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Brown, Democrats reach budget deal without taxes

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Los Angeles Times June 28, 2011 

Abandoning negotiations with Republican lawmakers, Gov. Jerry Brown struck a deal with Democrats for a budget that assumes billions of dollars in fresh revenue — but could lead to major service cuts if the money doesn't materialize.

The proposal, which Democrats said they would pass as soon as Tuesday, does not include the renewed tax hikes that the governor had been pushing to put before voters. But it does contain some charges that Democrats believe they can legally raise without GOP support.

Car owners, for example, would pay $12 more per year to register their vehicles. Residents of wildfire-prone zones would pay a new fee for state firefighting efforts. Other revenue would come from forcing online retailers such as Amazon.com to collect sales tax on purchases by California residents.

The budget is partly based on an expectation of an extra $4 billion in income. Without that cash, steep cuts to education and other state services would kick in, including a reduction in schools spending that could shorten the instructional year by seven days in some districts.

"In case we are overoptimistic, we have severe trigger cuts," said Brown, who has pledged not to sign a budget that pushes California's debt further into the future. "Those are real."

But Republicans immediately zeroed in on the projected windfall, which would be in addition to $6.6 billion in unexpected revenue that was forecast last month.

"That's nearly $11 billion in new revenue that the Democrats assume will magically appear," said Senate Budget Committee Vice-Chairman Bob Huff (R-Diamond Bar). "That's a wand that Harry Potter would be proud to wield."

Democrats said they would pass the latest budget with a simple majority vote, and the governor's signature would set the stage for lawmakers to be paid again. Their salaries and daily allowances have been docked since they passed an initial spending plan June 15. State Controller John Chiang decided that plan — which Brown quickly vetoed — was unbalanced and violated a new law that punishes legislators for late budgets.

Payment will resume if Brown signs the new one and the Department of Finance finds it balanced, Chiang spokesman Garin Casaleggio said Monday.

The new package retains elements of the earlier one, relying on some accounting maneuvers, such as bumping billions of dollars in school payments into the next budget year.

It also includes substantial program cuts that would take effect regardless of whether the projected revenue leap occurred. Courts and universities would have their funding curtailed, and Brown would still seek to dismantle the state's redevelopment agencies, which use tax money to spruce up blighted areas. Redevelopment boosters immediately vowed to sue.

The governor acknowledged that after months of often-halting talks with GOP lawmakers, he couldn't "get any Republican support" for his plan for a fall tax referendum and a bridge of tax extensions to balance the budget until then.

The governor said that "at end of the day, there just was not a willingness to sign onto [tax] extensions no matter what we did."

Republicans had demanded changes in pension, regulatory and spending policies in exchange for supporting an election. No such moves are included in the latest package, and GOP lawmakers accused the majority party of bending to special interests.

"The Democrats have proven once again that they are unwilling to stand up to the unions that fund their political campaigns and adamantly oppose meaningful pension reform," said a joint statement by four Republicans state senators who had been negotiating with Brown: Tom Berryhill of Modesto, Anthony Cannella of Ceres, Bill Emmerson of Hemet and Tom Harman of Huntington Beach.

Senate President Pro Tem Darrell Steinberg (D-Sacramento) dismissed Republicans as "the gang that chooses not to govern."

Democrats said $1.2 billion in unexpected revenue collected so far in May and June was the basis for their $4-billion assumption. But if sufficient new money doesn't appear to be on the way by January, prisons and the University of California and Cal State University systems would each lose $100 million. Programs for the sick, disabled and poor would be cut by twice that amount.

If those reductions fail to balance the books, K-12 schools would face a $1.5-billion cut and be allowed to shorten the school year by up to seven days to achieve it.

Many cutbacks in the plan were signed into law months ago. In March, lawmakers slashed billions from welfare, the courts, universities and programs for the elderly, blind and disabled. Many state park closures have been announced, and some cash grants for the poor will be slashed this week.

A total of $350 million would be cut from state courts, which California Supreme Court Chief Justice Tani Cantil-Sakauye said marked Monday as "a sad day for justice in California."

UC and CSU budgets would be slashed a total of $650 million, including $150 million in new reductions. Leaders of both university systems have predicted that tuition hikes and an erosion of the quality of education offered will follow the latest cutbacks.

And state Atty. Gen. Kamala Harris said that a $71-million cut to her office would "cripple California's statewide anti-gang and drug trafficking operations" and "jeopardize many ongoing investigations."

Steinberg called the plan the "most austere fiscal blueprint California has seen in more than a generation."

The budget also would redirect some of the sales tax to help ease the state's chronic prison crowding. Those monies would pay counties to keep tens of thousands of low-level offenders in county jails instead of transferring them to state lockups.

That would lower what schools must be paid under the state's education funding formula, which Brown said the plan adheres to "very legally and creatively."

But Bob Wells, executive director of the Assn. of California School Administrators, said that schools have borne the brunt of cutbacks during the multi-year recession and, under the latest plan, "it looks like we're in line for even more."

California began the year with more than a $25-billion deficit, which had fallen to about $10 billion by May, due primarily to spending cuts and an improving economy. Finance officials said the new budget deal would wipe away the remaining shortfall, but only temporarily — a new $5-billion deficit will probably appear in fiscal 2012-13.

Brown acknowledged that the package would not restore California's long-term financial health — one of his stated goals. "We still have our wall of debt hanging out there, and we still have work to do," he said.

Democrats said they would gather signatures to place an initiative on the November 2012 ballot to ask voters to raise taxes, although they did not specify what taxes. Political strategists believe the electorate will lean more Democratic with President Obama on the ballot next year. 





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