governor and the State Legislature. The publicly released results of today's poll can be found here.

CALIFORNIA DEBT UNNERVES INVESTORS AS TAXES PLUNGE $2 BILLION

2009-10-12T12:44:00.001-07:00

By William Selway and Michael B. Marois | Bloomberg.com

Oct. 12 (Bloomberg) -- A $2.1 billion drop in California tax collection is opening a hole in Governor Arnold Schwarzenegger’s budget only three months after lawmakers in the most-populous state slashed spending for the second time in a year.

General fund revenue in the state accounting for 13 percent of the U.S. gross domestic product dropped to $19.4 billion during the fiscal year’s first three months, according to figures Democratic Controller John Chiang released Oct. 9. The total for the period ended Sept. 30 trailed by $1.1 billion, or 5.3 percent, forecasts in the annual budget the Republican governor signed July 28.

“This reinforces that state’s budget problems aren’t over, and as the year goes on, we’re likely to see growing budget deficit projections,” said David Blair, an analyst with Pacific Investment Management Co. in Newport Beach, California, which invests $20 billion in municipal bonds. “This clearly is going to continue to put pressure on the Legislature and the governor.”

The latest report underscores how states including California, the largest municipal bond issuer in the U.S., are still dealing with fallout from the recession even as the economy begins its recovery. The state last week was forced to raise yields to attract buyers to a $4.1 billion debt sale, after cutting the issue from $4.5 billion.

California’s decision helped push up borrowing costs in the municipal market by the most in almost four months even as states prepare new issues of taxable Build America Bonds, whose sales already total $40.2 billion. The Treasury pays 35 percent of interest costs for the debt, part of the federal economic stimulus plan approved in February.

Losing Jobs

State governments are particularly hard hit by a continuing loss of jobs, which dampens the income- and sales-tax collections upon which they depend. From April through June, states and localities recorded a 12 percent tax revenue decline from a year earlier, the third consecutive quarterly drop, according to the U.S. Census. The national unemployment rate in September was 9.8 percent, the highest since 1983, according to the U.S. Labor Department.

In New York, Governor David Paterson on Oct. 6 ordered state agencies to cut spending amid predictions that the deficit for the year ending March 31 may grow to $3 billion, $900 million more than budget officials estimated in July. Pennsylvania, acting 101 days into the fiscal year, enacted a $27.8 billion budget on Oct. 9 that raises cigarette taxes and expands gambling to boost revenue. Ohio confronts an $844 billion gap, while Connecticut will borrow $2.25 billion over the next two years, beginning with a $1 billion debt sale in November, to balance its budget.

‘Somewhat Unique’

“California’s problems, while somewhat unique and self- inflicted, are really America’s problems,” said Bill Gross, co-chief investment officer of the world’s biggest bond fund wrote on Oct. 1. State and federal lawmakers, unable to comprehend the extent of consumer borrowing, “reflect a lack of vision to perceive that the strong growth in revenues was driven by the same excess leverage and the same delusionary asset appreciation that was bound to approach cliff’s edge.”

The state has been among the hardest hit and its Legislature, requiring a two-thirds vote to raise taxes or pass a budget, has struggled to respond swiftly as the state’s fiscal strains worsened this year. Since February, Schwarzenegger and lawmakers have slashed $32 billion from spending, cutting into funding for schools, universities and welfare programs. They also raised taxes by $12.5 billion to balance the $85 billion budget.

’ Court Decision

Chiang, the controller, said the state’s latest figures show that Schwarzenegger and the Legislature must prepare for “more difficult decisions ahead.” California was also handed a defeat on Oct. 2 by the state’s Supreme Court, which let stand a ruling that the governor and lawmakers illegally used $3.6 billion of money meant for local transportation agencies to balance the budget since 2007.

“Revenues more than $1 billion under estimates and recent adverse court rulings are dealing a major blow to a budget that is barely 10-weeks old,” Chiang said in a statement Oct. 9. “While there are encouraging signs that California’s economy is preparing for a comeback, the recession continues to drag state revenues down.”

California isn’t at immediate risk for running out of cash as it did in July, when it resorted to issuing IOUs to pay some vendors and tax refunds as lawmakers fought over how to shore up finances. Last month, it borrowed $8.8 billion by selling notes, an advance on the tax it will collect later in the budget year.

Plugging Gaps

Schwarzenegger’s administration said it’s too soon to tell whether the slide in tax receipts through September foretells a worsening trend. Should revenue continue slipping, California lawmakers may find it difficult to make up for the gaps, given how deeply they have already cut and resistance among Republicans to further tax increases.

Schwarzenegger, 62, who can’t seek re-election because of term limits, doesn’t have to present his budget for the next 12- month fiscal period until January, and he has given no indication that he is planning to call an emergency session beforehand, as he did last year.

“Clearly, the numbers are cause for concern but the issue now for us is to determine if this is a one-time event or whether it has one more long-term implications,” said H.D. Palmer, a spokesman for Schwarzenegger’s finance department.

The tax collection figures were released after the conclusion of a $4.1 billion bond sale, which was trimmed by about $400 million after investors demanded higher yields than the state was willing to pay on some of the securities. The sale came after a rally in demand for municipal bonds pushed state- and local-government borrowing costs to a 42-year low.

Watching for Deterioration

David Blair, the Pimco analyst, said the pullback was caused by the low yields California offered amid lingering investor concern that the state’s fiscal condition may deteriorate further.

“They just got a little aggressive in where they wanted to price it,” Blair said. “Most people still recognize that there’s budget deficits the state is trying to deal with this year and going forward.”

The difference between a 10-year California bond and a top- rated municipal security reached as much as 1.71 percentage points on July 1, when the California debt yielded 5.21 percent, according to Bloomberg data. The difference slipped to 1.06 percent on Sept. 11 before ending at 1.21 percent on Oct. 9.

Future Debt Sales

California plans to sell as much as $15 billion more in bonds this year and its deficits, while not projected to reach the $60 billion it dealt with in the two years that end in July, are persistent. The state will face a $7.4 billion gap in the fiscal year beginning on June 30 and about $15 billion in each of the following two fiscal periods, California Treasurer Bill Lockyer said in his annual report on the state’s debt, released ahead of the bond sale.

Tom Dresslar, a spokesman for the treasurer, said his office has alerted investors that the fiscal troubles are far from over and the latest tax data did little to alter the outlook.

“The state has been very clear that our budget problems aren’t behind us,” Dresslar said. “This shouldn’t be a big surprise to anybody.”

To contact the reporter on this story: William Selway in San Francisco at wselway@bloomberg.net; Michael B. Marois in Sacramento at mmarois@bloomberg.net

Last Updated: October 12, 2009 00:01 EDT

CALIFORNIA BUDGET IS AREADY IN THE RED 10 WEEKS AFTER PASSAGE

2009-10-11T18:22:00.001-07:00

By William Selway and Michael B. Marois | Bloomberg.com

Oct. 10 (Bloomberg) -- California Governor Arnold Schwarzenegger will know within a month whether a $1.1 billion drop in revenue collections is part of a growing budget shortfall or an isolated event, his budget spokesman said.

Revenue in the three months ended Sept. 30 was 5.3 percent less than assumed in the $85 billion annual budget, state controller John Chiang reported yesterday. Income tax receipts led the gap, as unemployment reached 12.2 percent in August.

“The culprit here appears to be estimated quarterly personal income tax statements,” H.D. Palmer, the governor’s budget spokesman, said yesterday. “The numbers are cause for concern, but the issue now for us is to determine if this is a one-time event or whether it has more long-term implications.”

The latest figures show that California is facing resurgent fiscal strains brought on by the U.S. recession. Since February, Schwarzenegger and lawmakers have cut $32 billion from spending, raised taxes by $12.5 billion and covered $6 billion more with accounting gimmicks and borrowing. Even with those actions, state budget officials predict an additional $38 billion in deficits in the next three fiscal years combined, including $7.4 billion in the year starting July 1.

Schwarzenegger must present a budget for the coming fiscal year in January. The state’s Franchise Tax Board will deliver new data to the governor in November.

Debt Sales

The budget news comes as the most populous U.S. state prepares to sell as much as $15 billion of bonds in the next nine months to refinance debt and fund public-works projects, and as a surge in fixed-rate municipal issuance sent benchmark rates up by the most in almost four months.

California, already the largest borrower in the municipal market, may offer $4 billion of debt during the week of Oct. 26 to refinance the bonds used by Schwarzenegger to cover previous budget deficits. The budget enacted in July would allow the sale of as much as $11 billion more of general obligation bonds through the June 30 end of the fiscal year if financial markets allow, state Treasurer Bill Lockyer said. The exact sale amount hasn’t been decided.

“If the market is inhospitable, we won’t go,” Lockyer said in an interview yesterday. “We’ll just have to wait and see how the feelings are when we get ready to think about it again.”

Additional bond sales by California would follow an offering of $4.1 billion of general obligation bonds this week.

Scaled-Back Offering

The state was forced to scale back the size of the deal by almost $400 million as benchmark yields surged. The yields climbed after gains in the tax-exempt market last week pushed them to a 42-year low.

California’s sale follows a two-month rally in municipal bond prices, fueled by a record flow of money into mutual funds that outweighed lingering fiscal strains on localities, said Craig Elder at Milwaukee-based Robert W. Baird & Co.

U.S. Treasuries also fell, sending two-year notes toward their first weekly loss since the period ended Sept. 18. Federal Reserve Chairman Ben S. Bernanke said the central bank is ready to tighten monetary policy once the outlook for the economy improves.

California, a state that’s been among the hardest hit by the recession, had already issued $22 billion of debt since March, including $8.8 billion of notes that provided the state with an advance on taxes collected next year.

Even after increasing what it would pay, California still borrowed more cheaply than during previous offerings. A taxable California bond maturing in 2039 yielded 7.23 percent this week, down from a yield of 7.43 percent during a sale in April.

“Everybody thinks there’s still an appetite for California bonds,” Lockyer said. “There’s certainly a continuing need for long-term investments in schools, high-speed rail, stem-cell research centers and so on.”

To contact the reporter on this story: William Selway in San Francisco at wselway@bloomberg.net; Michael B. Marois in Sacramento at mmarois@bloomberg.net

FUNDING THE CALIFORNIA BUDGET CRISIS

2009-09-24T23:42:00.000-07:00

By Daniel Johnson in New University on Oct. 13, 2008
September 24, 2009 | Volume 43

Following a record setting 85-day stalemate over the state budget, the financial situation for California looks nearly as downtrodden as it did two weeks ago when state officials were seemingly still in a deadlock deciding the budget. Because the budget was planned too optimistically and state revenue has been unable to meet original estimates, the deficit, which Gov. Arnold Schwarzenegger has been aiming to close, looks like it will get a lot worse before it gets better.

In fact, Schwarzenegger has been working with his brain trust to analyze the budget deficit through an emergency meeting in which they may or may not plan to decide to ask for emergency funds from the federal government. However, rather than working with his team, planning, waiting and planning to wait, Schwarzenegger, along with friends and enemies alike, needs to appreciate the timeliness of the situation, suck up his pride and reach for those emergency funds.

It could be argued that the abundance of bureaucratic red tape and the stalemate is just politics as usual. However, with the economic crisis confronting Californians on both a state and national level, it is tough to argue that California’s budget is anything but at its breaking point.
According to data collected from “The Economist,” state revenue in the form of sales tax receipts and corporate taxes have been 9 and 16 percent lower than state estimates. Furthermore, income-tax receipts, which make up the majority of state revenue, have only done marginally better.

Rather than arguing over how to allocate money, state officials should first consider whether or not they have the money at all, which can only positively be done through borrowing money from the federal government. This must be done as soon as possible for three primary reasons. First, as long as doubt drifts over the budget at the highest level, this will trickle down in budget matters concerning all levels of employment. Second, as the world’s eighth largest economy, California is positioned to be a trendsetter among the states, as far as balancing budgets is concerned. Thus, the longer the state is in the red, the longer the smaller economies that surround it will follow. Third, the national economy is in ruin and any financial assistance the federal government can offer will lessen over time.

According to one report that appeared in the Contra Costa Times, the state budget crisis affects not only politicians, but unions as well. An example cited in the report showed that teaching unions could not negotiate with school distracts because a three-year revenue projection is required to come to an agreement. Because the state budget is not concrete, these projection numbers have no solid basis, which in turn casts doubt on agreements being reached between teacher unions and school districts.

While California’s trendsetting status is impressive for a state that is currently in turmoil, it is also a responsibility. According to a recent Wall Street Journal article, the basic moneymaking system is the same in California as it is in other states, with one exception. It is on steroids. Through such factors as exporting businesses, manufacturing capabilities and professional services, California’s economy accounts for roughly 15 percent of the U.S. gross domestic product. So when waves are made on California’s financial coast, they resonate throughout the other 49 states.

Finally, while the effects of the Emergency Economic Stabilization Act of 2008 (the bailout plan) have yet to completely settle, it is tough to argue that the national economy is anything but worrisome. As long as this turmoil exists, both federal and private sources offering funds will have no choice but to become more conservative in their lending habits. Thus, if California is in need of emergency funds, it is best to aim for them while this safety net is outstretched rather than tucked away.

Daniel Johnson is a fourth-year literary journalism and film and media studies double-major. He can be reached at dcjohnso@uci.edu.

THE CALIFORNIA FIX: Tax commission report falls flat, but it's a start

2009-09-21T17:05:00.001-07:00

Proposals to eliminate the sales tax and levy an experimental business tax are said to have 'zero percent' chance of passing. But an overhaul is needed, and the ideas may provide a jumping-off point.

By Eric Bailey in the LA Times - Reporting from Sacramento

September 21, 2009 -- It was to be the sort of big-game victory that California political leaders rarely pull off. Gov. Arnold Schwarzenegger and legislative chiefs set out to shake the roots of the state's tax system to spur the business climate and resuscitate the treasury.

But as the commission they formed for that purpose prepares to release its final report this week, business leaders are grumbling, labor unions have turned wary and once-bullish lawmakers are backing away.

The recommendations from the Commission on the 21st Century Economy, which include some revolutionary ideas such as scrapping the sales tax and imposing a broad and untested new business levy, have been met with shrugs and even a few snickers.

"It's not cooked," said state Treasurer Bill Lockyer, who was a tax lawyer for decades. "It probably needs years of work."

Republicans like some of what they see, such as the plan's call for a flatter income tax, but they don't expect to make much headway in a Capitol dominated by Democrats.

"This is the most significant tax policy proposal in three decades," said Assemblyman Chuck Devore (R-Irvine). "But the chances of this getting approved, as is, are zero percent."

Such conclusions have not completely derailed the prospects for change in a state that Forbes magazine ranks 50th out of 50 for its big tax bite and other high costs of doing business.

Schwarzenegger is expected to call a special session of the Legislature to address the commission's findings.

Assembly Speaker Karen Bass (D-Los Angeles), an early proponent of the commission, has backed away from a vow to hold a yes-or-no vote on the package. But she calls the commission's principal suggestions "intriguing."

While that is not a warm embrace, she and other lawmakers see the package as a worthy starting point for debate on changes considered long overdue. They say the commission report should spark a full reappraisal of California's tax structure, and possibly a push toward a bipartisan compromise that might actually take flight in the fickle political winds of Sacramento.

"The issue is not going to go away," said Senate President Pro Tem Darrell Steinberg (D-Sacramento). "But it's important to get it right."

Sacramento has long been an epicenter of debate about taxation.

The state's tax system was fashioned during the Great Depression, when small manufacturers churned out retail products subjected to a sales tax. As recently as 1950, the sales tax provided nearly 60% of the state's revenue.

But in the years since, California's economy has shifted to one dominated by service industries -- lawyers, engineers and other professionals whose sales are not taxed. Although the state has the nation's highest sales tax, it now accounts for barely a quarter of revenue.

The result has been an increasing dependence on income taxes, which grew from 11% of state revenue in 1950 to more than 53% in 2008. In recent years, the wealthiest 1% of the state's population has generated a big percentage of that.

Liberals say the tax burden borne by the wealthy simply reflects the astronomical rise in incomes of the super-rich in Silicon Valley, Hollywood and other enclaves. But that revenue, too, has proven volatile, soaring or stumbling with the rise or fall of the economy and the stock market.

As the economy slumped and tax proceeds plummeted late last year, Bass and Schwarzenegger got together to form the 14-person tax commission and sidestep the usual Capitol bickering.

But the commission -- attempting to do in months the kind of wholesale reconstruction some states have taken years to accomplish -- slogged along. Partisan fissures cracked open, and the group's ideas fell well short of unanimous approval from participants.

Still, Schwarzenegger believes the panel's proposed changes in the tax system are "the most significant action we can take in ending our perpetual budget crises," said Aaron McClear, the governor's spokesman.

Under the plan, the state's current half-dozen income tax rates would be replaced by two -- 2.75% for those making up to $56,000 a year and 6.5% for those earning more. Sales and corporate taxes would be replaced by a single new business levy that would spread the burden -- at a tax rate of about 4% -- more broadly and would include service professions.

The proposals have drawn heavy fire from all sides.

Business leaders are worried it could make things worse for their bottom lines and the broader economy.

"There is simply too much at stake to adopt this proposal before the implications for jobs and the economy have been fully assessed," said Allan Zaremberg, president and chief executive of the California Chamber of Commerce.

With some tax experts saying the changes would favor the rich and could cost jobs, labor leaders don't like what they see.

"This feels like a dangerous experiment," said Courtni Pugh, executive director of SEIU California, the state's largest union with more than 700,000 workers.

Among the most pointed critics are nine tax experts from Stanford, UCLA, Rice and other universities. They rose up earlier this month to oppose the bid for a broad new business levy, saying in a Sept. 5 letter to Commission Chairman Gerald Parsky that there are "numerous reasons to believe that this is the wrong course for the state to take at this stage."

They cited potential administrative difficulties, legal challenges and competitive disadvantages to California businesses compared to out-of-state firms not hit by the tax.

"The problem with this is it's a poorly designed substitute for a sales tax," said Kirk Stark, a UCLA tax law expert who signed the letter.

Lockyer and other Democrats, meanwhile, say the commission's mandate to ease the volatility of state revenue -- a boom-and-bust cycle that has sent the state spinning into deep deficits -- seems to have masked a hidden agenda.

"What they really wanted to do, in my opinion, was lower taxes on rich people," Lockyer said.

Republicans counter that their foes across the aisle had their own motivation -- to raise taxes.

Still, lawmakers from both parties insist they will fully analyze the proposals and come up with alternatives.

One strategy suggested by Democrats is to broaden the existing sales tax to include more service industries rather than impose a whole new business tax. They also want to look at tapping Internet commerce, hiking the gasoline tax to help fund the fight against global warming and adopting a levy on oil extracted from California, the only petroleum-producing state in the nation without one.

Republicans will probably push for a bigger rainy day fund to help the state better survive slumps. But they draw the line at any proposal to boost taxes overall. Nearly every GOP lawmaker has signed a no-new-taxes pledge.

In addition to ideological opposition, attempts to increase taxes would face a gantlet of special interests with something to lose.

"Any revision of the tax code is a Herculean undertaking," conceded Assembly GOP Leader Sam Blakeslee (R-San Luis Obispo).

But the commission's report -- along with the Legislature's abysmal legislative approval ratings and an election year sure to be dominated by the cry for California government to fix itself -- could still provide enough impetus for change.

"The bottom line is we've got a tax system designed back in the 1930s, when we were building widgets," said Assemblyman Charles Calderon (D-Montebello), chairman of the lower house tax committee. "We need reform. We need a system for the information age."

…Nothin' t' read while you're waiting for th' Commission on the 21st Century Economy report?

Start here:

Government Reports

State of California Department of Finance (DOF)

Summary Document for the 2009 Budget Act (.pdf, <1 MB, www.dof.ca.gov)

Tax Expenditure Report, 2008-09 (.pdf, <1 MB, www.dof.ca.gov)

Legislative Analyst's Office (LAO)

Proposition 1A, State Finance (.pdf, <1 MB, www.lao.ca.gov)

Informational Hearing on Tax Expenditures, February 2008 (.pdf, <1 MB, www.lao.ca.gov)

California's Tax System: A Primer (www.lao.ca.gov)

Revenue Volatility In California (.pdf, <1 MB, www.lao.ca.gov)

California's Fiscal Outlook: LAO Projections — 2008-09 Through 2013-14 (www.lao.ca.gov)

California’s Changing Income Distribution (.pdf, <1 MB)

Other Governmental Organizations

California State Assembly: California State Assembly Committee on Revenue and Taxation Reference Book 2007 (www.assembly.ca.gov)

California State Board of Equalization: Sales and Use Taxes: Exemptions and Exclusions (.pdf, <1 MB, www.boe.ca.gov)

State of California Franchise Tax Board: California Income Tax Expenditures, Compendium of Individual Provisions (.pdf, <1 MB, www.ftb.ca.gov)

Reports by Non-Governmental Organizations

Center for Continuing Study of the California Economy "Are Businesses and High-Income Residents Fleeing California?" (.pdf, <1 MB)

"Manufacturing 2.0," Milken Institute. June 2009. http://www.milkeninstitute.org/pdf/CAManufacturing.pdf
Interactive data site :
http://www.milkeninstitute.org/manufacturing/

"Lone Star rising," Economist, July 9, 2009. Overview of the report, a section on California/Texas rivalry and another on the Texas economy.
http://www.economist.com/specialreports/displaystory.cfm?story_id=13938917
http://www.economist.com/opinion/displaystory.cfm?story_id=13990207
http://www.economist.com/surveys/displaystory.cfm?story_id=13938859

California Forward: Report to the Commission on the 21st Century Economy: Discussing Tax Reform (.pdf, <1 MB)

American Institute of Certified Public Accountants, Tax Division: Guiding Principles of Good Tax Policy: A Framework for Evaluating Tax Proposals. (.pdf, <1 MB, ftp.aicpa.org)

California Forward: It’s about trust: A state budget process that restores public confidence (.pdf, <5 MB, news.caforward.tv)

Stephen M. Sheffrin and Marla Dresch, California Policy Seminar: Estimating the Tax Burden in California (.pdf, <10 MB)

Joint Venture: Silicon Valley Network: Statement of Principles: California Budget and Tax Reform Initiative (.pdf, <1 MB, www.jointventure.org)

Michael J. McIntyre & Richard D. Pomp: A Policy Analysis of Michigan's Mislabeled Gross Receipts Tax (.pdf, <1 MB)

Thomas S. Neubig & Robert Cline: Future State Business Tax Reforms: Defend or Replace the Tax Base (.pdf, <1 MB)

Next 10: California's Budget (www.next10.org)

Silicon Valley Leadership Group: California Tax Policies and Business Expansion, "Tough Choices — Real Solutions" (.pdf, <5 MB, svlg.net)

Steven M. Sheffrin, Professor of Economics, UC Davis: Economic Aspects of a Split-Roll Property Tax (.pdf, <1 MB)

Tax Analysts: Repeal State Tax Breaks for Capital Gains (.pdf, <1 MB)

Tax Foundation: Background Paper: 2009 State Business Tax Climate Index (.pdf, <5 MB, www.taxfoundation.org)

The Urban Institute: Tax Expenditures and Tax Reform: Issues and Analysis (.pdf, <1 MB)

California Budget Project

To Have and Have Not (.pdf, <1 MB)

Available Data Do Not Support Claims That High-Income Californians Are Leaving the State (.pdf, <1 MB)

Budget cuts or tax increases: Which are preferable during an economic downturn? (.pdf, <1 MB, www.cbp.org)

The number of high-income tax payers increased … (.pdf, <1 MB, www.cbp.org)

Who pays taxes in California? (.pdf, <1 MB, www.cbp.org)

California Tax Reform Association

Commercial Property Assessment in California: Bad Law, Bad Economics, Bad Fiscal Policy, Bad Land Use (.pdf, <1 MB)

Recommendations on California’s State Budget Crisis (.pdf, <1 MB)

Council on State Taxation (COST)

Total state and local business taxes — 50 state estimates for fiscal year 2008 January 2009 (.pdf, <3 MB)

(With the Tax Foundation): Gross Receipts Taxes in State Government Finances: A Review of Their History and Performance (.pdf, <5 MB)

Sales Taxation of Business Inputs (.pdf, <1 MB)

The Best and Worst of State Tax Administration (.pdf, <1 MB)

LECG LLP

LECG Economic Jobs Report (.pdf, <1 MB)

LECG Economic Jobs Fact Sheet (.pdf, <1 MB)

LECG State Tax Comparison Report (.pdf, <1 MB)

LECG State Tax Comparison Bar Graph (.pdf, <1 MB)

Public Policy Institute of California

Are the Rich Leaving California? (.pdf, <1 MB)

California's Tax Burden (.pdf, <1 MB)

THE CALIFORNIA FIX :: Taming the California Beast: So many problems, so many competing interests -- only rewriting the Constitution will do.

2009-09-21T17:04:00.001-07:00

LA Times Editorial

September 20, 2009 -- It's not always easy to identify the tentacles that are strangling California and keeping it from fulfilling its promise for 38 million residents.

Who wrecked our public school system, which was once the envy of the world?

Who ruined the nation's premier network of highways, …the most ambitious and reliable water delivery system, …the best state parks?

Who killed the spirit of opportunity and innovation that once made California the headquarters for banks and oil companies, for makers of surfboards and electric guitars, for computers and communications?

Even if we can't identify the culprit, people here intuitively know that some kind of monster has wrapped itself around the Golden State. Well over two-thirds of registered voters said recently that they would vote yes on two key ballot measures to pave the way for a constitutional convention to wrest back control of the state for Californians.

The numbers were compiled by a pollster for Repair California, a coalition of organizations from across the political spectrum that believes a convention is the best way to make the state work again. The group has set Friday as its deadline for submitting ballot language to the attorney general. If current numbers remain strong, voters would call a convention in November 2010. The convention would take place the following year, and a constitution would go to voters for an up-or-down vote in November 2011.

But once the convention is called, then what? It's easier to agree on a fix if there's agreement on who, or what, the monster is.

Once, it was easy. Reformers and demagogues of the 1870s argued that California was being strangled by twin demons: Chinese immigrants and the Central Pacific Railroad. Anti-Chinese provisions were grafted onto California's second Constitution in 1879. But reformers believed things were still awry, and increasingly, they identified the enemy as the Central Pacific's successor, the Southern Pacific. As the state's biggest corporate presence, the railroad selected the candidates who ran for office and bought their votes to assure control over any attempt to regulate freight rates or impose taxes. As one of the state's largest landowners, it ruled agriculture and water.

The Southern Pacific became known as the Octopus, to describe the numerous corporate tentacles that worked their way into the statehouse, the voting booths, the farms, the cities. An 1880 land dispute between the railroad and settlers that grew violent and resulted in several killings became the basis of the 1901 Frank Norris novel “The Octopus: A Story of California.” The Southern Pacific's nickname stuck.

To break the railroad's iron grip on the Capitol, Progressive era reformers wrote, and in 1911 voters adopted, constitutional amendments to allow for the initiative, referendum and recall. The Southern Pacific might still have been able to bribe lawmakers into doing its bidding, but Californians now had a way to fight back. They could overturn bad laws, pass new ones and throw out politicians they believed were not serving their interests.

By 1996, when the Southern Pacific was absorbed by its ancient rival, the Union Pacific, the railroad Octopus was long dead. But there is a new multi-armed monster, more pernicious than any outside corporation ever was.

One tentacle belongs to public employee unions. Although Californians should reject the foolish notion that there is something intrinsically destructive about workers in public service, it is undeniable that their unions have gained enormous clout in Sacramento. They have the influence to select Democratic Party primary candidates in urban areas, and the money and foot soldiers to ensure their election. Then, at contract time, those unions sit across the table from officials they put in office -- officials who realize they are bargaining with people who have the power to end their careers. The greatest barrier to affordable and sensible prison reform has been the California Correctional Peace Officers Assn. -- the prison guards union. Ballot measures are made or broken by the California Teachers Assn.

Another tentacle belongs to big business. Less powerful, perhaps, than when the Southern Pacific ruled the state, business interests nevertheless exercise a remarkable degree of clout through lobbyists. Disgraced ex-Assemblyman Michael Duvall (R-Yorba Linda) may have just been telling stories earlier this month when he described trysts with a business lobbyist, but it's hard to distinguish between his supposed antics and those of lawmakers all too anxious to get, well, close to big-moneyed business interests.

Add two more arms: The state Democratic Party, in alliance with labor, and the Republicans, supported by business, seem locked in an eternal contest. But they are so invested in their game that they unite in resisting any attempt to change the rules. The parties and (more tentacles) their lawyers, political consultants, pollsters, signature gatherers, fundraisers -- effectively, a political/industrial complex -- are bent less on winning than on being able to continue playing the game.

One more tentacle of today's monster is the very weapon used to slay the last one. The initiative process, which loosened the Southern Pacific's grip on California, has been co-opted by the forces it was meant to control -- the tendency of power to seek any means to perpetuate itself.

The new Octopus is different from a single, all-encompassing railroad; this time the tentacles wrapped around California also are wrapped around one another in a knot so tight it can't be untied. It has to be cut.

That's where a constitutional convention comes in. Instead of removing one arm with a ballot initiative or shackling another with a regulation, a convention has the potential to remove all the arms at once. It can fail, of course, but it also might create a governance system that again puts Californians in control of their state, at least for a while -- until a new Octopus presents itself and a new generation of Californians rises to the challenge.

CALIFORNIA’S BUDGET: AN EXPENSIVE NEEDLESS DELAY: Missing the deadline on a budget has cost California billions and undermined confidence in the state.

2009-07-17T08:40:00.003-07:00

Editorial From the Los Angeles Times

July 17, 2009 -- Maybe you've seen the TV commercial. "Sacramento" is asking Gov. Arnold Schwarzenegger to sign a budget that "raises your taxes and spends money we do not have." Schwarzenegger is "standing firm." It's an act, and not a very good one.

The governor and legislative leaders are in what Californians can only hope are the final days of negotiations to close a $26-billion budget gap. Democrats went through their empty gesture a month ago, seeking to fill the hole with taxes on oil extraction and tobacco sales. But they knew those wouldn't fly -- and they didn't -- and there is currently no tax proposal being discussed in budget talks, regardless of Schwarzenegger's claims to the contrary.

What he's trying to do instead is to portray the three additional post-deadline weeks that the state budget has been out of balance as time well spent. That's debatable at best.

If those three weeks really helped the state crack down on supposed waste, fraud and abuse, we'll gladly take it, but we have several serious qualms. First, the savings from many of these reforms may, with luck, just offset the $1.5 billion to $3 billion the state lost by blowing its June 30 deadline, stopping cash payments to vendors and issuing IOUs with interest. So what was gained? The governor might answer that savings kick into future years as well, and that's great -- if there really are such savings to be had. County welfare officials have rejected Schwarzenegger's blithe assertion, for example,that many people in the state's welfare-to-work program aren't really looking for work and, without reforms, never will. CalWorks clients in Los Angeles County are lining up to grab the temporary and part-time jobs made available through the state program.

Are welfare programs chock-full of cheaters? We're left to rely on the word of the governor -- the same man who is raising special-interest money to run commercials pretending that he is in the midst of a fight over taxes.

Meanwhile, reforms in other areas, such as In-Home Supportive Services, were making their way through the Legislature. It is there, in public, where law and policy should be crafted, not in closed post-deadline budget sessions.

It would be merely annoying if the Kabuki, to use the governor's word for it, came during a typical budget disaster year. But this one isn't typical. This year, as its credibility erodes, California is nearing default, in which the state doesn't merely fail to pay its bills but shows no prospect of ever being able to do so. Then it would be too late for reform; no one would do business with California, and other states on the edge -- and finally all states -- could fall.

Schwarzenegger and the Legislature were on the verge of closing the budget gap and backing away from default at the end of June. Delay, ostensibly in the name of reform, deepened the problem and swept away much of the remaining confidence in California's ability to meet its obligations. It's hard to see that as worth the wait.

BUDGET MESS MAKES CALIFORNIA VULNERABLE TO CRIPPLING CREDIT DOWNGRADE, OFFICIAL WARNS: Treasurer Bill Lockyer says the state could find funding sources for crucial programs cut off if its credit rating is dropped to junk status. Lawmakers and the governor vow to keep negotiating.

2009-07-17T08:40:00.001-07:00

By Evan Halper and Eric Bailey | From the Los Angeles Times

2:50 PM PDT, July 16, 2009 -- Reporting from Sacramento — State Treasurer Bill Lockyer warned today that state leaders' failure to reach a budget deal has put California at risk of a credit downgrade that would cut off access to funds needed for building schools, roads and other public works projects.

"With every passing day, the state's credit rating moves closer and closer to the junk pile," Lockyer said in a prepared statement. "If our credit rating sinks to junk status, the state will find the door to the infrastructure bond market locked shut."

The warning came as budget negotiations remained stuck amid simmering frustrations, although legislative leaders and Gov. Arnold Schwarzenegger vowed to forge ahead in hopes of settling on a package to close California's $26.3-billion deficit.

Speaking at a midday news conference, Schwarzenegger characterized the state of negotiations, which halted Wednesday night.

"It wasn't a breakdown," he said, "but I think a stall. . . because some new issues came up."

No time has been set to resume talks, though Assembly Speaker Karen Bass (D-Los Angeles) said more bargaining sessions would take place. And the Legislature has postponed its summer recess, scheduled to begin Friday, pending a budget agreement.

"The legislative leaders plan on working through the weekend, and we hope to get a deal soon," said Jim Evans, a spokesman for Senate leader Darrell Steinberg (D-Sacramento).

The prime obstacles to an accord are in the areas of education and welfare. One major sticking point is how to tweak voter-approved school-funding guarantees so the state can cut billions of dollars it needs to balance its books -- while still guaranteeing that school funding will be restored when the economy rebounds.

Aside from disagreements over education funding and welfare, Schwarzenegger spokesman Aaron McLear said, Democrats remained "unwilling" to make deeper cuts to create a healthy reserve so the state can weather an economy that could get worse before it gets better.

Democrats are pushing for the budget package to include changes in state law that would assure repayment of roughly $11 billion diverted from education when the economy improves and create new guarantees that schools would not lose money in future downturns. The governor said he would support repayment of the $11 billion but will not allow permanent changes to the funding formulas.

"I think we are not going to do that," Schwarzenegger told reporters, "because Proposition 98 can only be changed by the people."

Schwarzenegger says the changes he wants to state government operations would produce long-term savings by making various programs more efficient. Democrats have resisted, saying there is not enough evidence that they would be effective, and they have not been properly evaluated through normal legislative hearings.

One contentious proposal, some participants said privately, would change the state welfare program to increase penalties for recipients who do not meet minimum federal work requirements. Currently, emergency cash is available for children of parents in that category; those grants could be eliminated under Schwarzenegger's plan.

THE SALLY RAND OF LEGISLATURES: “The Democrats want some guarantees and protections for education funding, and the governor’s evidently saying nix to that”.

2009-07-16T09:20:00.001-07:00

By Patt Morrison - Patt Morrison Blog KPCC 89.3 FM

Thursday July 16th 08:26 AM -- Oh, that legislature is such a tease, with the peekaboo budget – it’s off, it’s on, we have a deal, no we don’t.

By ten pm, the deal that looked good eight hours earlier – as Assembly speaker Karen Bass told us – was stalled and everybody went home to think it over for the night.

Whatever budget we wind up with, it won’t be any oil painting. Schools? Cut. Health services for poor kids and homebound elderly? Cut. Prison budget? Cut. The sad part is that even though this budget may straggle across the finish line, bleeding from $26 billion in cuts, it’s no triumph; as is so often the case, some cuts will wind up costing more than they save. The elderly whose adult day care is cut will wind up in bogglingly more expensive nursing homes. Poor kids who don’t get health care coverage will still get sick – and end up in bogglingly more expensive emergency rooms. Penny-wise, billion-foolish, maybe. In exotic-dancer terms, services could be stripped. But you can still read someone's lips, because they're saying ''no new taxes.'' You could still hope for a ten-spot in the g-string, though.

And then there's burlesque-like tease. The state Board of Equalization goes and dangles the prospect of a billion plus dollar tax bonanza in front of the state. It’s calculated that taxing the marijuana trade could raise as much as $1.4 billion a year. It arrived at this figure in response to a proposal by a San Francisco assemblyman to handle dope the way we handle booze: regulate it and tax it.

But don't count your buds before you pick 'em, bud.

Yesterday we heard about two breakthroughs in Alzheimer’s disease: a Duke University finding that a certain genetic biomarker could flag a coming case of Alzheimer’s anywhere from five to seven years before symptoms actually show up – and a UC Irvine study found that a drug rather like one used to treat the inflammation from rheumatoid arthritis could likewise reduce brain-cell inflammation that exacerbates Alzheimer’s. Lab mice treated with the drug didn’t suffer the same memory loss that untreated mice showed.

And how did Goldman Sachs manage to make a humongous $3.44 billion profit in the second quarter of this financially wretched year? We spent time with two guests on that topic – and one of them concluded pretty much what I would hear a few hours later, when one member of my book group said that as soon as he heard those numbers, he figured something or someone got finagled.

Today – could California really stage another constitutional convention? And I mean, make some really serious changes? Like to the initiative process? Proposition 13? Hey, if the guys in powdered wigs and buckled shoes could do it, why can’t we? Okay, then – what power would YOU be willing to give up? And to whom?

See? Harder than it looks.

IN SACRAMENTO, THEY ALL DROPPED THE BALL

2009-07-16T08:51:00.001-07:00

The state could have had a budget weeks ago and avoided the embarrassment of IOUs, but various actors -- especially the top one -- wouldn't let it happen. Now, everyone loses.

George Skelton | LA Times Capitol Journal

Rich Pedroncelli / Associated Press -- Senate leader Darrell Steinberg and Assembly Speaker Karen Bass talk with reporters as they head to a budget meeting Wednesday. Bass recently accused the governor of “moving the goal posts.”

July 16, 2009 -- From Sacramento -- They whiffed a fat batting practice pitch. Blew a gimme putt. Inexplicably clanked a slam-dunk.

Pardon the sports jargon, but it's a civil way to characterize incompetence and failure in Sacramento. It avoids invective language already too prevalent in California's Capitol.

Three weeks ago, as I left town on vacation, the politicians seemed poised to close a $24-billion deficit hole, which would have saved the state from issuing costly IOUs and suffering national ridicule.

Whatever budget deal ultimately is passed -- and in this economy it'll only be a temporary fix, at best -- virtually the same agreement could have been reached weeks ago.

What happened? For one, Gov. Arnold Schwarzenegger swung for the fence -- not willing to settle for a run-scoring single -- and didn't seem to know where the fence was.

But there were errors all around.

Democrats wasted too much time fumbling with tax increases that they knew never were going to connect and that many voters had made clear they hated.

The loudest message from the California electorate while rejecting the governor and Legislature's budget propositions in May was that it wanted Sacramento politicians to fix the state's fiscal mess themselves and not dither. Just do it!

So much for that notion.

But accompanying that overarching message was a strong chorus of: "Stop taxing us. Live within your means."

Schwarzenegger and Republican legislators heard the "no tax" gospel, even if some public employee unions and liberal activists closed their ears.

Democratic legislative leaders understood the political reality: They had few options. Deeper slashes had to be made in healthcare and welfare programs. Education would take a big hit, although there'd be some help from federal stimulus money. More cuts would be needed in virtually every state program, from prisons to parks.

Moreover, voters had granted Democrats a license to whack away.

The electorate's verdict had plunged the state $6 billion deeper into debt, cut off $16 billion in future tax hikes and denied schools $9 billion in eventual restoration of previous cuts. Before casting their ballots, voters had been warned about the dire consequences of rejecting the props.

Additionally, the measures had been opposed by labor and social groups that despised the ballot package's key feature, a modest spending cap. So the Legislature's majority party owed these traditional allies practically nothing when they began yelping about the program cuts -- and trims to state employees' pay -- forced, in part, by the propositions' demise.

Politically, signing off on the inevitable budget butchering should have been a slam-dunk. A gimme putt. A soft pitch.

But philosophically, Democrats couldn't handle it. They did cut sharply, but also decided to play out the game fighting, by pushing tax increases on oil companies, smokers and motorists. That losing effort took up valuable time right before the July 1 deadline for avoiding IOUs.

Democrats produced a stop-gap plan supported by Assembly Republicans that would have staved off IOUs. They proposed $3.3 billion in cuts to education and other programs that would have kept the cash flowing, at least for a few weeks. It would give them time to negotiate more cuts. Schwarzenegger rejected the idea and persuaded Senate Republicans to follow.

That's where the governor began bobbling the ball, although his coaches figured he was playing to his fan base, what's left of it.

Issuing IOUs will cost the state roughly $26 million in interest for July, the state controller's office estimates. The IOUs also prompted Wall Street bond rating agencies to lower California's credit to near junk status. That potentially could cost the state $7.5 billion over 30 years, according to the treasurer's office.

Schwarzenegger, aides say, calculated that Democrats wouldn't negotiate seriously without facing a deadline, such as the latest: most banks refusing to accept IOUs. Negotiating piecemeal would get nowhere, the governor believed.

But he might have dodged IOUs completely. Guess it doesn't rankle much that the state he has governed for nearly six years must now pay bills with scrip.

Schwarzenegger rankled Democrats by producing a packet of "reform" demands just before the IOU deadline. Most made sense, but they entered the game late.

"Moving the goal posts," Assembly Speaker Karen Bass (D-Los Angeles) called it.

She also theorized that the governor was going down his "legacy list" -- striving for achievements he can point to after leaving office in 18 months. That's fine, Bass says, but more thought and deliberation are needed. "You shouldn't use the budget process to jam through public policy."

Senate leader Darrell Steinberg (D-Sacramento) says Schwarzenegger returned to "the Terminator zone" after the May election and resumed bashing legislators, making negotiations more difficult.

Typical rhetoric: "I don't want to kick that can down the alley anymore. I've given them enough chances and now I say, let's fix the problem. . . . It's easy for the politicians to keep promising things, but they can't deliver. They live way, way beyond their means."

You'd think this guy hadn't been the head coach and superstar for all these years.

Both sides should have called the game long ago. There'll be no winners -- just bigger losers the longer it lasts.

WSJ: CALIFORNIA CLOSE TO NEW BUDGET DEAL

2009-07-15T17:31:00.001-07:00

By STU WOO | The Wall Street Journal

JULY 16, 2009 - California leaders say they are near a compromise on fixing the state's $26 billion budget shortfall, signaling the end of a weeks-long impasse that has forced officials to issue IOUs to keep the state out of default.

Gov. Arnold Schwarzenegger and legislative leaders have held negotiations late into the night this week to work out the last details of a budget plan, which staffers said could be finalized as soon as Thursday morning. "We're close," said Matt David, a spokesman for the governor. "There are still some details to be worked out."

Mr. Schwarzenegger and legislative leaders have agreed on $14 billion to $15 billion in spending cuts, with about a third of that in education, said staffers for the two sides. The remaining $11 billion gap would be closed through one-time fixes and accounting gimmicks -- such as issuing state workers' paychecks in July 2010 instead of June 2010 to save money for the current fiscal year -- despite the Republican governor's repeated demands for a lasting overhaul of spending.

Several controversial plans are still on the negotiating table, Mr. David said. Among them are the governor's proposals to scale back welfare programs, eliminate a college-scholarship program, close all state parks and borrow $2 billion from local governments.

The nation's most-populous state faces a $26 billion deficit in its $92 billion general-fund budget through June 2010. In February, lawmakers closed most of a $42 billion gap for fiscal years 2009 and 2010 through steep spending cuts and new taxes.

Budget stalemates are familiar in Sacramento, which has seen only a handful of spending plans passed on time in the past 30 years. But with the state on the brink of insolvency this year, this impasse has been far more costly.

Lawmakers missed a June 30 deadline to pass spending cuts, preventing them from reaping $3 billion in savings during the fiscal year that ended that day. That also forced the state controller to begin issuing IOUs to keep the state from running out of cash by July's end. The controller's office said it had issued 130,501 IOUs, worth a total of $588.1 million, by the end of Tuesday. The state will have to pay interest on the IOUs, while investors will charge California more for its annual short-term borrowing.

Dan Walters: Out-of-staters gleefully delve into California's woes OUT-OF-STATERS GLEEFULLY DELVE INTO CALIFORNIA’S WOES

2009-07-15T17:30:00.001-07:00

By Dan Walters | Sacramento Bee

Wed, Jul. 15, 2009 -- National Public Radio is running a series of broadcasts this week called "California in Crisis”. And NPR is not alone.

Network and cable television news shows, public broadcasters, major out-of-state newspapers and countless magazines are taking turns recounting and analyzing California's economic and fiscal travails. The tone of many reports is found in the German word "schadenfreude." It means taking pleasure from the distress of others.

The state's periodic social and economic upheavals have always generated that kind of media attention, something along the lines of "tarnish on the Golden State." But the current spate has an even edgier tone, suggesting that this time, it's worse and at least semi-permanent.

One example is California journalist and futurist Joel Kotkin, writing in Forbes magazine: "But the fundamental problem remains. California's economy – once wondrously diverse with aerospace, high-tech, agriculture and international trade – has run aground. Burdened by taxes and ever-growing regulation, the state is routinely rated by executives as having among the worst business climates in the nation. No surprise, then, that California's jobs engine has sputtered, and it may be heading toward 15 percent unemployment."

The Economist, a sober-sided British magazine, compares California to Texas, noting that the Lone Star State's economy has weathered the national recession nicely and suggesting it may have replaced California as the place creative and ambitious people flock to for opportunity.

The Economist cites "dysfunctional government" as a major California problem. It adds, "No state has quite so many overlapping systems of accountability or such a gerrymandered legislature," and describes the state's ballot measures as the "crack cocaine of democracy."

The New York Times surveys those who want to run for governor next year and wonders whether anyone can run an evidently dysfunctional state.

The carping tone and occasional inaccuracies aside, it's difficult to fault what the out-of-state media are saying about us. They see dysfunction because there is dysfunction. They wonder about our head-in-the-sand attitude about the state's economy, an assumption that everything will turn out all right, because that's exactly how we act.

Even as the state's economy continues to falter, state officials – including those in the Schwarzenegger administration – continue to add new layers of regulation, not to mention new fees and taxes, that contribute to the widespread belief that we are hostile to job-creating investment. And that doesn't include the psychological effects of chronic budget deficits, IOU payments to creditors and a credit rating much lower than that of any other state.

We desperately need to straighten out our laughingstock government, balance the state budget and demonstrate to the rest of the world that we're still in the game. The alternative is economic and social decay.

HOW DID CALIFORNIA GET INTO THIS MESS?

2009-07-10T15:28:00.001-07:00

Former longtime legislator John Vasconcellos (D-Milpitas) analyzes the ingredients that went into making the state budget crisis so bad (Hint: Proposition 13 gets dragged in by its tax-restricting toes), and offers his personal recipe for climbing out of the hole.

There's plenty of blame to go around in the budget crisis. Fingers can be pointed at Gov. Arnold Schwarzenegger, Democrats, Republicans -- and you and me.

By John Vasconcellos | Opinion From the Los Angeles Times

July 10, 2009 -- I was recently hospitalized with a life-threatening illness that it took doctors several days to accurately diagnose. Until they fully understood the problem -- which turned out to be an antibiotic-resistant staph infection -- they couldn't prescribe the medication that would cure me.

The experience got me thinking about California.

Our state's protracted budget crisis sometimes seems unsolvable. But part of the problem may be that those who are trying to solve it don't fully understand its cause.

I represented the Silicon Valley for 38 years in the Legislature, and I chaired the Assembly Budget Committee for 15 of those years. As a result, I have some insights into our current crisis that may be useful.

The immediate problem, of course, is a $26-billion shortfall, which we must now plug if California is to pay its bills. But before we can fix things, we have to understand how we got to this point.

A good place to start is with the slew of revenue reductions that have hit the state since 1978, when Californians passed Proposition 13. The initiative dramatically reduced most property taxes and resulted in a 57% reduction in property tax revenue during its first year, and its effects continue.

Another revenue drop came in 1982, when voters passed an initiative abolishing the state inheritance tax. Before that, California had taken in nearly $1 billion a year in estate taxes.

And there are vehicle license fees. Starting in 1998, the fees were reduced incrementally until Gov. Gray Davis raised them to close a budget gap in 2003. When Arnold Schwarzenegger came into office later that year, he immediately reversed the hike -- at a cost to state coffers of about $4 billion each year since then.

Add to that the collapse of the dot.com bubble in 2004 -- which resulted in a drop of several billion dollars in state revenues from capital gains taxes -- and the current global economic downturn and you start to see how state revenues have suffered.

Next, consider a series of structural complications that hamper the Legislature's ability to come up with solutions. First among them -- again -- is Proposition 13, which requires a two-thirds vote of both legislative houses to raise taxes. This has meant that a small minority can keep the majority from enacting tax hikes that would help balance the budget.

Term limits, enacted by voters in 1990, were designed with good intentions. They would, their backers said, allow for more turnover in state government and more opportunity for worthy candidates who wouldn't have a chance against incumbents. But term limits have also meant that many legislators don't have deep experience in the state issues facing them. They also don't have enough time in office to develop collaborative relationships with their fellow legislators.

The 2002 reapportionment deal further exacerbated matters by creating "safe" districts for Democrats and Republicans, which have largely ensured that people at the liberal or conservative extremes of their party are seated.

So, if those are the basic problems, whom should we hold accountable? Each and all of the following bear responsibility.

* Schwarzenegger: Despite his good heart and mind, our governor seems to be lacking proficiency in basic mathematics. While he has said the budget can't be balanced by cuts alone, he hasn't proposed solutions that would close the gap. And many of the cuts he has proposed would cost the state more in the long run.

* The Democratic majority in the Legislature: There is no denying that Democratic lawmakers failed to create a sufficient rainy-day fund, preferring to spend money when times were flush -- often using one-time revenue sources to fund ongoing projects. They did this both to protect services for needy Californians and because they are overly responsive to public employee unions, especially those in public safety.

* The Republican minority in the Legislature: Unlike their predecessors, who joined Govs. Ronald Reagan and Pete Wilson in meeting Democrats halfway, the current crop of Republicans in Sacramento seems unwilling to compromise. All but one has signed the "no new tax" pledge of Washington crusader Grover Norquist, whose stated ambition is to shrink government to "a size where we can drown it in the bathtub." This may make for good rhetoric, but it produces little in the way of sound public policy.

* We, the people of California: Voters in our state have repeatedly passed initiatives lowering taxes and earmarking funds for pet programs, thereby inhibiting the ability of legislators to make rational decisions about state spending. Voters seem to want an unsustainable combination of increased services and lower taxes.

That, in a nutshell, is how we got into this mess. It is the job of our current Legislature and governor to lead us out of the disaster, but it's the responsibility of all of us to understand the issues they face and demand a sound, long-term solution.

California is an economic powerhouse -- the eighth-largest economy in the world. And it is home to a wonderfully diverse, talented and creative population. But we now have some tough decisions to make. In the end, we will get the kind of government services we are willing to pay for. And we all need to participate in the discussion of what kind of state we want to have.

John Vasconcellos is a former state senator and assemblyman. His longer analysis of the budget crisis can be found at politicsoftrust.net.

California’s B-B-Blues in the Night: FITCH DOWNGRADES CALIFORNIA GENERAL OBLIGATION BONDS TO ‘BBB’; MAINTAINS WAITING WATCH NEGATIVE

2009-07-06T22:08:00.001-07:00

THE DOWNGRADE TO 'BBB' is based on the state's continued inability to achieve timely agreement on budgetary and cash flow solutions to its severe fiscal crisis

THE RATING WATCH NEGATIVE reflects the short-term risk that institutional gridlock could persist, further aggravating the state's already severe economic, revenue and liquidity challenges and weighing on the state's credit.
“The riskier a bond is, other things being equal, the lower its rating. The highest-rated nondefaulted bonds are rated AAA or Aaa, and the lowest are rated C, with defaulted bonds rated D; thus, junk bonds can be rated anywhere between Baa (BB) and D.” -from the concise encyclopedia of economics

From Fitch Ratings via Business Wire

July 06, 2009 03:49 PM Eastern Daylight Time -- NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded the state of California's (the state) long-term general obligation (GO) bond rating to 'BBB' from 'A-'. The bonds remain on Rating Watch Negative. The rating action affects the state's GOs and lease appropriation and related bonds as detailed at the end of this release.

The downgrade to 'BBB' is based on the state's continued inability to achieve timely agreement on budgetary and cash flow solutions to its severe fiscal crisis. Since no agreement was reached by the June 30, 2009 fiscal year (FY) end, the state's controller has now begun issuing registered warrants (IOUs) for certain non-priority payments to preserve cash, and the budget gap to be addressed has increased to $26.3 billion from $24.3 billion. The use of IOUs for non-priority payments would offset cash shortfalls into September 2009 as now currently projected.

The Rating Watch Negative reflects the short-term risk, in Fitch's view, that institutional gridlock could persist, further aggravating the state's already severe economic, revenue and liquidity challenges and weighing on the state's credit. Resolution of the Negative Watch will depend on actions taken to address the cash flow imbalance. The 'BBB' rating indicates that expectations of default risk remain low, although the rating is well below that of most other tax supported issuers. GO debt in California has a constitutional prior claim on revenues, although after education; appropriation debt has a lesser legal claim, but the controller prioritizes payment directly after GO debt service, ahead of other mandatory payments.

With issuance of IOUs for non-priority payments, margins for meeting constitutional and court-required contractual commitments are narrowing. After September 2009, absent any proposed budget and payment adjustments, cash deficits will expand dramatically. Cash flow solutions, including the ability to access short-term borrowing, are inextricably tied to reaching timely agreement on effective and credible budget solutions.

The state's budget revision released in May had forecast a $24.3 billion budgetary gap through June 30, 2010, the end of FY 2010, before proposed solutions; $3.1 billion of proposed solutions were in FY 2009, with the remainder in FY 2010. By failing to reach agreement prior to June 30, 2009, the end of FY 2009, a portion of the $3.1 billion in proposed FY 2009 budgetary solutions has been forfeited; notably, such solutions would have alleviated the cash flow stress forecast in the early months of FY 2010 by reducing or deferring scheduled statutory disbursements, primarily to education. Moreover, under the state's constitutional spending formula for education, foregone FY 2009 proposed solutions lead to higher required spending in FY 2010 and beyond, and pushed the FY 2010 baseline budget gap to $26.3 billion.

The inability of the state to reach agreement has prompted the controller to begin issuing IOUs for non-priority payments, primarily disbursements to vendors, for certain social services, and for tax refunds, in order to ensure payment of priority payments, including GO and lease debt service. The controller's office estimates that $3 billion in IOUs will be issued during July 2009; priority payments of $10.8 billion will be made for education, debt service, Medicaid, payroll, pensions and other mandatory contractual obligations. Projections will be revised to reflect June revenue performance and other changes but as currently estimated, cumulative cash deficits of $3.7 billion are projected through August, offset by $4.5 billion in non-priority payments that could be covered with IOUS, excluding tax refunds. However, by the end of October, the projected cash deficit expands to $16.1 billion, well beyond non-priority spending of only $10.6 billion, excluding tax refunds.

Today's further downgrade to 'BBB' on Rating Watch Negative affects GOs, GO veterans, economic recovery and Cal-Mortgage Loan Insurance Division bond ratings.

Moreover, the following appropriation bonds of the state are also downgraded to 'BBB-' on Rating Watch Negative:

--Public Works Board (except for those issued for the Regents of the University of California);

--East Bay State Building Authority;

--Los Angeles State Building Authority;

--Oakland State Building Authority;

--Riverside County Financing Authority;

--Sacramento City Financing Authority;

--San Bernardino Joint Powers Financing Authority;

--San Francisco State Building Authority;

--Golden State Tobacco Securitization Corporation (series 2005A);

--California Infrastructure and Economic Development Bank state school fund apportionment lease revenue bonds;

--California Judgment Trust;

--Shafter Joint Powers Financing Authority;

--Taft Public Finance Authority.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Contacts

Fitch Ratings, New York
Douglas Offerman, +1-212-908-0889
Richard Raphael, +1-212-908-0506
Cindy Stoller, +1-212-908-0526 (Media Relations)
cindy.stoller@fitchratings.com

Permalink: http://www.businesswire.com/news/google/20090706005808/en

News Analysis from China: WHO IS TO BLAME ON CALIFORNIA’S BUDGET CRISIS?

2009-07-06T14:00:00.001-07:00

…in which the Chinese explain the California Budget Mess while simultaneously suppressing the ethnic Uyghur minority

by Wang Yan Editor, ChinaView [Xinhua News Agency] www.chinaview.cn

LOS ANGELES, July 5 (Xinhua) -- As California has to operate on IOUs after failing to solve the budget crisis, Californians are asking who is to blame on all those problems facing this Golden State, a leader in the U.S. economy.

Governor Arnold Schwarzenegger, himself a Republican, blamed Democratic state legislators on failing to make necessary spending cuts.

But Democrats attacked Republicans and Governor Schwarzenegger for their refusal to raise taxes as a way to get new revenues. They also criticized Republicans for cutting services to the poor and needy, such as social services, health care and welfare for the poor, senior and disabled.

If the governor had the money, he would certainly not ask for any spending cuts. But the problem is, the state government can get no new revenue if raising tax is not an option.

It seems that the governor, both Republicans and Democrats in the state legislature are to blame. But some analysts say that voters in California are to blame too.

Schwarzenegger was elected governor in 2003 after former Governor Gray David (sic), a Democrat, was ousted in a recall campaign following a state budget crisis. Schwarzenegger promised voters he would fix the state's broken finances.

Schwarzenegger knew why Davis was ousted because voters in California did not want more taxes. So he took the easy way out by cutting taxes by billions of dollars, backing off a tough spending limit, unilaterally adding spending to placate Democrats and blowing through a one-time surge in revenues.

After he took office, Schwarzenegger sought and voters approved a 19 billion dollar bond issue that allowed the state to borrow heavily just to meet its annual operating expenses. Now the state has to pay the principal and interest of the bond.

He also put a vehicle license fee cut of 6 billion dollars to make the voters happy. But soon in February this year he had to partly restore the revenue by temporarily raising the vehicle license rate from 0.65 percent of a vehicle's value to 1.15 percent.

About 55 percent of California's general fund revenue comes form the personal income tax. The state depends heavily on the very rich to pay taxes. The top 5 percent of all income earners combine to pay 68 percent of income taxes.

But the very rich are largely dependent on capital gains for incomes, which are most commonly realized through the sale of real estate and stocks. Tax revenues from capital gains have virtually disappeared following the crash of both the real estate and stock markets.

Another reason is the failure of the governor and the legislature to cope with the dramatic drop of revenue after the bubble in Silicon Valley burst.

During the late 1990s, revenues soared as California benefited more than any other states from the tech-stock boom that was centered in the Silicon Valley. But the state spent billions expanding and creating state programs and passing out billions more in permanent tax cuts.

When such revenues dried, the state still refused to raise tax or cut spending as most of the U.S. states did during the 2002 recession. Instead, California relied heavily on borrowing and accounting maneuvers to balance its budget.

Traditionally, Democrats are supported by unions and other civil rights organizations. Schwarzenegger accused Democratic lawmakers of ignoring "waste, fraud and abuses" and said that Democrats are "just beholden to the unions and the special interests."

The governor also tried to shift the blame on the Democrats alone by saying that "the legislators' failure to act on those proposals sent a message to the California voters and to the taxpayers that says we want you to make the sacrifices but we in Sacramento don't want to make any sacrifices whatsoever."

"Protecting the special interests who benefit from our dysfunctional system was more important to the Legislature than protecting the taxpayers and dealing with the entire 24 billion-dollar deficit," he added.

Democrats are the majority in the California legislature. In normal conditions, it is easy for the Democratic controlled legislature to pass their version of budget. But California is one of the three U.S. states which require that the state budget should be passed with two thirds of majority, not simple majority. Republicans make use of the situation to kill any budget they disagree with.

While saying the state legislature is to blame, some Californians also blame the voters. In 1978, Californian voters passed Proposition 13 to cap property taxes at 1 percent of assessed value and mandated that increases would require a two-thirds majority at both the state and local level. That proposition greatly limited the state's ability to get more revenues.

That can explain why the Golden State has no money to support its welfare and social services.

The California education system has deteriorated to the point where it is now ranked 47th in the United States. For the past 30 years, governors and legislators have tried to keep California's financial house together by a series of tricks, most often borrowing in anticipation of future revenues. That worked as long as the California economy was strong, but the recession drove California to the verge of bankruptcy.

It seems that the California budget crisis is mixed with impacts of the recession, the struggle between legislators from different parties, structural problems of the state legislature, decisions from the voters and ability of the governor to lead.

CALIFORNIA GOVERNOR SIGNALS KEY BUDGET CONCESSION ON EDUCATION CUTS: Schwarzenegger sees possible compromise + GOVERNOR BACKS OFF PLAN TO SUSPEND PROP 98

2009-07-04T23:03:00.001-07:00

Gov. Arnold Schwarzenegger said Friday he is willing to reconsider his most recent proposal to help close the state's $26.3 billion budget shortfall by suspending state constitutional rules that control education spending in order to make deep cuts in school funding. View Larger Image

Sat Jul 4, 2009 3:56pm EDT

By Jim Christie - Reuters

SAN FRANCISCO, July 4 (Reuters) - Governor Arnold Schwarzenegger, optimistic California can finish its budget negotiations in a few days, is willing to reconsider his proposed cuts to education in hopes of averting a cash crisis, the San Francisco Chronicle said on Saturday. (ARTICLE FOLLOWS)

A compromise between the Republican governor and Democratic lawmakers may help clear the way for an agreement on an overdue state budget and avert a cash crisis for the government of the most populous U.S. state. California already is issuing billions of dollars in "IOUs" and, without a deal, is on track to run out of cash this month.

The San Francisco Chronicle reported that Schwarzenegger, in a Friday meeting with its editorial board, said he would be willing to reconsider his proposal to help reduce California's $26.3 billion budget deficit with cuts to school spending that would require suspension of constitutional rules on education expenditures.

"We are not stuck ... about the suspension," Schwarzenegger said during the meeting. "We've got to analyze all this."

He said budget negotiations are moving fast. "I think if we continue this way we can get this done in the next few days," he said.

Backing off on education spending cuts would go a long way with Democrats who control the state legislature.

On Thursday Democrats said they would no longer hold out for increasing taxes to help raise revenues to fill the budget gap. That was a major concession to Schwarzenegger and Republican lawmakers, who had opposed tax hikes and pressed for balancing the state's books with deep spending cuts.

That helped Republicans gain confidence that a budget deal could be reached soon.

"I think there is at least a 50-50 chance that we'll find a solution that is acceptable to all parties within a week," Assembly Republican Leader Sam Blakeslee said.

Democrats see backing off on education spending cuts as an important concession by Schwarzenegger.

"While taxes may be off the table, education cuts also have to be off the table," Democratic state Senator Leland Yee told Reuters.

GRIM REVENUE OUTLOOK

Lawmakers failed to agree on balancing the state's budget on Tuesday and the state government began its fiscal year on Wednesday without a spending plan in place.

In response, state finance officials began issuing "IOUs" in lieu of payments for tax refunds owed to taxpayers to preserve cash from higher prior payments, including payments to investors holding the state's debt. They warned that local agencies overseeing health programs and a variety of recipients of state financial aid, including the disabled and college students, could be in line for IOUs.

The state controller plans to issue more than $3 billion this month in registered warrants promising payments if Schwarzenegger and lawmakers fail to agree on a budget.

California is experiencing a severe revenue downturn as a result of the recession, rising unemployment and the lengthy housing downturn that will leave the state's government with an austere budget. It likely will force additional spending cuts throughout the fiscal year.

"The reality is that the revenues are not looking good," Yee said. "We just simply don't have the money to keep up the pace of services we're providing."

California finance officials hope a budget deal is reached soon so they can stop their IOU effort, which aims to reassure the municipal debt market that the state will honor its bond payments ahead of nearly all other obligations.

Finance officials also want to reassure the market in anticipation of having to sell short-term debt for cash-flow purposes once a budget deal is reached.

California's budget turmoil has made Wall Street nervous. Standard & Poor's warned in a statement on Wednesday that if California's budget is not settled soon, the state's A-credit rating, already the lowest of any of the 50 states, is at risk of falling.

GOVERNOR BACKS OFF PLAN TO SUSPEND PROP 98

Matthew Yi, sAN Francisco Chronicle Staff Writer

Saturday, July 4, 2009 -- Gov. Arnold Schwarzenegger said Friday he is willing to reconsider his most recent proposal to help close the state's $26.3 billion budget shortfall by suspending state constitutional rules that control education spending in order to make deep cuts in school funding. That concession may help him avoid a political battle with the influential California Teachers Association. Although the powerful union has been largely quiet during budget talks, it could sway lawmakers who are desperately needed to pass a budget. A source told The Chronicle on Friday that the union is preparing a statewide television advertising campaign to fight any attempt to ignore the education spending rules that voters passed in 1988 as Proposition 98.

On Wednesday, Schwarzenegger had proposed suspending Prop. 98, which among other things requires that school funding be based in part on what was spent the previous fiscal year. The requirement can make it difficult, if not nearly impossible, to make large cuts in education - an expense that makes up about half of the state's discretionary spending.

Such cuts became even more inevitable when the state's gaping deficit grew overnight by $2 billion because the Legislature failed to approve a budget fix by midnight Tuesday, the end of the 2008-09 fiscal year.

Still, the governor, who has proposed cutting this year's education spending by $3 billion, said he was willing to consider other solutions.

"We are not stuck ... about the suspension" of Prop. 98, he said in a meeting Friday with The Chronicle's editorial board. "We've got to analyze all this. ... We have to figure out how to deal with it."

Democratic lawmakers said they are encouraged by Schwarzenegger's willingness to reconsider the Prop. 98 issue. Yet Senate President Pro Tem Darrell Steinberg quickly pointed out that the issue would have never surfaced had the governor on Tuesday supported three budget bills that would have saved $3 billion.

"This problem was completely avoidable. The administration is stuck because of its own ... strategy," said Steinberg, D-Sacramento.

The governor has refused to support partial budget fixes. But the budget impasse has caused a cash crunch that on Thursday forced the state controller to begin issuing IOUs to some taxpayers, businesses and creditors.

That impasse would become even more complicated by an enraged California Teachers Association and other education groups.

"They had not declared war on this governor who had made billions of dollars in cuts to education in his budget proposals ... and to have additional rounds of cuts proposed by him on top of the huge reductions they've already made have gotten them very, very upset," said Kevin Gordon, an education lobbyist.

Gordon noted that the California Teachers Association, which led the effort to torpedo Schwarzenegger's ballot measures to reform government in 2005, had supported the governor's budget-related ballot measures that failed in the May 19 special election. That could spell trouble for the governor, who is one of the biggest proponents of next year's ballot measure that would create an open primary system.

Telephone calls to CTA representatives were not returned Friday.

Nevertheless, despite this new wrinkle in the budget negotiations, Schwarzenegger said talks with Democratic legislative leaders have been progressing and he's hopeful that a resolution is near.

The governor said there has been a greater sense of urgency since Tuesday. Since then, the bulk of the budget negotiations have centered on how much to cut spending in health and human services.

"There's more willingness to look at our proposals more seriously - to look at reforms more seriously ... and to look at cuts more seriously," said Schwarzenegger, who has backed away from outright elimination of popular state programs such as health care for poor children, a welfare-to-work program for single mothers, and in-home support services for the elderly and the disabled.

The governor said "there's movement" in budget negotiations. "I think if we continue this way we can get this done in the next few days."

CALIFORNIA’S DEATH THROES: A View From Sacramento

2009-06-16T15:55:00.001-07:00

Joseph A. Palermo - Author/Associate Professor of History | The Huffington Post

June 15, 2009 10:51 AM -- California Governor Arnold Schwarzenegger and his Republican colleagues are using the trauma of the economic collapse and the record state budget deficit to implement policies they've been advocating for years. "This budget ought to be solved in one chunk, at one time," the governor says, "and let's do it quickly." As usual, the working poor are going to suffer the brunt of the Republicans' slash-and-burn fiscal policies aimed at decimating the state's social safety net. Arnold and his rich friends propose throwing one million children off CalWORKS, the state's primary welfare program, and they want to strip away health care for 900,000 children by ending the "Healthy Families" program. They'd rather destroy the state's services, including the higher education system, instead of raising taxes on big corporations and rich individuals.

The "supermajorities" needed to pass state budgets means that six Republicans (two Senators and four Assembly members) can hold hostage the nation's most populated state. "Cal-EE-Forn-Ya's day of reckoning is approaching," Schwarzenegger intones, (as if he's starring in another Terminator movie). No wonder voters rejected his and the Democrats' ballot propositions last month. The Governor says the vote means he has a mandate to gut the government, while the Democrats say it means that voters didn't understand the gravity of the situation. I think a lot of people were sending the message to these politicians that they should do their damn jobs instead of expecting voters to give them political cover.

With all the fiscal carnage you would never think that California's registered Democratic voters outnumber the Republicans by about 1.3 million and hold substantial majorities in both chambers of the legislature. California never gave a single electoral vote to George W. Bush and the trend lines show it is becoming more Democratic each election cycle. Yet for years now the Democrats' key constituencies have been taking it on the chin.

The origins of the current crisis go back to early 2001 when Dick Cheney and "Kenny Boy" Lay conspired with Cheney's "energy task force" to allow Enron and other renegade companies to plunder California's energy markets. Bush and Cheney blocked the Federal Energy Regulatory Commission (FERC) from stepping in to stop the hemorrhaging and California Republicans slammed Governor Gray Davis for causing the whole mess. They then tapped "The Terminator" to lead their charisma-challenged party. Arnold offered up his celebrity in a bid to topple Governor Davis by abusing the recall provision in the state's constitution.

Soon Arnold was out on the stump promising to "terminate" all new taxes. He even staged an event where his supporters dropped a car from a crane symbolizing their opposition to a vehicle tax that Davis had proposed to deal with the then relatively small (but growing) budget deficit. In 2005, Scharzenegger supported Bush's Social Security privatization scheme and tried to do the same thing to the state's pension plan CalPIRS, the biggest in the country, by pushing a set of failed propositions that were a frontal assault on California's working middle class. And throughout this entire spectacle the Democrats allowed Arnold to make them jump through hoops like trained circus dogs. And they continue to do so today.

The Democratic "leaders" in the state legislature have over and over again betrayed their most important constituencies -- working people, educators, public employees, etc. -- leaving millions of California Democrats to wonder why they were thrown under the bus only so their representatives can reach terrible "compromises" with a recalcitrant and retrograde Republican minority.

One thing that contributes to this dismal state of affairs is that in the legislature here in Sacramento the Democrats often carry out their governing duties differently than do the Republicans. For example, Senate President Pro Tem Darrell Steinberg (D-Sacramento), the typical California Democrat, values comity and decorum as he extends his hand across the aisle to reach compromises in good will with his Republican colleagues. While the Senate Minority Leader, Dennis Hollingsworth (R-Murrieta), the typical California Republican, tears out the Democrat's heart and pees on his lungs through the hole in his chest. You might say the two parties have different negotiating styles.

Californians concerned about the future of the state might think of forming "Progressive Democratic Clubs" at the grassroots level modeled on the California Democratic Clubs that kept the ideals of the New Deal going in California in the post-WWII era, especially during the administration of Governor Edmund "Pat" Brown who built up the state's educational and social services. Progressive clubs such as these (like a state-level Moveon.org) could link up local communities to press the Democrats to get off their knees and start fighting for the people who put them in office.

At a time when President Barack Obama enjoys a 62 percent approval rating, and the California Congressional delegation is stronger than ever with Speaker of the House Nancy Pelosi (D-San Francisco) in the driver's seat, it's curious that Democrats in Sacramento still cower from the bullying of "conservative" Republicans. A grassroots movement working within Democratic Party structures might break the cycle of abuse the Republican minority has inflicted upon the state for purely ideological reasons.

CALIF. AID REQUEST SPURNED BY U.S.: Officials Push State To Repair Budget

2009-06-16T15:42:00.001-07:00

By David Cho, Brady Dennis and Karl Vick | Washington Post Staff Writers

Tuesday, June 16, 2009 -- The Obama administration has turned back pleas for emergency aid from one of the biggest remaining threats to the economy -- the state of California.

Top state officials have gone hat in hand to the administration, armed with dire warnings of a fast-approaching "fiscal meltdown" caused by a budget shortfall. Concern has grown inside the White House in recent weeks as California's fiscal condition has worsened, leading to high-level administration meetings. But federal officials are worried that a bailout of California would set off a cascade of demands from other states.

With an economy larger than Canada's or Brazil's, the state is too big to fail, California officials urge.

"This matters for the U.S., not just for California," said U.S. Rep. Zoe Lofgren, who chairs the state's Democratic congressional delegation. "I can't speak for the president, but when you've got the 8th biggest economy in the world sitting as one of your 50 states, it's hard to see how the country recovers if that state does not."

The administration is worried that California will enact massive cuts to close its deficit, estimated at $24 billion for the fiscal year that begins July 1, aggravating the state's recession and further dragging down the national economy.

After a series of meetings, Treasury Secretary Timothy F. Geithner, top White House economists Lawrence Summers and Christina Romer, and other senior officials have decided that California could hold on a little longer and should get its budget in order rather than rely on a federal bailout.

These policymakers continue to watch the situation closely and do not rule out helping the state if its condition significantly deteriorates, a senior administration official said. But in that case, federal help would carry conditions to protect taxpayers and make similar requests for aid unattractive to other states, the official said. The official did not detail those conditions.

California is among several states that have asked for a bailout from the Treasury Department. A few have gotten some traction, notably Michigan, whose economy is among the country's weakest and is struggling to deal with the fallout from the bankruptcies of General Motors and Chrysler. To stave off mass layoffs, Treasury officials are considering helping the state's auto suppliers stay afloat and convert their businesses to support other industries.

California Controller John Chiang, a Democrat, warned last week that the state was "less than 50 days away from a meltdown of state government."

While its fiscal crisis is severe, experts say the state is unlikely to default on what it owes, even if it runs out of cash. It can raise money through taxes and other means to assure repayment of its debt. Most likely are massive cuts in public services.

"After June 15th, every day of inaction jeopardizes our state's solvency and our ability to pay schools and teachers and to keep hospitals and ERs open," Gov. Arnold Schwarzenegger (R) said Friday.

Problems unique to California have made it hard for the state to find a way out of its crisis.

The state entered the downturn burdened with an inflexible budgeting apparatus, constrained by a state ballot initiative approved by voters in 1978 that severely limited property taxes in California. The signature example of "ballot box budgeting" left the Golden State inordinately reliant on the personal income tax, which accounts for half of revenue to Sacramento.

California's budget is also heavily dependent on taxes paid on capital gains and stock options, which have been clobbered during the meltdown of financial markets. State budget analysts made their annual estimate of revenue a month before the crisis spiked in the fall and have been backpedaling ever since.

"Those revenue projections turned out to be wildly optimistic, but nobody was predicting the October collapse of the financial markets," said Michael Cohen, deputy analyst in the Legislative Analyst's Office.

Consider capital gains -- income from sales of stocks or other assets. In California, that income dropped to $52 billion in 2008 from $130 billion a year earlier. It is estimated to be $36 billion this year.

By February, the shortfall was projected at $42 billion over two years. Lawmakers stared at the figure for weeks, stymied by the state constitution's requirement that the budget pass with two-thirds of the legislative vote and their own profound partisanship. The deadlock broke when a moderate Republican defied his caucus's pledge against any tax hike, but it didn't end there.

In April, budget analysts revised revenue projections downward by another $12 billion. And in May, voters overwhelmingly rejected the portions of the February deal that legally had to be put before them, taking $6 billion off the table.

To close an annual gap now put at $24 billion, Schwarzenegger and leaders of the legislature's Democratic majority have put aside talk of tax increases to concentrate on cuts. Most dramatically, Schwarzenegger would eliminate the state's basic welfare program, which serves 1.3 million.

Facing gridlock and few options other than severe cuts, California began to look to Washington for help. State Treasurer Bill Lockyer sent a letter to Geithner in mid-May, urging him to consider helping cash-strapped municipalities.

"A fiscal meltdown by California or any other large state or municipality would surely destabilize the U.S., if not worldwide, financial markets," Lockyer wrote. If the state were to default, it could shake bond markets and undermine investor confidence in a still-fragile financial system.

Tom Dresslar, a spokesman for Lockyer, said California will not default on its general obligation debts. But by late July, the state conceivably could run out of money to operate, as revenue continues to deteriorate while costs keep mounting. "The problem is getting worse, certainly not getting better," he said.

In testimony before Congress, Geithner did not rule out aiding California. But he was far from enthusiastic about such a proposal, instead suggesting that Congress was better positioned to help the states -- and that states should balance their budgets.

"A lot of the burden," Geithner said, "is going to be on them to lay out a path that gets their deficits down to the point where they're going to be able to fund themselves comfortably."

Most members of California's congressional delegation have also been ambivalent about whether to press for federal help.

State officials are "not expecting any help from the federal government," Dresslar said. "At this point, we're on our own."

LAWMAKERS’ PLAN EASES GOVERNOR’S PROPOSED CUTS: Budget panel wants to keep parks open and keep healthcare for low-income children.

2009-06-16T08:04:00.001-07:00

GOP leaders scoff at proposed tax hikes and criticize Democratic leaders for addressing only part of the deficit.

By Shane Goldmacher | LA Times

June 16, 2009 -- Reporting from Sacramento -- A state budget panel Monday rejected some of Gov. Arnold Schwarzenegger's most extreme proposals to close the state's deficit through cuts to government programs as the leaders of the Assembly and Senate announced their own plans for billions of dollars in additional taxes.

The joint legislative committee nixed Schwarzenegger's plans to borrow $1.9 billion from local governments, close adult day-care centers and eliminate a health insurance program for low-income children. The panel voted to shave $70 million from the Healthy Families program that serves those children, but that cut, like most others the members agreed on, was significantly smaller than the governor's.

Interactive: California budget balancer

Full coverage: California's state budget crisis

Committee members also said no to cutting off state funds for roughly 220 parks, proposing to keep them open with a new annual $15-per-vehicle fee on California drivers.

At the same time, Assembly Speaker Karen Bass (D-Los Angeles) announced that she wants $1 billion in new taxes on the tobacco and oil industries. And Senate President Pro Tem Darrell Steinberg (D-Sacramento) said Democrats in his house will push next week to suspend $2 billion in corporate tax breaks that were passed in February but have not yet taken effect.

Both leaders said the revenue from such moves would soften the blow for the state's neediest, who rely on services that will certainly be reduced as the Legislature looks for ways to plug a projected $24.3-billion shortfall.

"Would you rather take 900,000 kids off the healthcare rolls or delay a corporate tax break?" Steinberg said in an Internet question-and-answer session with Californians on Monday evening.

Bass said she expects the Legislature to take "a balanced approach" combining new revenue and service cuts.

"The cuts will be deep and painful," she said, "but we will not eliminate basic safety net programs."

Bass said a 9.9% tax on oil pumped from California land is "absolutely on the table."

Democrats are also eyeing possible tax hikes on tobacco products and liquor, though they did not provide details.

Schwarzenegger and GOP lawmakers, some of whose votes would be needed, have said they would not support new levies to balance the budget.

Schwarzenegger's spokesman, Aaron McLear, said Monday that the governor was not prepared to go along with the proposals to raise taxes or roll back corporate tax breaks, and he said the legislators' efforts at cutting state programs so far have been insufficient.

"They are nowhere near solving the $24-billion deficit that the state faces," McLear said.

The jockeying comes as California faces the prospect of being unable to pay all its bills as of July 28, according to Controller John Chiang. Members of the panel, which includes both Assembly and Senate members, said they hope to complete their work and send a budget plan to the full Legislature for approval within the week.

Though lawmakers have raised the possibility of resolving only part of the deficit immediately and addressing the rest later, Schwarzenegger has insisted that they send him a plan to close the entire shortfall.

Republicans on the committee criticized the dominant Democrats for not tackling the full deficit.

"We're falling well short," said Assemblyman Roger Niello (R-Fair Oaks).

Schwarzenegger had said that eliminating the Healthy Families program would save roughly $368 million. The panel's proposal for a $70-million reduction in the program says panel members hope charitable donations will make up the difference.

The governor proposed shuttering any state parks that could not generate enough in visitor fees to operate without government money. Niello said Republican votes for the higher car fees the committee wants instead are about as likely as the "survival of a scoop of ice cream on the pavement in the middle of July."

"This is our best effort to save the parks," countered Assemblywoman Noreen Evans, the Santa Rosa Democrat who chairs the joint budget committee. "If the Republicans want to close the parks, then the Republicans want to close the parks."

Schwarzenegger would eliminate Adult Day Health Care programs, a $170.5-million savings. But the panel restored much of that money, lowering the savings to $26.8 million. Cutbacks to a handful of AIDS/HIV education, prevention and treatment programs were lowered by roughly $50 million, to $33.5 million.

The lawmakers agreed with the governor's proposal to shift $336 million away from transit programs to the state's general fund. And they supported his one-year suspension of state payments for an open-space program that gives property-tax exemptions to certain landowners. Under the program, the state reimburses counties, mostly in rural areas, for the exemptions. But counties would be on the hook for the $34.7-million tab in the fiscal year that begins July 1.

The panel also agreed to reduce a state requirement that local governments keep shelter animals alive for six days before euthanizing them, shortening the mandate to three days for a projected savings of $25 million.

The lawmakers rejected Schwarzenegger's proposals to save $28 million by indefinitely suspending a state law requiring local governments to give absentee ballots to any voter who requests one and to maintain lists of permanent absentee voters. And they dismissed his plan to save $14 million by putting on hold another law requiring local officials to intervene in child custody disputes, including the recovery of abducted children.

Meanwhile, on Monday evening Steinberg announced that he would voluntarily cut his salary by 5%. He urged all other legislators to follow his lead.

"We have to demonstrate we will share the sacrifice, share the pain as well," he said. Steinberg's salary is $133,639 a year.

Times staff writers Eric Bailey, Patrick McGreevy and Michael Rothfeld contributed to this report.

3 views: CALIFORNIA NEEDS A STATE CONSTITUTIONAL CONVENTION + A ‘FALSE HOPE’ + HECK, YEAH, CALIFORNIA SHOULD THROW A CONSTITUTIONAL CONVENTION!

2009-05-29T11:15:00.001-07:00

California needs a state constitutional convention: Rebooting Sacramento by rewriting the state's Constitution seems to be the only way to move beyond financially broke and politically broken.

Editorial from the Los Angeles Times

May 21, 2009 - California is stuck. Schools are about to lay off teachers. Prisons are about to release inmates. Historic assets are on the block. Initiatives confuse. Revolts fail. No amount of electing and reelecting people who promise to fix things seems able to move us forward. It's time to reboot.

There have been calls for months now to convene a state constitutional convention and, in essence, start over. It's a good idea. The state Constitution runs to two fat volumes in print and is padded each year by new voter initiatives or legislative propositions. In the end, it's just a document. It's not the enemy. But retooling is one necessary step to make the state function better.

Of course, all kinds of things can go wrong. How would delegates be picked? Would unions control a convention, or union-busters, or Proposition 8 advocates or opponents? A poorly structured convention or one populated by self-interested fringe delegates could do more harm than good. Every care must be given to the details, and it is essential to include in the initiative that authorizes a convention -- alas, there must be a ballot measure -- restrictions on what it would be allowed to address.

One benefit: A convention could push the Legislature to accept deeper, more far-reaching reforms than it might otherwise. One provocative notion being floated by the reform group California Forward would devolve decision-making on taxing and spending back to counties and cities, realigning the relationship between state and local government. In another year, lawmakers might scoff at the prospect. Fear of a convention may encourage ingenuity.

The Bay Area Council, which is leading the charge for a convention, has put "proportional representation" in the Legislature at the top of its wish list. Interesting choice. We're curious to see whether voters already angry at Tuesday's barely comprehensible ballot measures will embrace something quite so cutting-edge.

No convention -- in fact, no statewide fix -- will work if it consists simply of one interest group's shopping list. The Times has made no secret of its position against the two-thirds legislative threshold for tax increases and budgets, and we will keep pushing to overturn it. But the point is to get more ideas on the table.

Prepare for the season of reform and reinvention. A tax reform commission is to release its report in July. Political parties and candidates will focus on next year's gubernatorial election. It's not time to back away from government; it's time to engage it, and change it. Over the coming weeks and months, this page will not be shy about asking questions and offering suggestions. Bring on the ideas. Bring on the convention.

A CALIFORNIA CONSTITUTIONAL CONVENTION: Despite what the pundits say, such a effort isn't the answer to the state's structural problems. It would take too long, be complicated and controversial, and likely lead to a dead end.

By Erwin Chemerinsky – Opinion From the Los Angeles Times

May 28, 2009 - Since the defeat of the budget initiatives on May 19, the pressure has been mounting for a constitutional convention to deal with the state's underlying structural problems. As California plunges further into fiscal crisis, this newspaper and others, as well as pundits across the state, have endorsed the idea. But I believe it's a false hope.

My experience as chairman of a similar convention -- an elected commission created in 1997 to propose a new Los Angeles city charter -- makes me skeptical that a constitutional convention can provide a solution to the serious problems that face the state.

It's not that I disagree about the roots of the crisis. The California Constitution is deeply flawed and desperately needs revision. The requirement that the budget as well as any tax hikes must be approved by a two-thirds vote in the Legislature ensures legislative gridlock and is a large part of why the state is now in such desperate financial shape. The overused initiative process has led to a host of unfunded, voter-passed programs that distort the state's spending priorities. Term limits have robbed the Legislature of experienced leaders and legislators.

But is a constitutional convention the best path to a solution? Even if there is a constitutional convention, and even if it does come up with a coherent and meaningful package of proposed changes, it's uncertain that that package would ever be adopted. There are countless controversial issues that could doom it. For example, if the revised constitution protects a right to marriage equality for gays and lesbians, a significant number of voters will oppose it on that basis alone. But if the new constitution does not protect a right to marriage equality, others will vote against it for that reason. The same impasse could arise over abortion rights, affirmative action or benefits for undocumented immigrants.

Even if the constitutional convention were narrowly limited to issues related to the state's fiscal problems, this difficulty would not go away. For example, Proposition 13, which limits property taxes, has a greatly distorting effect on the state's tax structure, and I would certainly argue that it should be repealed or, at least, reformed. But simple politics tells us that a proposal to repeal Proposition 13 would be enormously controversial and could doom any constitutional reform. The same goes for repeal of the two-thirds requirement for passing budgets.

Such controversies are unavoidable. That is why several efforts at charter reform were defeated in Los Angeles before there was finally approval of a new charter in 1999. And in order to ensure passage, the charter that was ultimately proposed had to stay away from some essential reforms, such as increasing the size of the Los Angeles City Council. Even a modest increase from the current 15 council districts was seen as likely to doom the whole proposal.

Moreover, during the charter reform process, there was no consensus on any issue concerning the structure of city government. Then-Mayor Richard Riordan had his views, City Council members had theirs, the city attorney and city controller had theirs, business groups had theirs, unions had theirs, homeowners had theirs, and so on. Many of these stakeholders had the power and resources to defeat any proposed new charter if they chose to.

The result was that everything had to be a careful compromise. But a compromise document can go only so far in providing innovative solutions to serious problems. For instance, an impasse over the role of neighborhood councils was only resolved after we drafted fairly ambiguous provisions that created a weak system.

Rewriting the state Constitution will also take time. First, the voters must approve a constitutional convention at the ballot box, and then the convention's delegates must be selected. They will need a significant amount of time to study the issues and to begin to draft the new constitution. When and if they finish battling over what their proposal should be, it would need to be approved at the polls. That could take years -- and frankly, the state needs a faster solution.

I have no real objection to a convention. I just don't believe we can count on it to solve our problems -- and certainly not in a timely fashion. Therefore, even if convention proponents continue to move toward establishing one, action must still be taken now to address California's most serious problems.

For example, an initiative should be placed on the ballot as quickly as possible to eliminate the two-thirds requirement for passage of the state budget and of new taxes. Only two other states in the country have such an antidemocratic requirement, and it is an enormous obstacle to responsible budgeting. The current crisis hopefully will provide the impetus for passage of this reform. But if such an initiative cannot get approved, there is little reason to believe that a new constitution that includes this change could get approved either.

No one in California can deny the seriousness of the state's problems or that the California Constitution needs major revision, if not replacement. But it is unrealistic to pin hopes on something that is so difficult and time-consuming to achieve.

Erwin Chemerinsky is dean of the law school at UC Irvine.

Patt Morrison:

California needs a constitutional convention: Only by starting over can we engineer a fresh start.

Patt Morrison | LA Times Columnist

March 5, 2009 - Heck, yeah, California should throw a constitutional convention.

I love political conventions -- the open bars, the zany outfits, the gaudy, overpriced souvenirs. Eureka and party on, say I!

Oh, a constitutional convention isn't that kind of convention? It's supposed to be sober and ponderous? Says you. We could make it anything we want it to be.

But we'd just better make it good.

California's only begun to crawl out of the smoking wreckage of a five-car political smashup, and all of us were at the wheel. The budget disaster crashed into term limits and redistricting and our tax-and-spend habits and the simple bullheadedness of voters and the people we elect.

A constitutional convention -- assigned to rewrite the operating manual for the state -- could be the only way to fix the mess we've already voted ourselves into. Anybody who thinks that the budget standoff was a stellar example of democracy at work is either a masochist or a saboteur from New York.

Arnold Schwarzenegger wants a constitutional convention. Public policy wonks and worried budgeteers want one. The Legislature may not want one -- another reason to convene it.

At this point, we've been running on the same basic chassis we've had since Edison invented the phonograph.

We made it so easy to overload the vehicle of state with amendments that we have nearly 500 of them. The U.S. Constitution has 27, and it had about a 60-year head start on us.

California's Constitution is apparently the second longest in the country, after Louisiana's, and we all know what a model of governance Louisiana is.

Robert Stern probably wouldn't accept, but I'd think I'd give him the gavel at a constitutional convention. He's the president of the nonprofit, nonpartisan Center for Government Studies in Los Angeles, and he makes it his business to think these things through.

"We should," he says, "be having such a debate every 10 or 20 years, not every 100 years."

At our first such convention, in 1849, 48 delegates put together a Constitution in six weeks. They wanted California to be a state, so they banned slavery. To entice more women to come here, they gave wives the right to own their own property. They banned anyone who had fought a duel with deadly weapons from voting or holding public office, and declared that no duly-made marriage contract could be invalidated for religious reasons.

Some Southern California delegates fought statehood because they didn't want to pay the taxes. And when the Constitution came to a vote, only 12% of eligible voters bothered to cast a ballot. Haven't changed much, have we?

The second, convened in 1878, brought together farm interests, left-wingers and right-wingers, and what they did agree on was dis- empowering the Legislature, which meant the Constitution got longer and longer as it did the lawmaking work it took away from Sacramento.

The third convention wasn't a formal convention at all but the profound 1911 progressive reforms that gave us the initiative, the recall and the referendum.

Three major runs at getting it right: the founding of California, the reengineering of government in California and the reform of California.

A constitutional convention has the potential of deteriorating into a "Kumbaya" chorus or a knife fight. Most likely a knife fight.

A convention is, in the end, about redistributing power, taking it out of some hands and putting it into others. Everybody wants power, and nobody wants to give it up.

What should it address?

How about making it harder to amend the state Constitution and -- slightly -- easier to pass a state budget. Changing Proposition 13 to reflect the tax differences between commercial property and our homes. Making it easier to oust bullheaded lawmakers and keep the reasonable. In short, we need a constitutional convention to help us end the misrule of our own making.

Maybe it'll come to nothing. If all the requirements can be met and the hurdles surmounted, and a convention is called, it has to deliver on the right changes. And then those changes have to be put to the rest of us.

The convention could labor mightily and still, as Stern says, "possibly nothing will be approved by the voters." For my money, that would make us the first state to commit suicide by OD-ing on what we tell ourselves is democracy.

Go ahead, hold the convention. Can we at least all vote in favor of getting some cool souvenirs out of it?

EFFORT LAUNCHED FOR ‘SPLIT ROLL’ PROPERTY TAX

2009-05-29T10:49:00.001-07:00

SacBee: The latest on California politics and government

Posted by Jim Sanders

May 28, 2009 - With California facing fiscal calamity, the assessor for one of the state's largest cities has launched a long-term, grass-roots campaign to increase state revenue by altering Proposition 13 property tax restrictions.

San Francisco Assessor Philip Y. Ting filed documents this week with the secretary of state's office to create the "Close the Proposition 13 Loophole" committee, which now can begin soliciting donations.

The effort is intended to increase future state revenue, but not soon enough to ease next year's projected $24.3 billion shortfall.

Ting said his committee plans to solicit minimal sums initially, startup costs, but added, "We're really building a grass-roots movement around this issue with perhaps the long-term idea of going to the ballot."

Jesse Mainardi and Kevin Heneghan, attorneys for The Sutton Law Firm, are listed as officers of the committee. Mainardi formerly worked for the state Fair Political Practices Commission and Heneghan for a public policy law firm, Nielsen Merksamer.

Ting is not pushing a specific proposal, but he wants to see Proposition 13 altered to allow creation of a "split roll" that would increase taxes on commercial property, perhaps when it is sold.

The idea of a split roll has been gaining steam among Democratic lawmakers and interest groups that would like to see the state's fiscal problems solved by generating more revenue, not solely by program cuts.

Ting said there are many "split roll" possibilities, including creating a different tax rate for commercial property, reassessing it more often, or allowing it to increase at a faster annual pace than homes.

Ting said he launched the new political committee at the urging of numerous private individuals in the Bay Area and Northern California, but that he did not act at the behest of lawmakers or Capitol interest groups.

"I really felt strongly that change was going to come from the grass-roots level first, and if we started by working with all the Sacramento insiders first, that wasn't going to be the recipe for change," he said.

Ting said he does not believe that California voters, by rejecting five of six ballot measures last week, sent a clear message opposing new revenue generation by the state in years to come.

"I don't think people voted against spending so much," he said. "They voted against the fact that there wasn't any reform in those ballot measures. People are starving for systematic reform, which I think is very hard, it's very tough.

"It means that that we're going to have to talk about issues that a lot of people considered sacred cows. (Proposition 13) is obviously one of the most sacred cows in the state."

Categories: State budget

GOVERNOR PROPOSES ELIMINATING CalWORKS

2009-05-26T15:07:00.001-07:00

The latest on California politics and government

May 26, 2009

Governor proposes eliminating CalWORKS

posted by Dan Walters

The Schwarzenegger administration today proposed $5.6 billion in additional spending reductions to narrow the state budget deficit in lieu of floating additional short-term loans, including elimination of the state's welfare-to-work program known as CalWORKS.

Dropping CalWORKS would save an estimated $1.3 billion next year and is the largest single piece of a 25-item list of additional spending cuts given to a two-house committee working on the budget deficit.

The deficit has been pegged at $24.3 billion by the Legislature's budget analyst and Gov. Arnold Schwarzenegger had wanted to cover part of it with some loans known as "revenue anticipation warrants" or RAWs, but abandoned that strategy last week after learning that the federal government wouldn't back the loans. Without those guarantees, obtaining financing from private lenders was uncertain.

Whacking the state prison budget by an additional $788.5 million is the second largest item on the list. The complete list may be found following.

Additional General Fund Reduction Proposals for 2009-10 May Revision
(Dollars in Millions)

		Impact on GF Reserve
#	Title and Short Description	2008-09 and Prior	2009-10	2010-11

1	Rural Health Care Equity Program- Eliminate funding for certain health care reimbursements currently provided to state employees who do not have access to health maintenance organizations.	$0.0	$15.7	$15.7
2	Furloughs - Assume savings if the proposed labor agreements with Service Employees International Union Local 1000 are not ratified by the Legislature and a 2-day furlough is maintained for all employees.	60.0	150.0	0.0
3	CalPERS PPO - Surplus reserves in PPO will fund a premium holiday for 2 months	0.0	100.0	0.0
4	Reduce UC and CSU Budgets--This option further reduces the segments to the Federal State Fiscal Stabilization Fund maintenance of effort level.	415.0	335.0	335.0
5	Phase out Calgrants--This eliminates new awards for the High School Entitlement and Community College Transfer Entitlement programs and CalGrant C program. The amount is the net remaining cost of new CalGrant awards after previous cost containnment measures, including proposals to eliminate new awards for the CalGrant Competitive program and lower costs of other new awards for UC, CSU and private colleges.	0.0	173.0	450.0
6	Complete Decoupling of Cal Grant Renewals--This eliminates the increase in award amounts for renewals associated with UC and CSU fee increases. The amount is net of the Partial Decoupling proposal included in the Governor's Budget.	0.0	28.0	28.0
7	Eliminate Funding for Hastings College of Law--Reduces to the minimum level prescribed in statute (EC 92212) without having to pay back to the heirs of S.C. Hastings, with accumulated interest, the original $100,000 bequest.	0.0	10.3	10.3
8	Eliminate funding for CALFIRE Equipment Replacement--One time elimination of funding for equipment replacement.	0.0	17.0	0.0
9	Eliminate General Fund funding for State Parks--Eliminate all General Fund support and require department to operate on fee revenue and special funding.	0.0	70.0	143.4
10	Special Projects--Eliminate the Multipurpose Senior Services Program and Community-Based Service programs. Funding for Adult Day Health Care will continue in support of the California Department of Aging's responsibility for Medi-Cal certification of program providers.	0.0	24.2	35.3
11	Medi-Cal - Eliminating Certain State Only Programs--Services include: Undocumented non-emergency services (breast and cervical cancer treatment and postpartum care, and excluding prenatal and long term care), Institutions for Mental Disease ancillary services payments, dialysis, non-digestive nutrition, and breast and cervical cancer treatment for women over 65, and men.	0.0	34.4	57.8
12	Medi-Cal--Assume Additional Savings from Federal Flexibility--This policy increases the amount of relief from federal requirements previously proposed to enable California to secure essential program flexibilities to slow the rate of program growth and manage program costs within available resources.	0.0	250.0	500.0
13	Medi-Cal - Skilled Nursing Facility COLA--Suspend an estimated 5.0 percent cost of living increase effective August 1, 2009, for skilled nursing facilities (AB1629 and non-AB1629).	0.0	67.1	109.8
14	Reduce General Fund for AIDS Drug Assistance Program (ADAP) and for other Office of AIDS program. Specific proposals include: expanding client cost sharing and limiting the formulary in the AIDS Drug Assistance Program; and reducing and eliminating other HIV/AIDS programs such as HIV Counseling and Testing, Epidemiologic Studies/Surveillance, Therapeutic Monitoring Program, and Home and Community Based Care.	0.0	55.5	58.9
15	Eliminate Healthy Families Program--This option eliminates remaining funding for the program (see related reductions proposed previously). Estimate assumes that the program phases out as quickly as possible after providing notice to beneficiaries and providers.	0.0	247.8	322.4
16	Reduce Mental Health Managed Care Services and Early and Periodic Screening, Diagnosis, and Treatment Services (EPSDT). Mental Health Managed Care services retained include acute inpatient services and prescription drugs for Medi-Cal enrollees only. EPSDT savings result from eliminating GF support for county programs identified as new programs in 2007-08 and 2008-09.	0.0	92.0	92.0
17	Eliminate California Work Opportunity and Responsibility to Kids Program	0.0	1,309.1	1,765.2
18	Eliminate State Funding for Community Care Licensing--This reduction in expenditures would be partially offset by a fee increase to maintain critical health and safety standards.	0.0	19.5	39.0
19	Offset GF Highway bond debt service with local share of gas tax--Reduce local share from $1.05 billion to $300 million and redirect $750 million to pay current and prior year debt service on highway bonds. The amount is 25 percent of total fuel tax revenues as allowed under Article XIX, Sec. 5.	0.0	744.0	745.0
20	Reduce GF Support for Courts by Another 10 percent and Require Electronic Court Reporting	0.0	181.6	190.8
21	Additional Reduction to Prison Population--Commute sentences of nonviolent, non-serious, non-sex offenders one year early.	0.0	120.5	0.0
22	Reduce Corrections Contract Expenditures, Reduce Rehabilitation Program and Make Other Reductions to CDCR. Impacted programs include a range of rehabilitative services, such as substance abuse counseling, vocational training, and educational programs. In addition, funding for building maintenance is being eliminated on a one-time basis in 2009-10 and other operational savings will be achieved.	0.0	788.5	914.4
23	Eliminate Funding for Various Community Clinic Programs--This proposal eliminates funding for Indian Health, Seasonal and Agricultural and Migratory Workers, Rural Health Services Development, and Expanded Access to Primary Care.	0	34.2	34.2
24	Eliminate Remaining General Fund in Maternal, Child, and Adolescent Health--This is in additon to the General Fund reduction included in the "Contingency Reductions" in the May Revision.	0	10.2	10.2
25	Reduce Financing Costs by Implementing Additional Cash Solutions--Reduce size of external financing by adopting cash solutions that would reduce the imbalance in timing of receipts and disbursements throughout the fiscal year.	0	210.0	210.0
	Totals	$475.0	$5,087.6	$6,067.4
	Total of 2008-09 and 2009-10		$5,562.6

ALL SMOKE & MIRRORS: Schwarzenegger missed his golden opportunity to give Californians the truth

2009-05-25T09:52:00.001-07:00

He promised to make it work by cutting 'waste, fraud and abuse.' It was never that easy. The real solutions are obvious, though.

Michael Hiltzik: from the LA Times

Mark Wilson / Getty Images | California Gov. Arnold Schwarzenegger talks to the media in Washington. He says he will ask President Obama for flexibility in the cuts that California needs to make.

May 21, 2009 - Page One/Column One - Marx Brothers fans will recall that the political philosophy of Rufus T. Firefly in "Duck Soup" boiled down to this:

"If you think this country's bad off now, just wait 'til I get through with it."

I've often considered that to be the secret slogan of Arnold Schwarzenegger's administration. (Just substitute "this state" for "this country.") After Tuesday's election, it's no longer a secret.

Schwarzenegger had the kind of voter support in 2003 that would have allowed him to tell the voters the harsh but necessary truths about California governance and force real reforms down their throats.

Instead, he uttered the same lies about state government and proposed the same nostrums as many of his predecessors: Californians are overtaxed and underserved, the budget can be balanced by cutting waste, fraud and abuse, etc. Like everyone else who has made these claims, he never delivered on his promise.

His cut in the car tax cost the state $3.6 billion per year, making him directly responsible for pretty much all of today's $21-billion budget deficit.

He hoped he could avoid reaping the whirlwind sown by these cliches. Unfortunately, Tuesday was Harvest Day.

Let's list a few of the lies he and our other political leaders have peddled about California's government and examine how they contributed to this week's debacle at the ballot box.

The most onerous lie is that Californians are burdened by the highest state taxes in the nation. The truth, according to 2006 figures derived from the U.S. Census, is that as a percentage of all personal income, California's tax and fee schedule ranks 18th in the country.

Then there's the canard that we unfairly soak our rich. This is supposedly a no-no, because the rich might flee, taking with them their sterling job-creating potential.

The dirty little secret, according to Citizens for Tax Justice, a left-leaning nonprofit group, is that California's wealthiest residents shoulder the lightest burden of any income group in the state. The top 1% of California income-earners (average 2007 income: $2.3 million) paid 7.4% of their income in various state taxes last year, counting the federal deduction for state taxes. The highest rate was paid by the poorest residents. Those earning $20,000 or less, with average income of $12,600, forked over 10.2% of their earnings in sales, excise, property and other levies.

This year's budget deal increased the disparity, raising the effective rate on the rich to 7.8%, but that on the poor to 11.1%.

The theme of the ballot campaign was that the state's chronic budget gridlock could be solved by more gridlock and more borrowing. All lies.

By no means does the governor deserve all the blame for the budget fiasco. Democrats and Republicans alike have abandoned any claim to statesmanship in Sacramento.

And what of the business community? Big corporations, entrepreneurs and mom-and-pop stores all have a huge stake in functional state government.

Yet the state Chamber of Commerce traditionally has offered one nostrum for California's budget ills: Cut taxes. But since it also claims to support better education and improved infrastructure, its approach has simply amounted to throwing the hard challenges back into the laps of a nonfunctional political establishment.

The truth is that real solutions to the budget crisis are obvious.

One: Eliminate, or at least loosen substantially, the two-thirds legislative requirement to pass a budget or raise taxes.

This rule has allowed a small Republican minority to hold up all budget progress unless its reactionary program is incorporated in the deal. If the supermajority were pared back even to 60%, the minority lawmakers would be unable to block a budget unless they could enlist at least a few moderates in their cause. The improvement in the tone of legislating would be immediate.

Two: Remove legislative term limits. This ridiculous provision has reduced the Capitol to a nursery full of would-be legislators needing afternoon naps. Worse, it has sapped legislative leadership of its vigor.

Since mid-1995, there have been nine speakers of the Assembly. Over the previous 20 years, there were two, including Willie Brown, the original target of the term-limit movement. You want to tell me that government in Sacramento has improved since then? As long as term limits exist, we'll never have a 21st-century state government.

Three is the Big One: Revise Proposition 13. Prop 13 is often described as a tax-cutting measure, but that scarcely does justice to the damage it has caused.

By rendering the property tax useless as a revenue device, Prop 13 hit local governments especially hard. Key budgeting authority devolved from cities and counties up to Sacramento, where they have to compete with the state government for money. You want your streets paved or more teachers for your third grade? Stand in line behind the health department, or the corrections department, or Caltrans.

So city streets deteriorate and local schools get worse. Police and firefighters are laid off. All the places where the voters come into face-to-face contact with their governments crumble.

The result? Voters get more cynical, more convinced that government is expensive and useless. It's a vicious circle -- the more government is unable to do the things voters want it to do, the less faith the voters have in government and the less they're willing to spend on it. Which leaves it with less money to do the things voters want. And on and on.

Reversing the worst effects of Proposition 13 doesn't take rocket science. Commercial property should be subject to regular reassessment -- the "split roll" that, inexplicably, can't gain traction in Sacramento. Cash-strapped homeowners can be provisionally protected from the burden of higher residential assessments -- say by allowing some assessments to be deferred until the home is sold.

Plainly, local government needs to recover its authority to collect revenue directly. That would help our political leadership make the case that, considering the quality of the services and institutions state and local government provide, Californians aren't overtaxed but undertaxed -- and the wealthy are the most undertaxed of all.

If Tuesday's election proves anything, it's that California's political sacred cows all need to be herded into the abattoir and dismembered, once and for all.

Breaking the cycle that has brought us to this pass will take political courage and real statesmanship. California's voters have been trained for too long to think they can have roads, schools, universities, clean air and other amenities without paying their true cost. The task of our next generation of leaders will be to show that California is not ungovernable -- it's just been ungoverned.

THE TWO MAJOR CALIFORNIA TEACHERS UNIONS AGREE THAT THE STATE OWES EDUCATION BILLION$, CTA Goes to the Ballot Box, CFT to the Courts

2009-04-16T23:46:00.001-07:00

The latest on California politics and government

Posted by Kevin Yamamura, SACBEE

April 16 - The California Teachers Association has pumped $5 million so far into a campaign to pass Propositions 1A and 1B, with the carrot of $9.3 billion in total additional education revenues starting in 2011-12 under 1B.

But the California Federation of Teachers believes there's a different way to get that money: litigation.

"We agree with CTA that the money that was suspended -- in my words, illegally from the governor -- is due to the K-14 public education system," said CFT Executive-Treasurer Dennis Smith. "We believe that money can be recovered through our courts. ... It's a risk we're willing to take."

The education community believes it is owed $9.3 billion under its interpretation of Proposition 98 after revenues dropped significantly this winter. But Gov. Arnold Schwarzenegger and the Legislature disagreed.

The fight was settled when lawmakers crafted Proposition 1B to commit $9.3 billion to schools while tying it into Proposition 1A, a maneuver that would seemingly avoid litigation while creating political incentive for school groups to support Proposition 1A.

CTA has calculated that it is better to go to the ballot to get that $9.3 billion than let the courts decide, but CFT doesn't see it that way.

CFT, which represents a much smaller share of teachers than the California Teachers Association, is opposed to Proposition 1A but supports Proposition 1B. CTA, on the other hand, is running television ads promoting Propositions 1A and 1B as a package that voters need to approve together.

CFT's position may make sense philosophically, but not logically: Proposition 1B depends upon Proposition 1A's passage to take effect. Smith's position Thursday seemed to be that defeating Proposition 1A is more important than risking $9.3 billion in the court system.

YouTube: CTA’s YES ON 1A & 1B COMMERCIAL

2009-04-16T23:45:00.001-07:00

4LAKIDS unenthusiastically recommends YES votes on 1A, 1B & 1C. We don’t like any of them, but they are the best we are going to get in this economy with politics-as-unusual in Sacramento.

1D and 1E hold early childhood education and mental health programs temporary hostage for education, if you can accept that – vote YES.

1E is a no brainer.

Familiarize yourself with the measures and vote like the future depends on it. Not the whole future, just couple of years until the 2/3’s rule can be undone and the actor goes back to Hollywood. – these half-baked/heartless compromises are about as far from real reform as it can get.

Constitutional Convention anyone?

LABOR ORGANIZES AGAINST BUDGET MEASURE 1-A + Strange 1A fellows move their beds closer together

2009-04-14T08:12:00.001-07:00

By Kevin Yamamura | Sacramento Bee

Monday, Apr. 13, 2009 - A powerful California public employee union formed a campaign committee Monday with two other labor groups to oppose Proposition 1A, a May 19 ballot measure that Gov. Arnold Schwarzenegger and legislative leaders have said will solve future budget problems.

Service Employees International Union's California State Council, which says it represents 700,000 workers, has teamed up with the California Faculty Association and the California Federation of Teachers to form a committee opposing Proposition 1A. The ballot measure would limit state spending in good fiscal years, diverting money to a "rainy-day fund." But it also would extend $16 billion worth of temporary tax increases on sales, income and vehicles to 2013.

"Prop 1A won't be able to do what its supporters claim," said Marty Hittleman, president of the California Federation of Teachers, in a statement. "This constitutional amendment, supported by the governor and legislators was developed with no public scrutiny and won't stop the budget chaos. Once voters read this proposal with their own eyes, they will see that it is flawed and overly complicated, and will give extraordinary new and unrestricted power to the governor and his political appointees, with no checks and balances."

State leaders included the temporary tax hike extensions in Proposition 1A in part to discourage groups like SEIU from fighting the measure at the ballot. By restraining public spending, the measure could limit the expansion of the public-sector jobs that the labor unions forming the committee represent.

The unions, in their Monday announcement, twice mentioned the $16 billion in tax hikes, which are considered to be the measure's greatest vulnerability among voters. Such labor groups find themselves unusual allies with anti-tax groups who typically fight union causes.

"This is disappointing since those who we hurt the most should Propositions 1A thru 1F not pass will be teachers, schools and the hard-working families of SEIU," said Julie Soderlund, spokeswoman for Budget Reform Now, proponents of the six budget-related ballot measures. "During these tough economic times, it is unfair to do anything that will likely cost many people their jobs."

It remains unclear how much SEIU plans to spend on the opposition effort, which will be a better indicator of whether they will succeed in defeating the ballot proposal. Proponents, including Schwarzenegger and the California Teachers Association, are raising millions of dollars in an effort to pass Proposition 1A and five other budget-related measures on the special election ballot.

Proposition 1A is tied to Proposition 1B, a separate proposal that requires the state to give schools additional total payments of $9.3 billion starting in 2011-12.

The California Federation of Teachers is a smaller union than CTA and represents 120,000 education employees. CFT supports Proposition 1B, despite the fact that it will fail unless Proposition 1A passes.

Schwarzenegger, during a press conference in Fresno to promote a health-care job training program, said he pays no attention to the opposition and believes "momentum is going our way."

April 13, 2009

Strange 1A fellows move their beds closer together

It's still not clear that the unions will spend money against Prop. 1A, despite Kevin Yamamura's report here that the SEIU, the California Federation of Teachers and the California Faculty Assn. have formed an opposition committee. But it would indeed be a perfect California marriage if the state's biggest public employee union and its anti-tax groups got together to kill this measure. The unions want to increase spending. The anti-tax groups want to reduce taxes. You can't do both, so one of them has to be wrong about the likely outcome of the political and fiscal crisis that defeating 1A would bring about. My hunch is that the union folks are gambling that they can win two-thirds majorities in the Legislature and seat a Democratic governor in 2010, then make the tax hikes permanent without having to worry about a spending limit. The anti-tax folks? The best they can hope for in the Legislature is continued stalemate, which probably means more borrowing and gimmicks. Or, on the ballot, a tougher spending limit not linked to taxes. The voters love that idea at first glance. But will they support it after the unions get down trashing it?

Posted by Daniel Weintraub | Weintraub is a member of the SacBee Editorial Board

THE OFFICIAL MAY 19th BALLOT RECOMMENDATIONS OF THE CALIFORNIA STATE PTA

2009-04-10T16:43:00.001-07:00

Measure 1A -- Support. This measure creates a rainy day fund, temporarily extends tax increases, and provides a funding mechanism for Proposition 1B, which will repay $9 billion to schools.
Measure 1B -- Support. This measure repays schools approximately $9 billion in Proposition 98 funding, beginning in 2011-12.
Measure 1C -- Support. This measure generates $5 billion in revenues this year by securitizing and updating the state lottery; school funding would no longer be tied to lottery revenues, with no net change to overall school funding.
Measure ID -- Oppose. This measure transfers monies away from First 5 programs created by Proposition 10 (1998) for a period of five years, with the intent that the funds be used to protect health and human service programs for children supported by the state's General Fund. The measure makes other programmatic changes to how First 5 funds may be spent.
Measure IE -- Support. This measure transfers monies away from mental health programs funded by Proposition 63 (2004) for a period of two years. The monies would go into the state General Fund to support mental health services.
Measure 1F -- No position. This measure prohibits legislators and the Governor from receiving pay raises when the state budget is running a deficit.

VILLARAIGOSA ENDORSES MAY19th BALLOT MEASURES

2009-04-10T16:33:00.001-07:00

The latest on California politics and government

April 10, 2009

Los Angeles Mayor Antonio Villaraigosa joined Gov. Arnold Schwarzenegger at an event today to throw his support behind the package of measures on the May 19 special election ballot.

Villaraigosa, a Democrat and potential candidate for governor in 2010, said the package would help "to bring stability back to California's budget system," in a prepared statement. Sacramento Mayor Kevin Johnson has previously endorsed the ballot package.

Other endorsers today: Los Angeles Sheriff Lee Baca and the Los Angeles Area Chamber of Commerce.

GUARANTEED TO RAISE A SMILE, THE BAND YOU’VE KNOWN FOR ALL THESE YEARS . . .

2009-04-10T10:51:00.001-07:00

GOVERNOR PUSHES LEGISLATURE FOR EXPEDITED RELEASE OF $1.2 BILLION IN RECOVERY ACT EDUCATION FUNDS

2009-04-10T10:41:00.000-07:00

Governor's office press release

The Governor’s California Recovery Task Force today asked the legislature for expedited budget authority to quickly pass $1.2 billion in federal American Recovery and Reinvestment Act funding on to schools.

“I am committed to spending Recovery Act dollars efficiently and effectively, and to passing these dollars onto schools as quickly as possible to benefit students and protect jobs,” said Governor Schwarzenegger.

Approximately $1.2 billion in education funding for elementary and secondary schools with large populations of disadvantaged students (Title I schools), Individuals with Disabilities Education Act (IDEA) programs and improving facilities in the National School Lunch Program (NSLP) was made available by the federal government on April 1.

It is required that the Budget Act be amended before these funds can be passed on, through the California Department of Education, to school districts. The Department of Finance, on behalf of the Task Force, has asked the Joint Legislative Budget Committee to quickly allow for those Budget Act adjustments.

The breakdown of the available funding is as follows:

$562.5 million in federal Title I Elementary and Secondary Education Act funds
$634 million in federal IDEA funds ($20.5 million dedicated to preschools)
$12.9 million in NSLP federal equipment assistance funds

The Governor’s Task Force in partnership with the Office of the Secretary of Education will continue to track Recovery Act funds to ensure we capture as much money as possible for education and the state of California.

Governor Schwarzenegger created the California Recovery Task Force to track the American Recovery and Reinvestment Act funding coming into the state; work with President Barack Obama’s administration; help cities, counties, non-profits and others access the available funding; ensure that the funding funneled through the state is spent efficiently and effectively; and maintain a Web site that is frequently and thoroughly updated for Californians to be able to track the stimulus dollars.

The Task Force can be reached through its Web site, www.recovery.ca.gov, or by telephone at (916) 322-4688.

TEACHERS UNION ADDS $2.2 MILLION MORE TO BALLOT WAR CHEST

2009-04-09T10:45:00.000-07:00

Sac Bee | The latest on California politics and government

April 9, 2009

The California Teachers Association has deposited another $2.2 million into the campaign to pass Propositions 1A and 1B, bringing the group's total spending to nearly $5 million.

The union also donated $350,000 to the umbrella campaign for all six measures on the May 19 special election ballot.

Proposition 1B would ensure repayment to schools of $9.3 billion starting in 2011. But it only goes into effect if Proposition 1A also passes. Hence the dual campaign.

Posted by Shane Goldmacher

THE BUZZ: Foes of Props. 1D and 1E on the May 19 ballot are joining forces to thwart the two measures.

2009-04-09T10:43:00.000-07:00

This story is taken from Sacbee / Capitol and California / State Politics

Published Thursday, Apr. 09, 2009

Prop. 1D would divert tobacco tax money from early childhood programs to the state's general fund.
Prop. 1E would siphon revenues from a surcharge on wealthy taxpayers used for mental health programs and put it in the general fund.

"Campaigning together makes perfect sense," said No on 1E's Rusty Selix. Make that "perfect cents." Combining efforts can cut costs and make more efficient use of campaign contributions.

MAYOR GAVIN NEWSOM AND SUPERINTENDENT CARLOS GARCIA OFFICIALLY RESCIND TEACHER LAYOFFS

2009-04-06T10:44:00.001-07:00

California Political Desk

April 03, 2009 — SAN FRANCISCO, CA — Today Mayor Newsom and Superintendent Carlos Garcia officially rescinded the majority of teacher layoffs set to take place this month by allocating over $23 million from the city´s Rainy Day Fund.

"Our commitment to education, demonstrated by the release of these rainy day funds, ensures that our teachers can spend their spring break relaxing instead of looking for new jobs," said Mayor Newsom. "We know that the school district, city, state and federal governments are all facing shortfalls. But San Franciscans can take pride in the fact that their city prioritizes education and once again, has stepped up to help."

Nearly all permanent teachers who received layoff notices on March 15 will have their notices rescinded and will have their jobs for the 2009-2010 school year. This represents 405 people who will be getting rescission letters over the next few days.

Almost all administrators who received ´may not renew´ or layoff notices will also be getting rescission letters within the week. Final determinations of the exact number of administrators whose notices will be rescinded are still being made, though it is likely to be almost all of the 144 positions who were noticed in March.

The Rainy Day Fund was created in 2003, when voters passed Proposition G. It requires the city to save revenue above 5% growth year over year, during good economic times. The school district is eligible for up to 25 percent of the total if two conditions are met: The school district must be getting less money per pupil from the state when adjusted for inflation, and must be facing significant teacher layoffs. Last year, the City provided the San Francisco Unified School District with $19.2 million in rainy day funding.

CALIFORNIA’S “BIG FIVE”* ON FIXING THE STATE BUDGET: A partial transcript of remarks make by Gov. Schwarzenegger and four other California officials during a recent visit to The Times.

2009-03-28T18:08:00.001-07:00

Posted in LA Times.com March 27, 2009

Making their pitch for the six measures on the May 19 special election ballot, Gov. Arnold Schwarzenegger and four state lawmakers visited The Times Tuesday. With the governor were Assembly Speaker Karen Bass of Los Angeles and Senate President Pro Tem Darrell Steinberg of Sacramento, both Democrats; Assembly GOP Caucus leader Mike Villines of Clovis; and immediate past Senate Republican caucus leader Dave Cogdill of Modesto. Cogdill's fellow Republican senators ousted him from his leadership post on Feb. 18 rather than back his support for the deal that created the state's current spending plan and shaped the special election.

(*smf: As the Senate Republican Leader [Dennis Hollingsworth R-36 which includes portions of San Diego and Riverside Counties] is neither represented nor on board – doesn’t that make this group the Big 4 plus 1?)

Arnold Schwarzenegger: This is without any doubt I think the first time in history that you see the "Big Five" together and all in sync -- I don't think that you will remember any time in the past.

Jim Newton: (laughs) Certainly not here.

Schwarzenegger: So obviously this is very important to all of us, which is that to make those various different initiatives pass, the six of them that will be on the ballot May 19. And I think that we have done an extraordinary job together working over a period of several months to negotiate this budget and these various different initiatives. But that's always half of the job because the other half is obviously making it pass by the people and it's no different than our infrastructure initiatives that we did in 2006, where it was a bipartisan kind of an effort, the Democrats and the Republicans went up and down the state and they joined together in fundraising activities and joined together also in campaigning for the initiatives. And because of that the people of California felt comfortable that both parties are working together and they won with overwhelming majority.

We hope this is the same case here. I think that budget reform is extremely important for the state of California because we didn't have it in place for so long -- for decades. Every governor has gone through a huge, huge crisis, if it is from Pat Brown to Ronald Reagan to [George] Deukmejian, Pete Wilson, Gray Davis and now myself where you always run out of money because the economy is going down, because we don't have a rainy day fund, because we always spend too much money when the revenues go up. So I think here we have a chance to fix this once and for all and have a rainy day fund for the first time in 60 years. I think that it's very important that these initiatives pass and we're basically here to just talk to you about it, answer your questions and get you to endorse the initiatives, because endorsements from major papers, especially the LA Times, is extremely important in supporting it to make it pass.

With that, I'll open it up, if my collegues want to say something about any of that, feel free.

Karen Bass: Well, I would just add in that as the governor laid out we have this critical election on May 19, and in L.A. we're actually having an election right now, so it'll be interesting.

Newton: (laughs) What's a week without an election, right?

Bass: Yeah, right, exactly.

I am concerned about turnout and I think it's very important that we do whatever we can to increase turnout. Yesterday, in Sacramento I hosted 55 African American ministers that were there to hear about the economic stimulus and we talked about the May 19 elections so that they will spread the word in their congregations.

A couple of the initiatives that would be a little counter-intuitive to a lot of people are the lottery, the money from Proposition 10 and Proposition 63, and so I think it's most important that we also educate folks about that -- that we need to secure ties to the lottery, we need to take the resources from Prop. 10 and Prop. 63. The [state Legislative Analyst's Office] came out last week and talked about the potential $8 billion deficit, and so as I've been talking to people I've been encouraging them to do the math. If there is a projected 8 billion, plus the initiatives go down, we're talking about a devastating $14 to $15 billion deficit that we would have to close at the end of May.

Darrell Steinberg: I appreciate the opportunity to meet with the full Los Angeles Times editorial board and I am all-in when it comes to these initiatives, despite the fact that there are a lot of elements of the agreement that I frankly don't like, and I think we can all say the same thing.

Bass: Right.

Steinberg: But this was a negotiation about shared sacrifice. I was the author of Propostition 63, the proud author, and put my heart and soul into the passage of that initiative. And the initiative is doing great things for a lot of people living with mental illness in California. And yet when it came time to make the hard decisions about how to resolve a $41 billion deficit, the largest in state history, what I think is important to note is that despite the stereotype, and frankly a lot of truth, about the Legislature and state government being dysfunctional that the five of us were able to craft an agreement where everybody gave something, where everybody put the interest of the state ahead of their own ideology or their own programs and it was a very very difficult thing to do. But it was necessary and these elections are crucial for a couple of different perspectives, and I'll be brief but I want to go through this.

Not only do we need the money in the short term -- the lottery securitization, the Prop. 10 the Prop. 63 dollars -- but Prop. 1A, the passage of Prop. 1A, equates to about $20-plus billion of additional revenue for the state and for the investments that I know you care about and that we care about. Prop. 1A has to pass. If it doesn't pass we not only lose the $9.3 billion respiration to public education but we lose two years of additional revenue. And when you add all that up it's over $20 billion.

And finally, I would say that as a Democrat who believes that government plays an important role in improving the lives of people on their merits, I think Prop. 1A is a good idea because the state's revenue stream is volatile and we have to change it, but until we change it I would much rather, for the things that we care about, I would much rather have 10, $12 billion in a reserve fund, in a rainy-day fund, so when the inevitable bad times occur we don't have to consider cutting foster care or MediCal or mental health, or any of the other safety-net programs that really matter to the most vulnerable. And so on the merits I favor Prop. 1A as well.

Newton: We'll hear from our Republican colleagues.

Dave Cogdill: Well just let me certainly echo the thanks that has been expressed by the governor and our Democrat friends to have the opportunity today to sit here today and discuss this issue.

Obviously these are extraordinary times, and I think that everybody recognizes that certainly this negotiation that led up to the budget agreement and the propositions that have been put on the ballot in many ways has been historic. The goals, obviously, from the very beginning, well certainly going back into October and November after the economy turned down as bad as it did and continues to falter today, as we all know, the governor's very strong in coming out and talking about the four-legged stool that he wanted to construct as it related to a compromise on the budget deal, that only dealt with the short term but certainly, hopefully fixes this problem long-term so that our children and our grandchildren aren't faced with these same awful decision whenever our economy takes a downturn.

And that was certainly our goal when we went back to negotiate after the attempt was made to put out a budget with a simple-majority approval on taxes and fees that ultimately didn't happen. And when Mike [Villines] and I came back to the table our goal again was to try and find this comprehensive solution that reflected and met all of the goals that the governor set out, and I think we were able to do that. As Senator Steinberg points out there's a lot in this budget certainly not to like and it isn't the budget that any of us, I think individually, if you'd have asked us to sit down and craft our idea of the perfect budget, it doesn't represent that.

But it does represent, again, what I think is a historic compromise that used a lot of different components and potential solutions to ultimately solve both the short-term and the long-term problem. And again, that's why the initiatives are so important as Darrell pointed out – they deal with the short term issues of Prop. 10 and 63 and the lottery, the monies that that brings to this year's budget and then also provides the discipline that has been lacking as it relates to windfalls that come to the state periodically when our economy is doing well and make sure that we put that money back so that when we do go through another downturn we don't have to face the awful specter of either huge cuts in spending or tax increases or some combination of those things that nobody likes.

And I think the most important thing when you look at the 1A piece of this, and what really convinced me that it was the way to go, is if you look at the modeling and realize that if we'd had it in place over the last 10 years, having gone through both the dot-com boom and the housing boom, we'd have put enough money aside that when this economy turned down the way it did, we'd have had a much smaller problem to deal with, and one that we could have done, I think, through just some economies and spending rather than have to face the awful reality of the need to raise revenues in a struggling economy.

So, again, I don't think we could over-emphasize how important those propositions are in both the short term and the long term and hopefully get people to realize when they're criticized for not going far enough from someone on the right that, again, it's a compromise that can pass, and I think will have the support of the voters and who it needs to at the polls in order to be successful and more importantly over time will accomplish what we want to accomplish.

Mike Villines: I'm Mike Villines and I think everyone has said it really well. I would just say that, first of all, I think all the comments are important and I agree with most all of them. The key to me is that I think that California in many ways has become dysfunctional and this is an attempt to I think to really bring some sanity back to budgeting and some fiscal discipline to the state without casting blame. I just believe that these reforms, all of them, in terms of the short term -- as Dave and Darrell and Karen and the governor have said, are important. And also the long-term, I mean the idea that we can put some restraint on spending but also some reliability for programs so that both sides can, I think, find a benefit is critical I think to our long-term success.

I also think that the governor has set up a very strong process and argument for reform in this state, first with redistricting last year, that I think is important to changing in the Legislature. Now we have the chance at a spending cap that I think the Republicans have been fighting for for a long time that I think is a fair one for both sides. And again I always tell my friends on the other side of the aisle, I think

reliability, maybe not as much, but the idea that basing reliability in funding is much better to plan for now than what we're going through now or what we did five years ago and, if we don't have this, will happen again in three years or four years.

So to me it's a long-term perspective versus a short-term perspective. And I think for the state, it's good to look long- term and that these initiatives all fit into a better, longer-term view of the state, a more optimistic view. So I think California's going to look at it and say that they agree. We've all had to make some significant trade-offs and concessions but the situation demanded it and nobody could go to their corner and I think everybody had to give, and I give the governor and my colleagues a lot of credit for all of us trying to come together….

Newton: I realize it's a compromise that brings you all together here today, but if you were to separate these out and consider them individually, are there measures within this package that you would personally oppose if they weren't part of the package?

Schwarzenegger: I cannot think of one, no. Because, I mean, I've been fighting for five years now for budget reform, to put a rainy-day fund aside and to put a certain cap on spending. I wasn't successful. I tried through the Legislature when I first came into office; I tried in 2005 to go directly to the people, but apparently it wasn't inclusive enough so that failed -- the idea was good but it failed. And so here was our chance again….

I think that we need the lottery, I think that we need the money from 63 and from 10. Under the circumstances, if we didn't have a crisis of course I wouldn't have even touched that money. I would go after the lottery money because I think it's ludicrous to have a lottery system in place that the people have voted for and only have the technology go up to 1984, so I think we can do much better than that. We don't want to be outdone by Teddy's Massachusetts. I mean, you know he rubs it in every time I see him, so it doesn't bode well, but I think we can do better with that.

I think that to pay back education is an absolute must because education has been getting such a beating in this budget. The interesting thing about Prop. 98 is that Prop. 98 was written in such a way that there was a hole. They always say that it wasn't written that well, that they want us to rethink it, but that's a whole other subject. But they would not get this money back from those cuts, and so what we did was we looked at it and said, "Wait a minute, is that we stand for? Do we really feel that from now on education should have this drop of $5-some billion and have the base lowered by that much?" No, education needs the money, of course it needs to be run more efficiently in order, which is another subject, but I mean in any case we need to go back again where we were with education spending and so that money, Proposition 1B, guarantees that.

So I think all of those things are very important, and the last one was part of the overall agreement, Proposition 1F. So … all of those are really good initiatives, and like I said the important thing for people to understand is they all go hand in hand. It's not one of those things where you can go to the grocery store and pick and choose. You've got to understand: In order to bring our economy back we have to bring our budget back to have enough money to pay for the programs I think they all have to be voted on "yes," and they all have to pass.

Nick Goldberg, L.A. Times: Explain what the process will be. What happens if one of these goes down? The whole deal collapses? That piece of the deal collapses?

Schwarzenegger: Not, but I mean, that's not the way you move forward. You don't move forward planning on losing -- there's no one that ever won by accident. You always win because you plan on winning and every move that you make is to win. And so we are going to go out and we believe that we can win those, the poll numbers show that we can win those, but the key thing for people is that they get the education of what they're about. We also know, as Karen said, that it is already a huge challenge when there is such a low turnout, we don't know who is going to turn up so we want to make sure that no stone is unturned and we want to go and raise enough money for the campaign so we can be on T.V. and do the mailers and all those kind of things, and go out and get the different groups of endorsements….

Villines: We'll just have to cross the bridge when we get there in terms of what doesn't work, but I think the governor is right, we're working hard to educate people. I've been pleased at travelling up and down, when you explain to people everything they understand it, in all kinds of different circles so our hope is that they all will pass because they are part of a package.

Jon Healey, L.A. Times: But Mr. Villines, are they listening to you or are they listening to Jon and Ken?

Villines: Well the people I talk to are listening to me. I mean, I've talked at five town halls; I travel up and down the state talking to everybody. I mean there's a real concern, I mean there's a trade off: Is it a short-term or long-term view? I think it's a long-term view, and I think that people are looking at it an realizing that we are at a historical economic downturn, crisis, and the ticket out of it's not easy and that all these initiatives have a piece of the puzzle that fits together, and I think they understand that.

I mean, it's not easy, people are frustrated with government -- so are we, and we're in the government. So we all go home to our districts and hear what they're saying and how frustrated they are with the economy, but I think they're listening and I think they get it. Our job is to make sure that we're appealing to a better, more positive vision where California could be with these reforms, because it really could be as opposed to being in the same spot in 18 months. And why would anybody want to do that?

Schwarzenegger: The question is who are they more upset about? Is it our budget reform or is it the L.A. Times by not saying that there's a billion people listening to them rather than just 500 or 600,000?

(laughs)

So we don't know yet who they're more upset about.

Sue Horton, L.A. Times: Is there a bait-and-switch aspect though in asking voters to support a new tax for funding mental illness programs and then -- how long are Californians going to put up with, they vote for a tax for a very specific thing and then it's redirected?

Steinberg: Maybe I should take that one. First of all it's $450 million over two years that is part of a prudent reserve in the Prop. 63 fund. The money itself is going to be used for Children's mental health services within the core budget, and I think your question is a fair question. Again, for me you asked the question earlier if any measure were standing on its own that you wouldn't like or wouldn't vote for. I don't like this, but I'm for it because I couldn't be a credible negotiator without being willing to put the thing I cared most about on the table. And I think that the people of California understand that this is a crisis and that we have to do all that is reasonable to get through the crisis. And so some voters may wonder that, but Prop. 63 remains intact, the money comes out of reserve, and it's necessary to avoid cuts to core children's mental health programs. If I can stand up and say it's OK, I think other advocates who are concerned about mental health can do the same.

Villines: Can I just add that it was important to Dave and myself and others to say that in this crisis, and again the context is a crisis of $42 billion for two years, which by the way we did a two-year budget which I think would be a great reform in California but that we did it, we actually did a two-year budget. We couldn't go to tax payers and say we're going to raise revenue if we didn't exhaust every opportunity we could in this time to find ways to minimize cuts on their side and for us, taxpayer involvement, meaning less taxes.

So we had done audits of Prop. 10 and 63 and originally we had talked about much larger sums of money in those programs, but you know a little wisdom and reflection and work we realized OK, there's reserves some people have invested for the future, so we didn't take everything. We took what we thought would make sense and help the process but also let taxpayers know that you're already paying taxes there and there're some reserver dollars we're going to move into this crisis to sort of mitigate having to do more. And I think they'll understand that, from both perspectives, from a Republican and a Democrat perspective, it is minimizing cuts at the same time it's minimizing more revenue and I think that that's one thing I hope people get that it's part of the overall package and its part of the crisis that we're doing everything we can to bring everything in before we look at the final result of what we had to do.

Healey: Isn't the existence of things like Prop. 63 part of the problem here? You've got budgeting done in silos, and when you have these great dips in revenue and you have opportunities to take broad structural looks at how we raise money in the state and how we pay for things, you can't because your hands are tied right and left.

Bass: Let me just respond to that, because it think there's a lot of things that we need to do long-term, but the fact of the matter is the house is on fire and we needed to put the fire out. But at the same time, we have done things, the five of us have, as in establishing the commission on the 21st century economy that looks at the overall revenue picture of California. You know our tax system is based on an economy that doesn't even exist anymore; it was created at the beginning of the last century. And so while we're trying to address the immediate crisis at hand, the fire we have in front of us, we are attempting to make longer term changes. And I think there's a variety of things.

Now, we have some differences on this one issue, which is the two-thirds and we would see it differently, but I think that's one of the structural things that needs to change. California needs to be like 47 other states instead of like Arkansas and Rhode Island, and so we are looking at that as well and polling about that, and might put something on the ballot next year. And you know, if you look at our overall budget, we have very little control, and that's something that needs to be looked at as well. That's not something we're looking at right now, but I think it's about 10% of the budget that we can actually deal with, and the rest of it is prescribed primarily by voters.

Steinberg: You can consider this, in a way, a down-payment on reform. This isn't the end of the reform discussion, but it's a very strong beginning and a demonstration that, again, a governor and leaders who have very different views on the role of government can put California first and can come together. But it is just the beginning; you have the tax commission, you have the potential for initiative reform, which I think is very important subject matter. Why can't the Legislature, why shouldn't the Legislature be able to vet initiatives and try to solve the problem before the measure actually goes on the ballot? There's realignment between state-local government and school districts which is a very complicated, but a very, very important issue because our government is so misaligned. So this isn't the end, it's the beginning, but it's a very important beginning.

Newton: Is it safe to say that this is as far as bipartisanship gets you? That as far as reform proceeds beyond these measures, assume all six pass, that you all are likely to go in different directions on what the next steps of reform are?

Schwarzenegger: Let me just comment on that quickly, because I've been there now for five years, maybe not as long as some of the people here but I've noticed one thing: It's all about the dynamics and about the rhythm. I think that now, because new leaders came in to their positions, and we see, everyone here is kind of new in their positions … but I've never seen in all five years four people that were more willing to compromise. See, the thing is if you get stuck in your ideological corners you can't get anything done, and this is why we did the redistricting, because people are just, because the way the district lines were drawn, it makes people be so far apart that when they get to Sacramento they just can't meet on things. Because if they would meet they would go back to their districts and get beaten up all the time or they lose the next election, so therefore they can't really come to the center. So this is why I think that what you have seen was unbelievable courage because everyone has risked their political lives to do that and to meet in the center and get the budget done. So that is, of course, the ultimate of post-partisanship or bipartisanship, whatever you may call it.

I think because of that there is great hope that I have and I think it will happen that we will get all kinds of things now done by because spending so many months together negotiating of course you agree and also a certain trust. There's always usually the distrust about the other party and what they thinking, what they're plotting. But when you spend that much time together, you get to appreciate the other side….

Robert Greene, L.A. Times: Over time, we've been relatively comfortable with ballot measures after they've been vetted in the legislative process, there have been open hearings, the various constituent groups had a chance to express their views, the legislation has been change. And we've been pretty uncomfortable, with good reason, with legislation that ends up on the ballot when there hasn't been that kind of vetting, both statewide and locally. And this one was part of a deal that didn't have any of that kind of input. Why should we not feel that kind of discomfort with this particular package when there's so many moving pieces, it's so complex? If it was possible to make Prop. 98 any more complex, you've succeeded with 1B. Why should we not shy away from it because of those reasons?

Villines: I actually think that, well first, it's not really complex. It may appear that way, but it's really not; it's a lot of common sense. Second, a lot of these have had hearings and have been going on for a long time. In terms of a spending cap, we've had versions of a spending cap since 1990. When it went away, in the Legislature we've talked intensely about it, all of us here, over the last two years. We've had bills and legislation, and indeed we've had a spending cap moved from committee to the Assembly floor last year, which has never been done. Those are the pieces of a spending cap, and so I think that there has been a lot of daylight on that.

The lottery, we've discussed not for a year and a half…. It makes perfect sense to get government out of something it shouldn't do. It could actually make more money for the state. It's a great way to see a public-private partnership, but there's been a lot of daylight on that….

The three that might appear a little confusing if you're trying to read the language -- which I understand, but it's really very common sense – it's that in 63 and 10, we're simply trying to mitigate a taxpayer protection and moving some money that's in reserve to try and take care of the crisis, and most people understand that. We're not trying to take away from mental health or children's programs, and in fact we can get to a healthier environment, and if we have a spending cap there will be that reliability.

And then on 1B, that's simply an amount of money that is in dispute that owe or don't owe or not sure when it's going to happen. And we're just saying, as the governor pointed out very well, in an environment where education has taken a very disproportionate hit, we should do something to try to work with them so that they're not having to take such a big hit. And I think that Californians will say yeah, we don't want to see the kids and the teachers have to take that hit.

So I think if we present it the right way people will get it, because the intent is that way. It wasn't a ploy to sit down and make it confusing; it really was these are the pieces needed to help us for long-term structural change and short-term advantage, and none of them make sense. And none of them frankly are really partisan; they are actually just common sense. That's the spirit it was done in; I hope that's the spirit people receive it in and you also. I haven't seen everything in print, but I'm sure it will look confusing, but it's really not.

Steinberg: I agree with Mike. Much of -- all of it has been publicly vetted at one stage or another during the process. But the other thing, just to be completely frank about it, this was an extraordinary crisis, and it was coupled with an extraordinary process. In the best of all worlds, you would want there to be a month of analyzing all these issues that we negotiated, but frankly, it would have fallen apart because the interests – the special interests – would have picked it apart very, very quickly. And we were days away, if you remember, we settled the budget at seven o'clock in the morning on Thursday, Feb. 20 … and by noon that day, or sometime that day, the governor's department of transportation was going to issue "stop work" orders on almost 300 major infrastructure projects resulting in the unemployment of tens of thousands of people and the loss of economic productivity of billions of dollars. And when you weigh what was at stake versus the only way to get this done, it was extraordinary; maybe not something we want to repeat necessarily, but it was the only way to get it done.

Bass: Let me just add too, in terms of the transportation projects, which I'm assuming that you are aware of: Those projects were the ones that were allowed to go forward after December because they were considered to be vital to public safety. A number of projects had already been stopped. And so the idea that we were hours away from stopping those projects definitely led to the urgency of us getting it done….

Greene: There was also the implication of – if perhaps not a promise – that despite anything in this package that people are uncomfortable with, at least it would take care of the problem from a tax perspective, that yes, you're raising taxes, it had to be done, but this is it. And then we hear from the LAO as you noted that we've got a much bigger problem. And none of you have said it, but there's the possibility that there might have to be additional taxes to address that problem down the road. What about that? Is this the final take-care-of-the-problem solution, or is this just a stop-gap and we're going to be facing this again after May 19?

Cogdill: You've got to look over time. If this had been in place over the last decade, we would have been in a much different place when the crisis hit. And 10 years out, I think you can say the same thing. Again, presuming we're going to go through some up times in our economy and with the reforms in place, the discipline will be there to fill the rainy day fund. Now that's not going to happen in the next two or three, four years maybe because no one's expecting the economy to roar back or to have another opportunity at an April surprise, if you will. But it will happen eventually, and the reforms will put that discipline in place so that ultimately, that rainy day fund will grow out and we will have the money that we need to deal with it. And it should go a long way to alleviating the problem.

It's definitely a better situation than we have today, and I think that's another very important point that gets missed in this debate, is that politics is the art of the possible. And we could all argue and say, "If it was my cap, the one I would design, the one I would hope the people would vote for, this is the way it would be." I know the reality of that is the people of this state would not support it; the special interests would not support it. We'd have huge amounts of money spent against it, and the governor's already been through that attempt back in 2005, and we saw firsthand what happens when you have that kind of organized, well-funded opposition.

This is an opportunity to actually make a real improvement long-term and provide some real structural change in our budgeting and put the kind of discipline in place that we need to make it better. Does it make it perfect? No, but it makes it better, and there's again a real opportunity to get it done this time. We haven't had that in the past.

Steinberg: Rob, we can manage the 8 billion. I mean, the problem is, if it gets much worse as a result of the result of losing the election. Remember, the budget we passed does have a reserve of $2 billion; there is federal economic stimulus money that won't be counted toward so-called trigger, the education money that potentially could be used to mitigate against what we may have to do around the $8 billion (that's estimated to be around three and a half billion). So you can begin doing the numbers here, and you down to two, two and a half. And we can manage that, right?

But what we don't want is to see that go from that manageable number to something much larger, where all bets are off because you have to go back in and look at all the different options to try to resolve it. But the idea of crisis management is, we avoided an economic catastrophe, we're putting in place the protections to help ensure that it doesn't happen again. We're also focusing on trying to get through this crisis so that we can begin focusing on water, on renewable energy, on healthcare, on education….

Villines: We did not do a good job of communicating. I mean, it was not unanticipated, the LAO report. It comes out every year at that time. When we solved the budget this time, the numbers were still eroding, and they still are. So we knew the LAO was going to come out with a report something like that. We have the pre-negotiated cuts; we have the pre-negotiated 2 billion reserve....

Folks didn't realize that we had planned for that and that it is a manageable number, and it is part of a larger context. But if we don't pass these reforms -- and I think there's a benefit to California both short-term and long-term, which is the most important – then we could be in a very, very difficult position. But this is manageable, and we can do it, even in the worst economy we've had since the Depression. And I think that's the silver lining here that we had planned for it, we just didn't do a good job of letting people know about it I think.

Bass: I think we're fortunate here too to have a governor who is developing a close tie with the president and has been very supportive of the economic stimulus plan and encouraging the infrastructure dollars. And who knows, there might another economic stimulus plan. But I think all of that is very helpful because as Mike Villines said, we absolutely anticipated there was going to be another downturn.

Villines: Or a continuing one.

Bass: Right….

Michael Rothfeld, L.A. Times: Isn't there a conflict between saying we need to control spending and have these systems in place that are going to control spending, but then at the same time -- because I think most or all of you have supported initiatives that have forced yourselves to spend the money – so isn't there a conflict there? And also, to say as leaders, we need to be able to work things out, yet to say at the same time, we support taking away the prerogatives from ourselves as leaders to manage the state's money in the way that we need to in any given point in time?

Schwarzenegger: Well, first let me just answer that I think there's a difference. We can manage the money; we can make … decisions. The only thing is the overriding decision that says don't spend more than we have. And there's also the overriding decision is that we look at the last 10 years of revenue increases, and the average annual revenue increase is 5%, approximately. It varies; sometimes 4.7, sometimes 5.3, but sometimes 5%. So common sense tells you if we spend more than 5% a year increase in spending, then we are going out of whack and somewhere we have to make more cuts.

So therefore what we are saying in our budget reform is that we should not spend more. If there is 16% coming in, if revenues rise 16% -- which will happen again in a few years from now when the economy comes back, as much as it happened during our administration, a 13% rise, or under Davis, a 23% rise. So those things happen. But then after 5%, the rest goes into a rainy day fund so that we have money stored away for the bad years, when the economy goes down.

So I think that's basically what we're saying here, is that I think it is very important that we finally looked at the history of California in the last 60 years and the kind of mess it created. We have basically put people on a roller coaster ride -- education, law enforcement, prisons, healthcare, all of those different programs -- and everyone is kind of like frantic…. So now [for] the first time, we let people know, you will have a steady increase in your programs, just the way the revenues increase. But what we are trying to do in the meantime is fixing this problem, this jaggedy up-and-down, these peaks and valleys, and create more rolling kind of hills -- called the Alps.

(laughs)

Rothfeld: But my question is, for instance you have supported Jessica's Law, the after-school programs that have essentially at the same time made it harder for that gradual spending to go into effect.

Schwarzenegger: Not really. I mean, the way Proposition 49 was written, I think it was written brilliantly because -- I'll tell you why. Because we did not say in the initiative that if it wins, that next year it starts kicking in. It was written in a way where we said, OK, when they did the revenues -- at that point the revenues were around $70 billion -- when it hits $80 billion, then it will kick in. So it took four years. It passed in 2002, and it finally kicked in in 2006. It took four years, so we didn't crowd out any other programs right away to go in and say, "We are more important than you." We waited until the revenues increased to a certain point. So that's the way to do it -- you've got to be sensible how you go about doing those kind of things.

And there's certain times, programs that have passed through the initiative process that have become more expensive than originally thought, like putting bracelets on and following people and all those kind of things, that became instead of a $300 million program, potentially a billion-dollar program…. So that's why the last one didn't pass, by [state Sen.] George Runner, because they knew this could be another billion dollars. Where's the money?

Bass: Or you have Proposition 63 that identified a new funding source.

Steinberg: Well, that's what I was going to say, is that one potential reform going forward to the initiative process is to say that an initiative which requires the expenditure of state funds, or local funds for that matter, must have a dedicated revenue source. Because that's one way to assure that you match the resources with what the people are articulating as a priority.

The thing about the initiative process, the people love it. I mean, every public opinion shows the people like the initiative process. I think it's our job to look at it and see how we can improve it. And that would be on significant improvement because -- I do think the Runner initiative is a very good example, his latest one, where people said, "What is this going to cost?" It's a big problem with corrections and our overcrowding and all of that. We've done all this penalty enhancement, right or wrong, but there hasn't been a commensurate discussion [of] how we're going to pay for all of this....

Schwarzenegger: Like Darrell said, I think that we should look at the initiative process and update it. The spirit of the initiative process is great, but I think that now since it has been quite some time, I think that one has to look at it again.

Goldberg: Both of your Democratic colleagues here have talked about the two-thirds requirement. I was curious whether you think that the two-thirds rule has contributed to the difficult and somewhat chaotic budget process and what your position is on changing that.

Schwarzenegger: Well, I think that you can say that it has contributed, but you also can say that actually what really has contributed is the redistricting, that the colleagues are so far apart that they can't come together, that they way the district lines are drawn, if you're in the Republican Party and you just go in there and talk about a tax increase, you cannot get voted in again. So I think that's a problem, that if you want to do what is right for the state, then you can lose the election. So what kind of system is that? I think we should reward compromise. We should reward doing what is best for the state rather than what is best for your party. And I think that is where the problem lies.

As you can see in the past, Deukmejian raised taxes, and Pete Wilson raised taxes, now I raise taxes, and I'm not running for anything. So I'm more comfortable with it because I'm not running for anything, because I know that's the right thing even though I promised the people of California I'm not going to raise taxes. At the same time I said I'm not going to sign a pledge because what if there is an emergency, thinking at that time a pandemic or huge fires or an earthquake or something like that? It became a fiscal emergency; it's the same thing. If you all of a sudden have to spend $10 billion on freeways and rebuilding buildings, or if you all of a sudden lose $42 billion, I mean, there is no difference. And so it's a fiscal emergency, and that's why I never signed this pledge. The overriding thing there is what is best for the state of California.

So there are some people I know that are saying it's the two-thirds vote. I happen to think that we have to go and create a political system where people can come closer together and where they are rewarded for working together rather than getting stuck over here in their ideological corners….

And just one more thing. I just want you let you know that Dave Cogdill, I mean, think about the courage, I mean, to lose his leadership position. And he knew that this could happen in the direction that he was going, and he did what was right for the state. He saw the numbers in front of him and he saw there was no way to go and solve this problem any other way, otherwise you would have to wipe out all schools. If you wipe out all schools in California, kindergarten through 12th grade, erase them, then that's when you save $42 billion, just to give you an idea. Or if you just wipe out all healthcare, higher education and let out 170,000 prisoners and close down the state prisons and have them run around your neighborhoods, that will save you if you're lucky the $42 billion. Just to see the numbers and how ludicrous it is to even think about that, that you could do something like that, so he made the right decision. It cost him his leadership, so we all look at him as heroic because he has done that.

Bass: And as a Democrat, we want to make sure he gets reelected…. I think it's really important that we change the history, because the history as I understand it has been that Republicans that voted for taxes in the past have not been reelected. And I think this time we have to change that. We have to make sure Anthony Adams gets reelected, we have to make sure Dave Cogdill gets reelected, and I'm a Democrat saying that….

Rothfeld: Governor, you've said you're not running for anything. Does that mean no Senate run next year against Barbara Boxer?

Schwarzenegger: I'm not running. When I say I'm not running for anything, that's exactly what I mean.

Rothfeld: So you've ruled that out.

Schwarzenegger: Until we change the Constitution.

(laughs)

Bass: So he can run for president. (laughs)

ARNOLDS MAY SPECIAL ELECTION: Just Say NO!

2009-03-03T14:23:00.001-08:00

“ I don’t fault Democrats for using any means necessary to pass a state budget. But now that Propositions 1A-1F are on the ballot, voters don’t have to approve them – and the Democrats shouldn’t encourage them. ”

Editorial by by Paul Hogarth | from Beyond Chron, San Francisco's Online Daily

Mar. 03‚ 2009-- I’ve been on record supporting a special election to get the budget reform California desperately needs – such as scrapping the “two-thirds rule” in the legislature, or helping local governments raise revenue. But now that a statewide election is set for May 19th, no such measures will be on the ballot. Instead, the six propositions we will get to vote on are Schwarzenegger gimmicks that would cripple the state’s ability to function, throw us further into debt, and roll back a small handful of fiscal victories. A campaign must start now to urge a “no on everything” vote, repeating the success that progressives had in 2005 by defeating Arnold’s special election.

The Governor, however, is a lot savvier this time. Prop 1B (which deals with school funding) is a naked ploy to keep teachers from opposing Prop 1A (an awful spending cap), and there’s a dangerous possibility that organized labor will sit out this whole election. Democrats are not unified in their opposition, as State Senate President Darrell Steinberg even gave Schwarzenegger cover last week at a press conference when he promoted the “budget reform” package. Only by exposing this election as another Arnold scam can the state come out winning, helping to map a sane fiscal future for California.

Many observers noted the “parallel universe” that California – a very blue state – experienced when it passed Proposition 8 on the same night we elected Barack Obama. Today, it’s déjà vu all over again. Nationally, President Obama’s budget proposal is a sharp repudiation of the Reagan Era – with progressives on the offensive, and optimistic about the future. But at the state level, right-wing ideologues still dictate our budget policy. Progressives are on the defensive, allowing a Republican Governor to pit constituencies against each other – while some Democrats reluctantly believe our choices are the bad and the worse.

After a grueling process where Republicans (once again!) abused the state’s two-thirds vote requirement, Arnold and the legislature finally passed the budget by cutting a deal. In exchange for the necessary GOP votes and the Governor’s signature, a special election was called for May 19th to pass some budget “reform.” It was a Faustian bargain that cries out the need to scrap the two-thirds rule, and I don’t fault Democrats for using any means necessary to pass a state budget. But now that Propositions 1A-1F are on the ballot, voters don’t have to approve them – and the Democrats shouldn’t encourage them.

Proposition 1A: Spending Cap to Disaster

As I’ve written before, a spending cap would cripple the state’s ability to provide essential services. It’s been tried in Colorado, and the results were disastrous. A spending cap would give California a permanent fiscal straitjacket – which is precisely what the right-wing extremists in the legislature have always wanted. All of them signed the infamous Grover Norquist pledge – from the same guy who wants to “shrink the size of government so we can drown it in a bathtub.”

Prop 1A creates a spending cap by nearly tripling the amount of revenue that gets locked into the state’s Rainy Day Fund – and bars the flexibility to use that money in times of need. It also strictly regulates how the state can spend “unanticipated” revenues. It gives the Governor more power to unilaterally cut certain spending without legislative approval – such as blocking cost-of-living adjustments. Given that Arnold already killed the renters’ tax credit for seniors and the disabled, why give him the power to terminate more programs?

A spending cap was the only way Republicans in the legislature would support any tax increases to pass a budget. And it’s true that Prop 1A includes several revenue measures: (a) raise the sales tax from 8 to 9%, (b) up the vehicle license fee that Arnold slashed on his first day in office, and (c) raise the income tax on every bracket by 0.25%. But a vote against Prop 1A doesn’t stop those tax increases from going into effect; it just means they expire next year, and there would then be a fight in the legislature to extend them. What is the “upside” if Prop 1A passes? Those taxes would instead sunset in two years – 2011.

Selling out the state’s flexibility in exchange for these (mostly regressive) tax increases to stay on the books for an extra year? Sounds like an awful deal to me. As the Legislative Analyst’s Report says, a lot of what Democrats got in Prop 1A is temporary – while the spending cap parts are permanent. “Once these effects have run their course,” it said, “Prop 1A could continue to have a substantial effect on the state’s budgeting practices.”

Proposition 1B: Attempting to Bribe the Teachers’ Union

It will take resources to defeat Prop 1A, and getting organized labor (the one progressive institution who can deliver) to oppose it will be essential. Arnold suffered a humiliating blow in 2005 because unions went all out to defeat his special election, but they had good reason to do so: each ballot measure that year was a direct assault on working people.

Schwarzenegger clearly learned from that mistake, which is why Prop 1B was designed to throw a bone at the California Teachers’ Association – hoping to keep most unions out of defeating Prop 1A. Prop 1B would guarantee school funding through $9.3 billion in “supplemental payments” – but it only goes into effect if Prop 1A passes.

I’m all for school funding – but at the cost of passing Prop 1A? So far, Arnold’s ploy is working. The CTA has offered “interim support” for Prop 1B, while no union has taken a position on Prop 1A. Given the expense of defeating statewide ballot measures, unions are being understandably cautious about entering the fray – unless there’s a consensus in the labor movement to defeat Prop 1A. Education advocates should consider that the $9.3 billion in Prop 1B is not an annual appropriation, but doled out over a five to six-year period.

Education is a high budget priority – but so are housing, health care and public transit. Even if Prop 1B guaranteed additional funds for public schools, the straitjacket of Prop 1A means all other issues we hold dear will be sacrificed. It’s the classic “divide-and-conquer” strategy Republicans use all the time to keep progressives fighting with each other. While every group is protecting its budget during these tough times, now is not the moment to take the bait. Despite the attractive “sweetener” of 1B, Prop 1A must fail.

Proposition 1C: Arnold’s Awful Lottery Idea

This is just the latest in a series of reckless Hollywood gimmicks the Governor has proposed – sinking our state deeper into debt, and strangling our ability to get anything done. Prop 1C would let the state borrow $5 billion against future lottery sales. What will Arnold propose next year – borrow against future tax revenues? Is there any end to our credit card Governor’s nerve when it comes to raiding our fiscal future?

Propositions 1D and 1E: Turning Back the Clock

It’s rare when California voters approve fiscal measures that both (a) create more revenue and (b) fund good projects. In 1998, voters passed Proposition 10 – a cigarette tax that created a Childrens’ Health Fund. In 2004, voters passed Proposition 63 – a 1% tax on millionaires to fund mental health programs. Props 1D and 1E would re-direct these tax revenues – slashing programs voters created for a purpose. Arnold tried to cut funding for mental health before, but Prop 63 prevented him from doing so. We can’t let this happen.

Proposition 1F: Do-Nothing Reform

The last measure on the May ballot – Proposition 1F – sounds like a good idea. It would ban statewide elected officials from receiving pay raises if the budget has a deficit. But does anyone honestly believe this is the kind of “structural budget reform” the state needs that would justify an expensive, statewide, off-year special election? Even if it’s good public policy, the budget savings are miniscule. This is more about Arnold trying to score political points against the legislature than proposing a sensible long-term solution.

Democrats Have to Stop Being Scared

All too often, liberals get spooked by the state’s dire financial situation – agreeing to go along with an awful Republican budget “solution” at the ballot to prevent cuts that affect poor people. In 2004, for example, Arnold proposed two ballot measures – Propositions 58 and 59 – sold as necessary to solving the state’s $15 billion deficit. I’m embarrassed to admit I voted for both of them, because I feared what would happen if they failed.

Prop 58 was a $15 billion bond to pay off just one year’s budget deficit – which we are now stuck paying interest on. Prop 59 was a state “balanced budget amendment” that has placed California in a permanent fiscal straitjacket. In the long run, was it a good idea to support such a reckless solution? Conventional wisdom at the time was that a “yes” vote would prevent devastating budget cuts. But what if we stood up as a matter of principle?

Assembly Speaker Karen Bass (D-Los Angeles) has sent signals that she won’t support the special election measures, and State Senator Loni Hancock (D-Berkeley) has publicly opposed Prop 1A. Democrats are unified about wanting to scrap the “two-thirds rule,” but that won’t be on the May 19th ballot. And when Arnold had a press conference last week to promote his special election measures, one of the leaders who flanked him was State Senate President Darrell Steinberg (D-Sacramento.)

I like Darrell Steinberg. He’s been a champion for mental health funding, and is a vast improvement over his predecessor, Don Perata. But standing next to Schwarzenegger to promote a reckless special election with no budget solutions to vote for was disgraceful. Props 1A-1F must be defeated, because they would wreak long-term havoc on the state. They are awful Republican solutions, and Schwarzenegger should be left alone to defend them.

Because if Democrats unify to sink these ballot measures (with substantial help from labor), Arnold will have to own these defeats – just like he did in 2005. And when we have to go back to the drawing board, progressives will have the upper hand. Unless, of course, too many Democrats went along to support these failed proposals.

Field Poll: VOTERS BOO BUDGET, BACK BALLOT ITEMS

2009-03-03T13:08:00.001-08:00

SACBEE CAPTOLALERT: Edited by Shayne Goldmacher

March 3, 2009 -- A new Field Poll shows that California voters are dissatisfied (55 percent) with the state budget passed by the Legislature last month. Those likely to vote in the May 19 budget special election are even more unhappy (65 percent).

The plan contains a broad swath of tax hikes and deep spending cuts.

Come to think of it, who are the 45 percent of the people satisfied with that budget?

The same poll shows initial support for all six items on that ballot.

Of course, support for Proposition 1A, the spending restriction measure which would extend the life of the tax increases, plunges by 23 percent when voters are told about the tax provision.

Lawmakers must have accidently left that out.

That's not what the odd-couple of the month -- the conservative Jon Coupal of the Howard Jarvis Taxpayers Association and the liberal Anthony Wright of Health Access -- think. They teamed together Monday to sue to change the ballot summary for the measure.

They even got a letter of support from UC Berkeley professor George Lakoff, he of Don't Think of an Elephant fame.

"In each case, the language prejudices voters towards passage of the proposition and toward the political and economic views of the proponents of the proposition," Lakoff wrote in a letter accompanying the suit.

Umm, wasn't that the point?

We've posted each of the propositions' polling numbers [following] And, as usual, Capitol Alert has the Field Poll's exclusive statistical tabulations [also follows]

Other poll highlights: 18 percent of voters think the state is headed in the right direction. The same percentage approves of the job the state Legislature is doing. Schwarzenegger's approval held steady at 38 percent since last September. The open-primary ballot measure on the 2010 ballot gets first-blush support from 58 percent of voters.

Meanwhile, it's election time in Los Angeles.

An itsy-bitsy fraction of the city's electorate will head to the polls today, when Los Angeles Mayor Antonio Villaraigosa is expected to waltz into a second term.

Photo: Gov. Arnold Schwarzenegger signs the budget plan in his office on Friday Feb. 20, 2009. Credit: Brian Baer/Sacramento Bee.

Poll: Voters on the budget ballot measures

March 3, 2009--The budget plan adopted by the Legislature last month sent six different budget-related measures to the May 19 special election ballot.

The Field Poll asked voters their initial position on each of the measures. Below are the results:

Proposition 1A (Spending cap/tax extension)
Registered voters
Yes: 54 percent
No: 24

Likely voters in May special election
Yes: 57
No: 21

Proposition 1B (Education funding)
Registered voters
Yes: 59
No: 27

Likely voters
Yes: 53
No: 30

Proposition 1C (Lottery)
Registered voters
Yes: 48
No: 37

Likely voters
Yes: 47
No: 39

Proposition 1D (Early childhood services funding (Prop. 10))
Registered voters
Yes: 62
No: 20

Likely voters
Yes: 54
No: 24

Proposition 1E (Mental health funding(Prop. 63))
Registered voters
Yes: 61
No: 23

Likely voters
Yes: 57
No: 23

Proposition 1F (No raises for officials in deficit years)
Registered voters
Yes: 74
No: 17

Likely voters
Yes: 77
No: 13

March 3 Field Poll Results

Publish at Scribd or explore others: Other Research may 19 california election

UNIONS HOLD THE WILD CARD ON PROPOSED STATE SPENDING CAP

2009-03-02T11:37:00.001-08:00

By Kevin Yamamura | The Sacramento Bee

How ‘sweet’ does it have to be before the diabetes kicks in?

- Gov. Arnold Schwarzenegger urges support for six budget measures – topped by a state spending cap and school funding sweeteners – in a special election May 19. [BRIAN BAER Sacramento Bee file, Feb. 26 ]

Monday, Mar. 2, 2009 --Labor unions that blasted a state budget deal for its constitutional spending limit have gone quiet as the state gears up for a May 19 election asking voters to ratify the agreement.Campaign veterans believe Gov. Arnold Schwarzenegger and legislative leaders can only succeed in persuading voters to pass six budget-related ballot measures if unions remain on the sidelines.

Labor groups will hold internal meetings over the next month to decide how to proceed.

"That's the multimillion- dollar question," said Dan Schnur, a former Republican strategist who now directs the Jesse M. Unruh Institute of Politics at the University of Southern California.

"Initiatives like this only pass when there isn't much money spent against them," he said. "And the only people who have that kind of money and that kind of motivation are unions. If they decide to sit this one out, it probably passes."

Schwarzenegger hopes the special election will be nothing like the one four years ago, when he suffered multiple defeats at the hands of labor groups.

One immediate difference is that the powerful California Teachers Association has backed Proposition 1B to ensure that schools receive $9 billion in future years, one of the six proposals that Schwarzenegger and legislative leaders are selling as part of an overall "budget reform" package.

In 2005, the CTA worked against the governor by galvanizing opposition to his various ballot proposals.

The most controversial ballot measure this year is Proposition 1A, which establishes a cap on future state spending based on a trend line over the previous decade.

Public employee labor unions fear the measure would mean less money for government jobs, yet the cap was essential to winning Republican support for the budget package.

Unions last month were attacking the budget deal for including a limit on future state spending growth and $15 billion in cuts to state programs. The spending limit must be approved by voters in Proposition 1A to take effect.

Fearing that unions could mount a successful opposition campaign, lawmakers and Schwarzenegger crafted the budget deal so that increased taxes on income, sales and vehicles would last up to an additional two years if Proposition 1A passes.

The strategy assumed that the additional state tax revenue, worth as much as $16 billion between 2011 and 2013, would provide enough incentive for unions to let Proposition 1A go unchallenged.

Different branches of the Service Employees International Union, which represents tens of thousands of public-sector workers, are having internal discussions about what approach they want to take toward the ballot measures.

"We have always been against the spending cap," said Jeanine Meyer Rodriguez, spokeswoman for the state council of SEIU, representing 750,000 workers statewide. "We have to go through our internal process."

If unions decide to pony up money in the special election, they will find vocal partners in the Howard Jarvis Taxpayers Association, an anti-tax group usually on the opposite side of labor in public policy debates. The group opposes the tax hikes linked to Proposition 1A and believes the spending limit allows for too much growth in the state budget.

"I think the opposition is not only there, but I think it will grow the closer we get to May 19," said Jon Coupal, president of the Jarvis group. "It's well known that some bargaining units are not happy and may have motivation to oppose Proposition 1A. Politics makes for strange bedfellows."

Lawmakers and Schwarzenegger crafted the budget deal to win support from education groups. They placed Proposition 1B on the ballot to specify that the state would pay schools $9.3 billion beginning in 2011-12. They tied the measure to Proposition 1A, partly to discourage teachers unions from opposing the spending limit.

CTA President David Sanchez said that his group has taken an interim support position on Proposition 1B, but that it will take positions on all the measures at a state council meeting next month.

"We're going to be having a campaign to encourage electorate support for repayment back to schools," Sanchez said.

Schwarzenegger held a kickoff news conference Thursday for the six ballot proposals with Senate President Pro Tem Darrell Steinberg, D-Sacramento, former Senate Republican leader Dave Cogdill and leaders from business, public safety and construction groups.

The governor plans to build a substantial war chest in case any financial heavyweights emerge to oppose the six budget-related ballot proposals.

Schwarzenegger, who has set gubernatorial fundraising records, already has the support of major business-backed groups, including the California Chamber of Commerce and the California Taxpayers Association.

"We will get enough money together so we can have an effective TV campaign because even though there's no opposition at this point, you never know," Schwarzenegger said last week. "We want to make sure that if there is opposition coming up and spending money against it, that we have enough money available to push back and get the message out."

The unions may not be Schwarzenegger's only concern.

Republican gubernatorial candidate Meg Whitman, a former eBay CEO whose net worth has been estimated at more than $1 billion, hasn't ruled out using the special election as a means to court the party's anti-tax base by spending heavily to oppose Proposition 1A. She already is on record opposing the measure.

THE MAY 19 BALLOT MEASURES

2009-02-27T14:33:00.001-08:00

The State Legislative Analyst’s Office has prepared a summary and analysis for each of the six measures.

The Secretary of State has now posted the ballot summaries, arguments for and against, and other information.

Countdown: THE COMING BALLOT FIGHT + CONSTITUTIONALLY UNCONVENTIONAL

2009-02-24T13:03:00.001-08:00

SacBee CAPITOL Alert | Shane Goldmacher

The political establishment is already starting to gear up for the budget-centric special election on May 19.

Here are the budget measures that will be on that ballot:

Proposition 1A: Implements a spending cap based on the rate of growth from the last 10 years. If approved, it would extend the length of the taxes approved by the Legislature.
Proposition 1B: Changes the state's education funding law -- Proposition 98 -- for supplemental education payments to local districts due to recent budget cuts.
Proposition 1C: Borrows from future lottery earnings.
Proposition 1D: Takes money from the First 5 Commissions -- aka Proposition 10 funds -- to help balance the budget.
Proposition 1E: Takes money from the Mental Health Services Act -- aka Proposition 63 funds -- to help balance the budget.
Proposition 1F: Prevents state-level elected officials from receiving pay raises in years when the state is running a deficit.

Gov. Arnold Schwarzenegger hosted a D.C. steakhouse fundraiser Monday. The money went to Schwarzenegger's California Dream Team PAC, which is gearing up its fundraising operation for the budget special election.

A $25,000 ticket bought a seat at the head table with the governor, according to the Associated Press, while $10,000 paid for "preferred seating" and photos. Cheap seats were available for $2,500.

WIGS OPTIONAL: A coalition of left-of-center and good government groups are sponsoring a Sacramento summit today on whether the time has come for a California constitutional convention.

That's an actual possibility afforded under state law that would allow the state to, in essence, chuck a good chunk of its constitution and start over.

As the Bay Area Council, which initially spearheaded the effort, says, "We believe it is our duty to declare that our California government is not only broken, it has become destructive to our future. It is time to repair our system of governance."

CALIFORNIA STATE PTA RESPONDS TO STATE BUDGET

2009-02-20T15:38:00.001-08:00

PRESS RELEASE

February 20, 2009

For Immediate Release

Contact:

Carol Kocivar

Vice President, Communications

(415) 577-1125

communications@capta.org

Alison apRoberts

Communications Manager

(916) 440-1985, ext. 106

aapRoberts@capta.org

California State PTA Responds to State Budget

SACRAMENTO - California State PTA President Pam Brady issued the following statement today in response to the budget adopted by state lawmakers and signed today by the Governor.

"This budget does not value the children of California. Instead, it puts on entire generation of children - and the state's very future - at risk.

"Some new revenues are part of this budget, and for that we acknowledge the Governor and legislators for recognizing the need to take a balanced approach to the state's budget crisis. Even so, the severe cuts that are included in the final budget threaten our state's commitment to a world-class education.

"These cuts are almost certainly going to drive California - already a dismal 47th - to the bottom among all states in per-pupil spending. That means cutting teachers, arts, classroom materials, counselors, nurses, small class sizes, and much more that children need to succeed in school and life.

"California cannot afford to go backward in its commitment to children and students, especially in challenging economic times.

"In the coming weeks, we will continue to analyze the details of the budget package, including several statewide initiatives that will be placed on the May 19 ballot as part of the budget deal.

"And California State PTA will continue to advocate for legislators and the Governor to develop a farsighted budget plan and process - a plan with vision, a plan that is a reflection of the hopes and dreams of the next generation, and a plan that is truly focused on the future of our state."

###

everychild.onevoice.

The California State PTA has nearly 1 million members throughout the state working on behalf of public schools, children and families, with the motto, "Every child, one voice." The PTA is the nation's oldest, largest and highest profile volunteer organization working to improve the education, health and welfare of all children and youth. The PTA also advocates at national, state and local levels for education and family issues. The PTA is nonprofit, nonsectarian and noncommercial.

For more information about the California State PTA, visit www.capta.org.

NO DAY 107, BUT COUNTING DOWN TO THE NEXT ELECTION

2009-02-20T10:28:00.001-08:00

SacBee CapitolAlert: Shane Goldmacher | Capitol Alert Coordinator

Gov. Arnold Schwarzenegger today will sign the budget package that the Legislature passed early Thursday morning.

Then comes the list of line-item vetoes.

[smf: The gov signs at 1PM, the list of line item vetoes should be available after that. California government is only transparent after the fact]

Of course, as Jim Sanders reports in today's Bee, more money woes could be in the state's future as the economy continues to falter.

"If I could tell you what revenues are going to be in May, I would not be making this call from Sacramento -- I'd be making it from Las Vegas," quipped H.D. Palmer, a spokesman for Schwarzenegger's Department of Finance.

I'd bet the under on that.

The real drama of the weekend will be at the California Republican Party's convention, which descends on Sacramento this evening.

In terms of budget fallout, there's the pending resolution to censure every Republican lawmaker who voted for taxes.

But there's also early jockeying in the 2010 governor's race between Meg Whitman and Steve Poizner.

Both candidates have been very critical of the budget deal struck in the Legislature.

(Speaking of sharp words from gubernatorial candidates, check out Lt. Gov. John Garamendi say this week, "We have an infection here. And it's a Republican infection, and it's really spreading across this nation.")

VICTORY LAP? Schwarzenegger, meanwhile, won't be anywhere near the GOP activists. The governor is off to Washington this weekend, in preparation for next week's National Governors' Association conference.

He'll also appear on at least two Sunday talk shows -- ABC's "This Week with George Stephanopoulos" as well as CNN's Sunday show.

FURLOUGH FRIDAY: Believe it or not, it's been only two weeks since the first state worker furlough.

Photo credit: After the Legislature approved the state budget, Gov. Arnold Schwarzenegger removed the numbers from the "deficit clock," outside his Capitol office on Thursday, Feb. 19, 2009. Credit: AP Photo/ Rich Pedroncelli.

LAUSD BUDGET UPDATE AS OF 2/18/09

2009-02-19T07:13:00.001-08:00

Subject to change based on updates from the State

from the office of superintendent Ramón C. Cortines

OVERVIEW

1. Based on current projections from the State, our projected district shortfall is between $600 and $700 million and the prospects do not look any brighter for future years. We also do not know if we will have class size or categorical flexibility, so we must prepare for the worst case scenario.

2. My philosophy for moving forward will be the same as the 2000 Plan adopted by the Board

a) Central offices are to be right-sized and to focus on core operations, monitoring and oversight

b) The local districts are to provide support and service to schools

c) The schools are the heart of our District and are where teaching and learning takes place

3. Federal Stimulus money will provide some temporary relief, since the money is for one time expenses (spread over two years). Flexibility and use of this money still has not been determined.

a) Although the stimulus money has yet to be finalized, I will recommend that the majority of any unrestricted resources to be set aside to protect the schools.

CENTRAL – RIGHT-SIZED

We will be streamlining the central office to ensure the majority of our resources are at the school site.

1. I have recommended a 30% reduction in most central offices. We are in the process of reviewing the budgets and discussing how to implement our decentralized governance model.

2. Further, I am considering a recommendation to reduce the work year for most non-school based employees. Besides providing substantial savings, it will emphasize that our highest priority is support of the local school.

3. We are also reviewing outside contractors with the goal of substantially reducing costs and administered accounts.

LOCAL DISTRICT OFFICES SUPPORT AND SERVICE TO SCHOOLS

Via the decentralization of the central office, the local district offices will be responsible for working with their schools to ensure each school receives the service and support they need.

1. However, I am recommending that local district offices be cut up to 50%. I will expect my leaders in the local districts to work smarter to target services to the schools that need the most support.

2. While we have benefited from many ancillary programs that support our student population, we must now cut some of these programs to focus our limited resources on our core instructional program.

LOCAL SCHOOLS – WHERE TEACHING AND LEARNING TAKES PLACE

My approach is to build a school district from the classroom out, so that we can minimize the impact on teachers. The percentage of cuts will be the lowest at the school level, but given the cumulative size of our school budgets, the dollar amount will be large.

1. Since we don't have all of the necessary budget information from the State, we must be conservative by noticing a potentially larger number of certificated employees on March 15^th

a. All certificated administrators will be notified

b. Since central and local district certificated employees have rights to the classroom, we will need to notify some permanent teachers.

c. To ease the impact on our novice teachers, we have implemented an aggressive early retirement incentive program (ERIP)

NEXT STEPS

February 26^th: 2009-10 Budget Development process with recommendation for March 15^th letters

March –June: Hold public reviews of the budget to ensure we all agree on our priorities

Council of Great City Schools – Update on Stimulus Package 2/17/09

Disclaimer – details have not been finalized on how and when the funds will be allocated to LAUSD, especially the State Fiscal Stabilization funds

Overview of Federal Stimulus Package - Jeff Simmering

Five major types of aid to be expended over a 2 yr period (potential for flexibility to spread over 3 yrs)

Non Categorical Aid – State Fiscal Stabilization: $40B for education (broadly defined)
1. Proportionally allocated based on split b/w K-12 and higher education state reductions
2. Distribution of funds will vary state by state, but can be used to backfill state cuts
3. Distributed on per capita basis
4. Use of funds are based on ESEA, IDEA, Perkins, School modernization or repair
Categorical IDEA: $12.2 B ($11.3B traditional part B, $400M early Childhood, $500M infant and toddler)
1. 50% of funds can be used to offset Spec Ed use of General Funds
Categorical Title I: $13B ($10B Regular, $3B School Improvement)
1. Allocated by targeted and equity formulas
2. 95% will be passed through to LEAs
3. 1% used for State Administration
4. 4% school improvement activities
Secretary Bonus or Incentive: states that have made good progress will be awarded $5B ($2.5 allocated on basis of Title I)
1. Progress defined as states that are increasing equitable distribution of teachers, improved data systems, and improved assessments
School Construction Bonds - $22B tax subsidizes or bonding authority
1. After you sell your bonds the interest that you pay will be given a tax credit
2. Can be used as new construction and land acquisition

Council of Great City Schools estimate of stimulus for LAUSD (over two years)

- Title I: $398M

- IDEA: $168M

- Ed-Tech: $9.7M

- State Stabilization has not been determined

Key Takeaways for LAUSD

1. We will need to be flexible in our projections until we receive the final allocations from the State

2. We need to be conservative with our projected use of our funds, because we do not know the magnitude of the cuts that from the State

3. Stimulus funds are one time funds, so we can not rely on using them to cover ongoing expenses

4. Depending on the cuts from the State, we will use the majority of the funds to help schools offset some of their reductions

Day 106 | 6:17 AM: SENATE APPROVES BUDGET PLAN!

2009-02-19T06:30:00.000-08:00

Senate approves budget plan

The state Senate voted early Thursday to approve a massive budget package of tax increases, spending cuts and borrowing to close a $40 billion deficit after granting major concessions to one holdout Republican senator.
Read More

Maldonado's price for budget vote: 3 constitutional amendments

STATE HELD HOSTAGE

2009-02-18T13:42:00.001-08:00

Sacramento Bee cartoonist Rex Babin

AM Alert - REPUBLICAN SENATORS FIRE THEIR LEADER: Hollingsworth in, Cogdill out

2009-02-18T07:23:00.001-08:00

The Sacramento Bee CapitolAlert

Senate Republicans have a new leader today after the caucus ousted Sen. Dave Cogdill and replaced him with Sen. Dennis Hollingsworth shortly after midnight.

Despite speculation that Senate Republicans may ask to reopen budget talks, Senate President Pro Tem Darrell Steinberg insisted the change has absolutely no effect on his strategy to break the budget deadlock this week.

"We're going to maintain our focus towards solving the problem of getting one vote regardless of who the leader is," Steinberg said after his house took a recess around 1 a.m. "Leadership doesn't change the fact that there is no other idea put forward that would take $41 billion out of a budget deficit. And so, for me, it doesn't change anything."

After the Senate failed to approve the contentious tax hike bill, Steinberg made good on his threat to keep his members locked in for the night. He said he plans to resume talks later Wednesday with Sen. Dave Cox, R-Fair Oaks, and Sen. Abel Maldonado, R-Santa Maria, to see if either one will back the budget package.

"I would describe it as a bit of a discouraging day," Steinberg said of Tuesday. "Despite a lot of effort, and a lot of work today by our office, the governor's office, they're not there. But they have to be there eventually."

Schwarzenegger flew home to Brentwood around 9 p.m., a sign that the budget deal remained elusive Tuesday. His spokesman, Aaron McLear, said the governor plans to continue speaking to Cox and Maldonado on Wednesday.

Hollingsworth, an ardent tax opponent, made it clear that he continues to oppose the budget. When asked whether he wants to reopen the "Big 5" negotiations, he said he'd take a wait-and-see approach.

"I think the majority of my caucus doesn't want to see a tax increase passed in this particular package," Hollingsworth said. "But we'll see what happens in the next few minutes, the next few hours, the next few days."

AM Alert: BRING A TOOTHBRUSH

2009-02-17T08:12:00.001-08:00

SacBee CapitolAlert- Shane Goldmacher

Photo: Sen. Abel Maldonado, R-Santa Maria, talks to the media about his budget vote outside his office on Monday Feb. 16, 2009. Credit: Brian Baer/Sacramento Bee.

After a marathon weekend, including an all-night session beginning on the evening of Valentine's Day , passage of the roughly $40 billion plan remains one vote short.

With the budget stalled, Gov. Arnold Schwarzenegger will send out layoff notices to 20,000 state workers today.

In his second emotional speech on the Senate floor in as many days, Senate President Pro Tem Darrell Steinberg announced Monday that the upper house will take up the controversial tax-hike legislation this morning at 10 a.m.

And if, as expected, the bill does not pass he will lock down the Senate.

"We will stay on this floor until we get it done," Steinberg declared just before 8 p.m. Monday. "Bring a toothbrush, bring whatever necessities you need to bring."

Monday's floor session capped a whirlwind weekend that will continue into the week.

Way back on Saturday evening, Democratic lawmakers went into session with high hopes that the six necessary Republican votes were in hand.

Democratic Sen. Lou Correa ultimately sided with his fellow caucus members after a measure to give Orange County an extra slice of the state budget pie was included in the budget.

Three GOP votes seemed assured in the Assembly. (With a little sweetener of a tax break to provide the Glendora Community Redevelopment Agency with millions of additional dollars beginning this year. That just happens to be in the district of Republican Assemblyman Anthony Adams.)

But the vote stalled in the Senate, with only GOP leader Dave Cogdill going up on an initial piece of the budget puzzle and Sen. Roy Ashburn, R-Bakersfield, abstaining.

That's pretty much where the budget process still stands -- one vote short.

Oh, lawmakers in both houses stayed past sunrise, as the 27th vote focus shifted from Sen. Dave Cox, R-Fair Oaks, to Sen. Abel Maldonado, R-Santa Maria.

(Watch Capitol Alert's video highlights of the all-nighter.)

Maldonado was a particularly curious case. Early Sunday morning, he told the San Jose Mercury News, "There's nothing they can give me that would make me vote for this budget."

He snapped at Schwarzenegger: "Where was he when I needed him?" -- a reference to his 2006 primary loss in which he hoped for the governor's endorsement. And he took a swipe at Cogdill, saying "There's a difference between managing a caucus and leading a caucus."

But hours later, he told The Bee, "I'm very concerned with the tax package...We're still working on that. Everything's fluid... I don't want my state to go off the cliff, OK? I don't want that."

By Monday, Maldonado enumerated a list of four demands...

Maybe closing this package will take a miracle-worker. Speaking of which, Captain Chesley Sullenberger, he of the famed Hudson River plane landing last month, will be in the Capitol today.

Schwarzenegger and first lady Maria Shriver will host a celebration honoring Sullenberger in the Capitol rotunda at 11:30 a.m.

CALIFORNIA STRUGGLES TO CLOSE A PROJECTED $41 BILLION DEFICIT: “The State of California — its deficits ballooning, its lawmakers intransigent and its governor apparently free of allies or influence — appears headed off the fiscal rails.”

2009-02-16T15:21:00.001-08:00

By JENNIFER STEINHAUER | NEW YORK TIMES

February 17, 2009 — LOS ANGELES — The state of California — its deficits ballooning, its lawmakers intransigent and its governor apparently free of allies or influence — appears headed off the fiscal rails.

Since the fall, when lawmakers began trying to attack the gaps in the $143 billion budget that their earlier plan had not addressed, the state has fallen into deeper financial straits, with more bad news coming daily from Sacramento. The state, nearly out of cash, has laid off scores of workers and put hundreds more on unpaid furloughs. It has stopped paying counties and issuing income tax refunds and halted thousands of infrastructure projects.

After negotiating nonstop from Saturday afternoon until late Sunday night on a series of budget bills that would have closed a projected $41 billion deficit, state lawmakers failed to get enough votes to close the deal and adjourned. They returned to the capital late Monday morning only to adjourn until the afternoon, though it was far from clear whether they would be able to reach a deal.

California has also lost access to much of the credit markets, nearly unheard of among state municipal bond issuers. Recently, Standard & Poor’s downgraded the state’s bond rating to the lowest in the nation.

California’s woes will almost certainly leave a jagged fiscal scar on the nation’s most populous state, an outgrowth of the financial triptych of above-average unemployment, high foreclosure rates and plummeting tax revenues, and the state’s unusual budgeting practices.

“No other state is in the kind of crisis that California is in,” said Iris J. Lav, the deputy director of the Center on Budget and Policy Priorities, a liberal research group in Washington. The roots of California’s inability to address its budget woes are statutory and political. The state, unlike most others, requires a two-thirds majority vote in the legislature to pass budgets and tax increases. And its process for creating voter initiatives hamstrings the budget process by directing money for some programs while depriving others of cash.

In a legislature dominated by Democrats, some of whom lean far to the left, leaders have been unable to gather enough support from Republican lawmakers, who tend on average to be more conservative than the majority of California’s Republican voters and have unequivocally opposed all tax increases.

And then there is Gov. Arnold Schwarzenegger, whose budget woes far outweigh those of his predecessor, Gray Davis, whom he drummed from office in a 2003 recall that stemmed from the state’s fiscal problems at the time. The governor has failed to muster votes among lawmakers in his own party, whom he often opposes on ideological grounds, resulting in more scorn from Democrats.

Furthermore, Republican leaders in the Senate and Assembly who have agreed to get on board with a plan have been unable to persuade a few key lawmakers to join them. The package needs at least three Republican votes in each house, to join with the 51 Democrats in the Assembly and the 24 Democrats in the Senate.

For months Republicans have vowed not to raise taxes, which in California means no increase in either the sales, gas or personal income tax.

“It is a dramatic time,” said Darrell Steinberg, the State Senate’s president pro tempore. “The solvency of the state is on the line. It is really quite a system where the fat of the state rests upon the shoulders of a couple of members of a minority party. The system frankly needs to be changed.”

In the meantime, motorists are met with “closed” signs at Department of Motor Vehicles offices two days a month, environmental programs are left unattended, piles of dirt mark where highway lanes are to be built to ease the state’s infamous traffic congestion, school systems mull layoffs and counties prepare to sue the state for nonpayment of bills.

Last week, Mr. Schwarzenegger and the four legislative leaders concurred on a series of bills that included $15.1 billion in budget cuts, $14.4 billion in tax increases and $11.4 billion in borrowing, much of it subject to voter approval.

The Senate Republican leader, Dave Cogdill, said he thought he had all the votes needed to get the deal done in each house. But on Sunday, two Republican senators — Dave Cox, who was originally thought to be the last vote needed, and Abel Maldonado, whom Mr. Schwarzenegger had been able to woo into voting against his party in the past — said they would reject the plan.

Democrats, who had already given into Republicans’ long-held dreams of large tax cuts for small businesses and for some of the entertainment industry and a proposed $10,000 tax break for first-time home buyers, balked at Mr. Maldonado’s request that the legislature tuck a bill into the package that would allow voters to cross party lines in primary elections.

Mr. Maldonado, who is also seeking a constitutional amendment to prevent lawmakers from getting paid if budgets are late, defended his request that the open primary bill be included in the budget package.

“There needs to be good government reforms in this budget, and no member should be getting pet projects,” he said. “I think with an open primary, we would have good government that would do the people’s work.”

Sunday evening ended in frustration and exhaustion for lawmakers, who returned to work Monday facing the state’s uncertain future.

“My boss will continue to work toward a responsible budget solution,” said Mr. Cogdill’s spokeswoman, Sabrina Lockhart. “There are real risks and real consequences for not passing a budget.”