Blame Blown Deadline on Two-Thirds Rule
Today marks the fifth straight time that California’s Legislature and governor failed to deliver a state budget by the July 1 start of a new fiscal year.
Lawmakers have missed that target in 20 of the last 29 years, stopping at least some wheels of government for as long as 67 days while haggling over various issues.
Jean Ross has long watched the process, first as a legislative staffer with the Assembly Revenue and Taxation Committee and, for the last 10 years, as executive director of the California Budget Project, a nonpartisan center in Sacramento that works to improve the economic and social well-being of low- and middle-income Californians. She agreed this week to field these questions:
Question: As much as lawmakers publicly talk about the importance of making that July 1 target, they often fail to achieve it. What is it about the state budget process that causes this?
Answer: On June 15, 62.5% of the Senate and 58.8% of the Assembly voted to support a budget. If California were almost any other state in the nation, approval by these margins would have been sufficient to pass a budget by the June 15 constitutional deadline. That’s because California is one of just three states in the country to require a two-thirds or greater margin to pass a state budget under any circumstances. The other two -- Rhode Island and Arkansas -- are substantially smaller and less diverse than California. California’s rules allow a small minority of the Legislature to block passage of the budget. More often than not, the two-thirds vote rule leads to lengthy delays in passing a spending plan.
Q: When the deadline has been missed in years past, the sky has never really seemed to fall -- or has it? Is it necessarily a bad thing when a budget isn’t produced on time, or does the deadline create positive pressure toward compromise? Are there consequences most people don’t see?
A: Bad things do happen when the state begins the budget year without a spending plan. Most notably, the state can’t pay many of its bills. Case law defines what bills can and cannot be paid in the absence of a budget, and that law changes from year to year. The state can’t, for example, pay vendors who sell goods and services to the state and can’t pay child-care centers that care for kids in state child-care programs. For small businesses and nonprofit service providers, lack of timely payment can cause real financial problems.
The real consequences of a delay, coupled with heightened media attention that accompanies a prolonged stalemate, does increase pressure on the Legislature. Lawmakers must then balance the negative attention they receive against the desire not to compromise their core values and priorities.
Q: Polls have suggested that voters are concerned about the budget deficit, which currently stands at about $6 billion. Since we know lawmakers tend to pay close attention to public sentiment, why has the deficit not yet been eliminated?
A: I’d come back to the state’s two-thirds vote rules, both for passage of a budget and for enactment of any state tax increase. California is one of only 11 states to require two-thirds of each house of the Legislature to approve any state tax increase. Public opinion research consistently shows that voters support a balanced approach to solving the state’s fiscal problems: prudent spending reductions coupled with tax increases. But a minority of the Legislature has blocked efforts to increase revenues and has held out for deeper spending cuts.
California has faced very substantial shortfalls in recent years. There is little evidence that suggests voters support either spending cuts or tax hikes of the magnitude needed to bridge the spending gap -- particularly gaps of the size we’ve had over the past several years. As a result, lawmakers have turned to one-time measures such as borrowing to soften the impact of the shortfall.
Q: When you speak to groups of people who don’t pay close attention to state government, how do you begin to explain the complexities of a $116-billion budget document? How do you make it relevant to their lives beyond saying that it’s all taxpayer money?
A: We look at the basics -- where the state spends its money and where that money comes from. Most Californians don’t know that over half of general-purpose spending goes to education, for example. Three-quarters of the state budget goes to individuals, healthcare providers and local governments (including schools) -- not to the state “bureaucracy” (and the University of California and California State University systems account for the largest fraction of the money the state spends on itself).
We take a lot of our basic services for granted -- the fact that there is a road outside of our house that takes us to work in the morning, the fact that the water that comes out of the tap in our kitchen is safe to drink, the fact that we have a legal system that protects consumers and allows commerce to thrive.
There’s a tremendous need for basic education about the budget -- a “Budget 1A” for voters. California’s finances are complex, more so than those of other states. A lot of the complexity is due to Proposition 13, which shifted a larger share of the cost of public services from local schools and governments to the state. The fact that many local services, including schools, are largely funded with state dollars makes it difficult for voters and policymakers to establish clear lines of financial and program accountability.
Q: The governor talks a lot about fighting “special interests” in Sacramento. What are the most powerful interests you see on both sides of the political spectrum? And how much do they factor in the budget process?
A: All Californians have a special interest in the budget, and all programs have stakeholders. Healthcare providers -- doctors, clinics and hospitals -- have a particular interest in the healthcare budget, as do the individuals who rely on publicly supported programs for their healthcare. A number of organizations -- ranging from PTA parents to teachers -- play an active role in debates over school funding. Organizations that represent a large number of members and those with sizable financial resources clearly have an impact on the process. Nevertheless, individual voters can and do have an impact.
While by no means perfect, California has a relatively open and vibrant budget process. Individuals and organizations that represent them can and do come to Sacramento and testify at budget hearings. There’s a tremendous amount of information on the Web -- you can listen, and sometimes watch, budget hearings on the Internet. Staff analyses of budget proposals are posted online and organizations like mine make analyses available to the public. Competing interests make it harder to pass a budget, but that’s what a democracy is all about.
Q: Recent polls indicate that voters’ opinions of the governor and the Legislature have declined. We also know that political divisions in Sacramento remain deep. What would you say is the ratio of hardworking lawmakers to those who are more focused on advancing their political interests?
A: By and large, all lawmakers are hardworking. The lack of an on-time budget doesn’t represent a lack of work, but rather unreasonable budget rules and distinctly different perspectives on the future of California and the role of public services within that future.
(BEGIN TEXT OF INFOBOX)
Governor’s budget proposal
(Revenue: Percent of total)
Personal income tax ($43.9 billion): 40.7%
Sales tax ($31.3 billion): 29%
Other ($11.7 billion): 10.8%
Corporation tax ($8.8 billion): 8.2%
Motor vehicle fees ($5.1 billion): 4.7%
Highway users tax ($3.4 billion): 3.2%
Insurance tax ($2.3 billion): 1.3%
Tobacco taxes ($1 billion): 1%
Liquor tax ($315 million): 0.3%
(General fund expenditures: Percent of total)
K-12 education ($36.1 billion): 40.8%
Health and human services ($26.8 billion): 30.3%
Higher education ($10.2 billion): 11.5%
Corrections and rehabilitation ($7.3 billion): 8.2%
Legislative, judicial and executive ($3.1 billion): 3.5%
Business, transportation and housing ($1.7 billion): 1.9%
Resources ($1.4 billion): 1.5%
General government ($1.2 billion): 1.4%
State and consumer services ($576 million): 0.7%
Labor and workforce development ($92 million): 0.1%
Environmental protection ($78 million): 0.1%
Numbers may not add up to 100% due to rounding.
Where to watch budget hearings on the Internet:
www.calchannel.com/webcast.htm; www.assembly.ca.gov/defaulttext.asp; www.senate.ca.gov/~newsen/audiotv/audiotv.htp
Other sources of budget information:
www.dof.ca.gov/ (Department of Finance summary); www.lao.ca.gov
(Legislative Analyst critiques); www.cbp.org (California Budget Project)
Source: California Department of Finance
Los Angeles Times