A salve for California’s financial woes -- if voters will buy it

The spending lobby, the tax haters and a ticked electorate all fouled up in 2009. But Gov.-elect Jerry Brown may give everyone a chance to redeem themselves next year.

The spenders and the anti-taxers acted out of knee-jerk ideology. The voters were confused and distrustful of Sacramento. For many, it was a “cut off your nose to spite your face” moment.

Remember: Gov. Arnold Schwarzenegger and the Legislature compromised on a budget-balancing package that included a four-year tax increase. Part of the package required voter approval, most notably a constitutional amendment, Proposition 1A, that would have enacted state spending controls along with a meaningful “rainy day” reserve.

But Republican lawmakers inserted a poison pill into the tax hike. If Prop. 1A didn’t pass, taxes would be raised for only two years, not four, shorting the state $16 billion.

Bingo. The spending lobby — public employee unions, welfare activists — feared the spending controls. Fiscal conservatives despised the tax increase. The two sides formed an abnormal alliance.

For many voters, the special election was a referendum on the unpopular governor and Legislature. Consequently, Prop. 1A was overwhelmingly rejected.

That’s history, but it’s not complete. The story continues.

Because of that election, roughly $9 billion in income, sales and car tax revenue will disappear in the fiscal year starting July 1. Meanwhile, there’s a projected $28-billion budget deficit for the next 18 months.

Schwarzenegger and the Legislature already have pared general fund spending by 16% in the last three years. And Brown is promising even more painful whacks. “Fasten your seat belt,” he cautions. “The day of reckoning is upon us.”

But roughly 70% of the general fund isn’t spent by the state at all. It flows out to schools and local governments. That’s largely because of a state “bailout” that began when local entities lost much of their property tax revenue after Prop. 13 passed nearly 33 years ago.

So Brown — if he can get some Republican support in the Legislature — is expected to ask voters in June to reconsider those expiring tax hikes and extend them for two years or more.

Of course, voters would need to be offered more than a tax increase, er, extension. That’s why there’s a move afoot in the Legislature, primarily the Senate, to gradually redirect the increased tax revenue to local governments and schools. Keep the tax money at the local level. Make that part of a gradual “realignment” — government-speak — of state and local responsibilities.

Senate leader Darrell Steinberg (D-Sacramento) has been pushing to transfer more power, responsibilities and tax resources to local governments and schools. And Brown talked about it vaguely while running for governor.

What’s new is the concept of extending the state tax hikes and using the revenue to help local governments finance increased responsibilities.

The theory is that voters will balk at sending Sacramento more money, but may be willing to pay higher taxes if the revenue is controlled locally.

And Sacramento could finally unload its Prop. 13 bailout burden after a third of a century.

“I think that’s a good idea,” says Democratic state Treasurer Bill Lockyer, who as a legislator in 1978 voted for the bailout and later realized it was a mistake. “Voters have more confidence in local government. And local government is more accountable to voters.”

Steinberg says “we’re going to have to make deep spending cuts. But there also has to be a revenue solution. And it has to be tied to fundamental restructuring of which governments provide and pay for what.”

Assembly Speaker John Pérez (D- Los Angeles) isn’t as passionate about the restructuring as Steinberg, but says “I’m committed to doing whatever we need to do to bring a rational approach to budgeting. And with the new governor, there’s a new opportunity to take a holistic approach.”

Unfortunately, Brown surrendered the taxing power of the governor and Legislature by promising not to raise taxes unless voters approved. The Democrat apparently thought that was the only way he could be elected. It was a clever political move, but will make governing harder.

He’ll need some Republican legislative support to place a tax extension on the ballot. For starters, he and Democrats should also offer up a revised rainy-day reserve proposal currently slated for the 2012 ballot.

Brown also might need to offer Republicans some business regulatory relief that environmentalists would oppose and flexible work schedules abhorred by labor.

And it must be done by March in order to hold a special election in June.

If all the Capitol politicians can come up with is a garden-variety tax extension and loud threats of a decimated government, they’ll be in serious trouble. Voters have shown that they resent special elections anyway.

“If there’s even so much as a whiff of a tax increase it will be defeated,” predicts Republican consultant Wayne Johnson. “People are not ready for that, until they see some change in the culture of Sacramento. And I don’t think that can happen in that short of time.”

But, Johnson adds: “If they take tax money from the state and send it to the locals, that’s different.”

Democratic consultant David Townsend, who has run many local tax campaigns, believes “there’s a good chance voters would extend temporary taxes they’re already paying if they felt the governor and Legislature were making serious cuts. But if it’s about new taxes, no chance.”

Mostly, it will depend on whether Brown is a better salesman than Schwarzenegger.

george.skelton@latimes.com