At Christmastime, no one should have to think about the misadventures of the California Legislature, but there is this problem: The state budget deficit over the next 18 months is $42 billion – which is more than the combined annual spending on criminal justice ($13 billion), higher education ($12 billion), social services ($9 billion), environmental protection ($2 billion) and transportation ($1.4 billion).
In other words, the Golden State could shutter all the prisons, close all the universities, stop helping the poor and the elderly, let the environment go to hell, and stop maintaining highways, and it would still be more or less broke.
Merry Christmas, everyone.
Desperate times call for desperate measures, and so it came to pass on Thursday that Democratic majorities in both houses of the legislature uncorked the mother of all desperate measures – a plan so convoluted that it almost defied description.
To simplify, the proposal would have replaced gasoline taxes and sales taxes on gasoline with a 39-cent-per-gallon gasoline “fee.” It would have raised sales taxes and imposed a one-time surcharge on incomes taxes. And it would have imposed an oil production tax.
The measures promised to raise an additional $11 billion and – in the Democrats’ expansive imaginations – to be “revenue-neutral” at the same time.
Therefore, proclaimed the Democrats, the plan could be passed by simple majorities in both houses of the legislature – which means Democrats could pass a budget plan without Republican votes.
Well, Republicans lawmakers were going nuts. They and conservative interest groups vowed to respond with lawsuits and a ballot initiative to make sure that elected majorities never seize control of the government.
But the Republican governor, Arnold Schwarzenegger, didn’t question the Democrats’ untested legal theory. Instead he asked for additional concessions to accelerate public works projects by relaxing environmental and workplace rules. The central sticking point didn’t involve taxing and spending; it centered on a perennial disagreement between business and labor.
At the end of the day, Democrats passed a package that wasn’t acceptable to Schwarzenegger. A few minutes later, he announced that he wouldn’t sign off. And everyone went home angry.
But the episode left open the possibility that the governor and Democratic lawmakers might still cut a deal because, well, these are desperate times for California.
Schwarzenegger has made clear that he would support a solution that combined spending cuts and new revenues – a position that puts him at odds with the hard-right positions of Republicans in the legislature.
No one likes new taxes, especially in a down economy, but if California can’t pay its bills and repay its debts, maintain schools, pay cops and build highways – if California becomes a laughingstock – that isn’t good for business.
Keep in mind that the latest machinations came a day after the state was forced to suspend $4 billion in construction projects, including $200 mllion in projects in Sonoma, Mendocino and Lake counties. “You can’t spend money you don’t have,” explained State Treasurer Bill Lockyer.
This was a sobering moment. In shelving the projects, the state effectively eliminated thousands of jobs – just as efforts are being made to stimulate economic growth.
State officials say they expect to run out of cash in February.
To understand the magnitude of the crisis, consider this: The Democratic plan that generated so much outrage would reduce the budget deficit by $18 billion ($7 billion in spending cuts and $11 billion in new revenues). That’s less than half of the $42 billion shortfall facing the state between now and June 30, 2010.
Even Republican lawmakers’ spending-cuts-only plan, released last Monday, manages to cover only $22 billion. In doing so, it would eviscerate the operating budgets of schools, community colleges, health care and social service agencies.
Over the last decade, California has careened from one budget crisis to another, usually by papering over the shortfall – increasing the debt, postponing obligations, using accounting gimmicks.
Most of the time, the legislature has been stalemated because California is one of only four states that require a two-thirds majority in each house to pass a budget plan.
As a result, no one has been in charge, and no one has been accountable.
When Democrats argue that the budget should be passed with simple majorities, they are called “anti-democratic,” but it is difficult to identify what is democratic about a system in which a minority forever dictates what can and cannot be accomplished.
Whatever else one can say about the Democrats’ latest budget maneuver, it could at least make someone responsible for the state’s financial wellbeing.
At the end of his press conference on Thursday night, Schwarzenegger warned again that the state “is in a terrible condition. . . as I said, we are going towards a financial Armageddon. . .”
In Sacramento last week, people were tossing around words such as precipice and abyss. If the Democrats and Schwarzenegger make a deal, they may be relying on a inventive legal theory. But, as California moves closer to bankruptcy, the state has run out of other options.
High-wire act or economic meltdown? Which would you choose?