by Sheila Kuehl
June 22, 2009

This is the third in a series of new essays on the current (May-June 2009) state of California budget considerations and analyses on contributing factors.    In this essay, I describe how the Republicans force an all-cuts budget and then vote against the cuts, what the next series of Floor votes means, and options for a majority-vote budget fix.

First: Republicans Craft a Win-Win Scenario (for themselves)

By adamantly refusing to support even the smallest of revenue increases, including fees, the Republican members of the Legislature have been spectacularly successful in forcing an all-cuts budget.  In seeming contradiction, in the most recent Floor vote, they then, in a breathtakingly cynical move, loudly refused to vote for the Democratic bill containing the cuts, allowing them to claim that they "didn't vote to cut schools or services".  (I'm not making this up, it happened every year I was in the Senate).  The Democrats, having no choice, as the majority party, but to finally put together a budget the Governor will sign, end up appearing to be the only ones who favor cuts! I wish some reporter would have the courage to report on this duplicitous dance.  Barring that, I sincerely hope no one is fooled when it repeatedly happens again this year.

Second: What Did the Vote on both Floors in mid-June Mean?

Although most of the press termed the vote on the Democratic Conference Committee proposal a "drill" (what the press always calls it when we put up a Democratic budget with tax increases that require a 2/3 vote, without the probability of enough Republican votes), the balanced cuts and taxes proposal would have allowed the State to continue to operate.

An outline of some of the provisions in the Democratic proposal:

Taxes and fees:

Incorporates the Governor's proposals on accelerating the collection of revenues but doesn't include a new oil drilling lease.
Increases the cigarette tax by $1.50 per pack (starting October first), so smokers would pay $2.37 tax on each pack of cigarettes and the state would get an extra $1.2 billion in 2009-10.
Imposes a 9.9% tax on oil extraction (California is the only state not to tax oil companies for taking oil and gas out of the ground) netting $830 million.

Cuts:

• Cuts $3.8 billion (not 4.5 as Gov. wants) from K-12 schools, and $700 million from community colleges.
• Allows districts to shorten the school year by up to five days (not seven as Gov. wants)  and suspend the high school exit exam.
• Increases fees for community colleges by $6 per unit to $26.
• Leaves in money for school buses.
• Reduces state aid to UC/CSU by about $2 billion (same as Gov.).
• Rejects governor's plan to phase out CalGrants.
• Rejects the governor's additional 5% pay cut for state workers (who have already been cut 10%).
• Realizes departmental reorganization savings by eliminating state umbrella agencies instead of oversight boards, as the Gov. proposed.
• Retains CalWORKS, but cuts $270 million by reducing payments to counties, and exempting families with very young children from work requirements.
• Retains the Healthy Families (children's health)program, but cuts $70 million by freezing enrollment.
• Retains the Adult Day Health Care program, but limits it to three days a week, saving $26.8 million.
• Rejects most of the governor's cuts in In Home Support Services, but saves $118 million by increasing the share of payments for some clients and reducing or eliminating services for clients with a lesser amount of need.
• Leaves parks open by increasing the annual vehicle license fee by $15, and letting folks with a California license plate enter free in all state parks.
• Shifts $336 million in local transit funds and $1.7 billion (over two years) in local government transportation money to the general fund to make state transportation bond debt payments.
• Cuts $322 million from prison counseling and rehabilitation programs and building maintenance (less than the Gov's proposed cut).
• Adopts the governor's early-release from prison program for non-violent offenders.

Third: The Bills Failed, So What Next?

It Could Mean Elimination of the Reserve

The Governor has proposed a 4.5 billion dollar reserve.  The majority party could tell the Governor that they will put a budget on his desk with very little reserve and allocate the 4.5 billion to achieve most of the program changes listed above.  This has the advantage of highlighting the Governor's choices: 1) new taxes on oil, tobacco and park fees and keep the reserve or (2) decimate the reserve.

Or, It Could Mean A Majority Vote Budget

This scenario is not the same as the eventual hope of doing away with the 2/3 vote budget requirement now in the California Constitution.  Instead, since the Republicans have made themselves irrelevant to a real solution, this is a (theoretical and untested) way to increase revenue in the budget with only Democratic votes.

The device is simple.  Remove taxes now in the budget that can be transformed into fees (requiring only a majority vote) and directed to a particular budget item, thus satisfying the requirement for a nexus between fees and the purpose of their expenditure.  Substitute other taxes in an equal amount.  The resulting zero-dollar change can be adopted by only a majority vote.