No Celebrating in Sacramento The Passage of the Earliest Budget in Years

Jerry-BrownThe budget is on time for the first time in a long time, but there is no joy in Mudville.  The goals of the administration are quashed and the only reason the budget was passed was the voters last November allowed a majority budget to be passed so long as there were no tax increases.

Last fall we argued that if Jerry Brown could not fix the system, no one could.  At the end of the day, no one can.

As the Bee quotes this morning, Bill Whalen, a research fellow at Stanford University’s Hoover Institution and former speechwriter for Gov. Pete Wilson, “The premise here was that one man could outmaneuver the system … that the governor, through his wiles, his skills, his experience, could change things in Sacramento.”

He added, “That premise was a patent failure.”

Jerry Brown thought he could do it by March, he could not.

The mood is probably best epitomized by Assemblymember  Bob Blumenfield the chair of the Assembly budget committee.

“These cuts will forever haunt our conscience,” he said. “However, those of us who do vote for this budget can take comfort with the knowledge that we did what was necessary to move ourselves toward stability.”

Meanwhile, the Republicans were on the attack, arguing that the budget simply pushes the state’s fiscal problems into the future while failing to address the most critical problems such as pension reform and regulatory relief for businesses.

“It does not solve our problem in the long run,” said Republican Assemblymember Jim Nielsen, “There are no sustaining reforms that are critical.”

Columnist Dan Walters argued that while the budget solves Democratic legislative leaders’ political problem for the moment, and means that “Democrats didn’t have to meet demands from Republicans,” it does not mean “the chronic fiscal crisis is over, and the budget’s shaky assumptions mean it could fall apart in months.”

He writes, “The biggest and wobbliest assumption is that even though about $10 billion a year in temporary sales, income and car tax increases are expiring, the state will garner about $4 billion in previously unanticipated revenues because of an improving economy.”

He argues, “Brown’s bean counters didn’t conduct a full revenue modeling exercise, as they do for proposed budgets earlier in the year, but rather did a horseback extrapolation from the somewhat higher than anticipated revenue of the last few months.”

He writes, “It may be something more than a guess, but it’s shaky enough that the budget package includes spending cut ‘triggers’ that will presumably be pulled if revenue falls short.”

The Sacramento Bee writes of the budget situation, calling it more bitter than sweet, arguing, “Yet judged on California’s needs and ambitions, there isn’t much to celebrate. Our standing as a state that invests in its future and protects its most vulnerable is about to take a horrible beating.”

Of course, they naively argue that it “could have turned out differently,” that “Republicans and Democrats could have found common ground on a combination of spending cuts, budget reforms and tax extensions. They could have acted like true public servants.”

Right, and monkeys will fly from the least expected locations.  The reality is that the system is fatally flawed and needs to be imploded.

The Bee writes, “Yet all the posturing and no-tax pledges and pressure from vested interests poisoned whatever common ground might have existed. This week, Gov. Jerry Brown and his party decided there was no deal to be cut with GOP lawmakers, whose votes were needed for tax extensions. So Democrats came up with a Plan B that cut the minority out of the action. Republicans gained nothing – no pension reforms, no regulatory reforms, no spending cap – even though their constituents will share in the pain.”

They call it “Ugliness heaped upon ugliness,” with “More cuts to higher education, driving up tuition costs. More cuts to Healthy Families. Less help for children whose parents are trying to find jobs. Less help for the developmentally disabled. More cuts to the judiciary. The list goes on and on.”

On the other hand they note, “It is easy to make jokes about the $4 billion in extra revenues that Democrats hope will arrive, and it could well be optimistic. But it isn’t as if Democrats don’t have a backup plan. Should the revenue not materialize, they’ve laid out more cuts to universities, social services, public safety and other programs. That’s not a Harry Potter piece of wizardry, as Republican Sen. Bob Huff characterized it. It is contingency planning – forced upon Democrats by GOP ideologues who would not even let the electorate decide the fate of tax extensions. “

This is the point we made yesterday and why this is not voodoo economics, the redux as Mr. Walters implies.

Law enforcement, who have been spared the worst of the cuts to date, are not happy.

In a release from Attorney General Kamala Harris she writes, “The general fund reduction proposals would reduce by $71 million the budget of the Division of Law Enforcement. This could lead to the loss of several hundred special agents and other personnel, the dissolution of 55 statewide task forces – many of which coordinate responses to transnational gang and drug crime  – and the loss of investigators on the state’s new Mortgage Fraud Strike Force. As a result, two entire law enforcement bureaus could be shut down, the Bureau of Investigations and Intelligence (BII) and the Bureau of Narcotic Enforcement (BNE).”

She argued, “”The proposed $71 million cut will cripple California’s statewide anti-gang and drug trafficking operations. Our Division of Law Enforcement leads 50 task forces across the state that target criminal gangs and drug trafficking organizations. Earlier this month, one of these task forces took down 101 leaders and members of two transnational gangs terrorizing California’s Central Valley. Last month, we announced the seizure of over 100 lbs of methamphetamine  and the arrests of more than 30 gang members in the Bay Area. These cuts will eliminate many, if not all, of these task forces and jeopardize many ongoing investigations.”

Naturally, state’s law enforcement leaders are up in arms.  Said Imperial County District Attorney Gilbert G. Otero: “As a district attorney in a county bordering Mexico, I would like to take this opportunity to urge you to oppose the Governor’s proposal to cut $71 million from the Department of Justice, Division of Law Enforcement’s budget. Such a move would have a major negative impact on public safety in my county, in the state and across the entire nation.”

But what is the state to do?  $71 million is a mere pittance compared to the cuts to education, $150 million in both CSU and UC IN ADDITION TO THE $500 million in cuts EACH suffered this year, not to mention the resumption of deferrals to public education which means more borrowing.

$71 million looks like whining, compared to the billions in cuts to public education and higher education over the last three years.

UC President Mark Yudof issued a statement on Tuesday, “Because cuts of this magnitude inevitably will drive up tuition for public university students and their families, we cannot stand silent.”

If the $4 billion in extra revenues fall through, UC and CSU may be looking at the full billion in cuts they were facing in May.

“The governor in his budget document asserted that, in an all-cuts budget, reductions in state funding for the University of California would be doubled, to $1 billion in cuts,” President Yudof said in May noting: “A cut of this magnitude would be unconscionable — to the university, its students and families, and to the state that it has served for nearly a century and a half.”

The Bee reports, “Now facing a cut of at least $650 million, CSU trustees will likely consider raising tuition again before the fall semester begins, said Robert Turnage, assistant vice chancellor for budget. He said the increase could be around 12 percent – on top of the 10 percent already approved last year.”

Law enforcement might want to be thankful if all that gets cut is $71 million.

—David M. Greenwald reporting

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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10 Comments

  1. Dr. Wu

    [quote]“The biggest and wobbliest assumption is that even though about $10 billion a year in temporary sales, income and car tax increases are expiring, the state will garner about $4 billion in previously unanticipated revenues because of an improving economy.”[/quote]

    My reading of the tea-levaes is that at least the smart people in Sacramento know full well that these increased revenues will not be realized. Indeed the US economy seems to be slowing down and we may have another recession (not a double-dip) next year.

    The danger in this approach is that when the revenues do not pan out cuts will need to be even more draconian…so we are “kicking the can down the road” to quote from one of our City Council members. This also makes it harder for public agencies and schools to plan–its no way to run a state, but at least we have less smoke and mirrors than we have had recently.

  2. Rifkin

    [i]” Indeed the US economy seems to be slowing down and we may have another recession (not a double-dip) next year.”[/i]

    There may be an exception or two to this, but the reason an economy experiences a recession is excess inventory build up in some key segment or many segments of the economy. The 2008-09 recession was no different in this respect: it was tipped-off by a massive build up of inventory in the residential housing sector.

    So for those who think “we may have another recession next year,” I am curious to know where it is they think we have too much inventory?

    I should add that I recently read a column by Martin Feldstein ([url]http://www.business-standard.com/india/news/martin-feldstein-whats-happening-tous-economy/440906/[/url]), and he agrees with Dr. Wu: [quote]Economic growth in the United States during the first three quarters of 2010 was not only slow, but was also dominated by inventory accumulation rather than sales to consumers or other forms of final sales. [/quote] But then Feldstein does not seem quite so sure: [quote] The last quarter of 2010 brought a welcome change, with consumer spending rising at a four per cent annual rate, enough to increase total real GDP by 3.1 per cent from the third quarter to the fourth. The economy seemed to have escaped its dependence on inventory accumulation.

    This favourable performance led private forecasters and government officials to predict continued strong growth in 2011, with higher production, employment and incomes leading to further increases in consumer spending and a self-sustaining recovery. [/quote] If you read the full piece, what Feldstein notes that our real problem is that we still have not overcome the housing inventory problem: we have too many people in too many houses in which the homeowners have no capital or even negative capital.

    I should add that before Obama launched his poorly designed stimulus package in 2009, I argued (in my column) that our real problem was with too much housing inventory and too much of it undercapitalized. My solution was to incentivize people with capital to buy up as much of the foreclosed and nearly foreclosed housing stock as possible. We did no such thing and this problem lingers on. If Obama had followed my advice, we would be in far better shape economically, right now.

  3. E Roberts Musser

    [quote]Of course, they naively argue that it “could have turned out differently,” that “Republicans and Democrats could have found common ground on a combination of spending cuts, budget reforms and tax extensions. They could have acted like true public servants.”

    Right, and monkeys will fly from the least expected locations. The reality is that the system is fatally flawed and needs to be imploded.

    The Bee writes, “Yet all the posturing and no-tax pledges and pressure from vested interests poisoned whatever common ground might have existed. This week, Gov. Jerry Brown and his party decided there was no deal to be cut with GOP lawmakers, whose votes were needed for tax extensions. So Democrats came up with a Plan B that cut the minority out of the action. Republicans gained nothing – no pension reforms, no regulatory reforms, no spending cap – even though their constituents will share in the pain.”[/quote]

    Neither side comes out looking like a rose in this one… they both should share in the blame… and that includes Brown himself…

  4. Dr. Wu

    [quote]the reason an economy experiences a recession is excess inventory build up in some key segment or many segments of the economy.[/quote]
    [i]
    post hoc ergo propter hoc?[/i]

    there may be a build up of inventory but that doesn’t mean that is the cause of a recession

    what could cause a recession next year:

    1. The US housing market is still slow
    2. China may have its own real estate bubble
    3. Financial contagion from Greek crisis spreading to Europe and US banking system–the markets have now discounted a Greek default (in 2-5 years) the question is will it be orderly or disorderly
    4. End of Obama stimulus and further cutbacks at State and local level (see other article in Vanguard)

    Not saying it will happen but it might

  5. Mr.Toad

    “The majority already rules the budget… but still refuses to take responsibility for it…”

    This is the most disingenuous statement you could make because of the 2/3 rule for raising taxes. What we have is the tyranny of the minority. No taxation with little representation. The way it is supposed to work is the majority decides the budget and how to raise the revenue. The executive has a veto. It is amazing that you who decry the loss of services to the elderly fail to make the connection between the blocking of any tax increases and the reduction of services. If we had majority rule on taxes and the budget they could fix the state’s problems, then if people didn’t like it they could vote them out. Instead what we have is the Republicans claiming victory while the state crumbles its disgusting.

  6. E Roberts Musser

    To Mr. Toad: If we left the budget and taxes up to the current majority legislators, they would tax and spend this state right into the ground. They pretty much already have just on the budget alone… you cannot help seniors if there are no employed to provide services, now can you?

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