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For a new governor: a fresh budget or leftover bickering?

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As August dissolves into September and Labor Day approaches, California’s extended budget season traditionally gives way to election season. The many frayed and loose ends left after months of budget bickering get stitched into a measure that is tacked on to a ballot, and lawmakers and interest groups turn their attention from the budget to the first Tuesday following the first Monday in November.

The problem is that this year, even budget overtime is ending without a budget, putting California in real danger of merging several discrete dysfunctions into one. No longer content merely to adopt inconsistent and unenforceable laws at the ballot box or to fail to adopt a sustainable budget, we are poised to begin turning over to voters the job of adopting or rewriting the state’s annual spending plan.

If the road to resolution of the state’s problems wends through more dysfunction, so be it. But it’s now too late to send voters a new measure intended to fix, once and for all, the state’s perpetual mess. Gov. Arnold Schwarzenegger was right to try; he was right to focus on budget reform, he was right to call for tax reform, he has been right to press for restructuring of the state’s public pension obligations. But when push comes to shove, the state needs to enter the postelection period with a budget adopted, with creditors and employees paid, with new state leadership able to focus on the future rather than this year’s leftovers, and with taxpayers knowing, roughly, what their obligations will be for the coming year.

The opportunity for a more global solution to California’s problems has come and gone. Voters will decide on Nov. 2 whether and how to change some of the budget rules and will select a new governor to implement them. Meanwhile, for Schwarzenegger and the Legislature, it’s time to make a budget deal.

A short-term deal doesn’t have to interfere with the state’s long-term health. Democrats this summer unveiled a plan to lower the state sales tax while increasing income and vehicle license taxes. They claimed their idea would pump nearly $2 billion of revenue into the state while actually lowering taxes for a majority of Californians who pay federal income taxes by taking advantage of available federal deductions. It was resourceful and creative without descending into the realm of gimmickry; or rather, it would have been, had the numbers worked out as Democratic leaders claimed they would. An impartial analysis showed instead that the plan would have resulted in higher taxes for a large swath of middle-income Californians.

Ultimately, in future years, tax increases for some must be on the table as part of the state’s restructuring, but only as part of a strategic rethinking of who pays, and how much. The Democrats’ first tax revamp plan was not only politically infeasible, it was unfair. They are trying again, and they should. At the core of the attempt to rejigger taxes is the realization that Californians already pay proportionately more to the federal government than they receive in return. The federal government should not be held responsible for a direct state bailout — nor should the goal be perfect parity between taxes paid and services rendered — but the state would be well within its rights to keep a larger share of its tax dollars at home.

This needn’t be a matter of partisan disagreement. Tax restructuring, although a Democratic plan, falls directly in line with Schwarzenegger’s stated goal of smoothing out the revenue peaks and valleys that exacerbate Sacramento’s demonstrated failure to plan for tomorrow. The governor surely recognizes that the plan developed last year by Gerald Parsky and the Commission on the 21st Century Economy, with its business net receipts tax, is simply a conceptual bridge too far and will be neither accepted nor adopted whole. The state must try out more modest tax plans, and the governor and Republican legislators should not reject them out of hand merely because they move beyond restructuring and actually help the state, by boosting revenue.

The revenue is needed. Democrats have assisted over the last several years in unraveling the state’s human services fabric, not because they wanted to but because, in the end, they saw they had little choice if they were to finally balance the budget. Senate President Pro Tem Darrell Steinberg of Sacramento and Assembly Speaker John A. Pérez of Los Angeles have said they can cut no more. They are drawing a line in the sand. They are right to do so, for two reasons.

First, they recognize their responsibility to the elderly, the young, the sick and the poor. California has made a decades-long commitment to help those in need, and it would be perverse, to say the least, to scrap those programs just when they are most needed. Schwarzenegger still proposes to save money by eliminating the state’s most basic welfare programs. Democrats are right to tell him no.

Second, even absent any humanitarian motivation in protecting human services, Democrats see that eliminating these programs would be an exercise in poor fiscal management and regressive public policy. Those programs on the chopping block are not redistribution-oriented cash grants; they are smart welfare-to-work programs, developed in the Clinton and Gingrich era, geared toward educating and training people to earn a living and the means to keep themselves, and their children, from falling back into poverty, the public assistance rolls and the streets. Eliminating CalWorks pulls millions of dollars of federal money out of the state. Eliminating daycare for low-income families means keeping adults on welfare at home instead of at work or in training — and thus keeping them and their families in the kind of poverty cycle that California affirmatively sought to break.

It is tempting for all interests to use the overdue budget and the looming election to push through structural change. Indeed, such change is needed, and Schwarzenegger has wisely used the opportunity to renegotiate public employee pension contributions. But the state must begin to back out of its mess the same way it got into it: one step at a time. The step needed now, although perhaps less grandiose than the governor would like, is simple — a completed budget.

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