It’s a gimmick-laden budget, but get the deal done

Capitol Journal

Barring a holdup by legislative extortionists or powerful interests, California’s Capitol will finally produce a state budget by sundown Friday.

The budget will rely on kludges — temporary patchworks — to circumvent the unsustainable reality of the state still not living within its means. Call it a kludget.

The Legislature and governor have been kludging for several years now — using accounting gimmicks, such as delaying payments into the next budget year, and playing with funny money by assuming revenue that is a pipe dream.

It’s terribly ugly. But that’s what the system generates these days with a two-thirds vote requirement for both budget passage and tax increases, and term limits that rob the Capitol of experienced lawmakers.


Add in political polarization compounded by past legislative gerrymandering that assured incumbents of reelection, toss in the lousiest economy since the Great Depression, and it creates a foul brew.

“I’m a realist,” says Senate leader Darrell Steinberg (D- Sacramento). “You use the tools you have to achieve the very best you can in a broken system.”

An eternal optimist, Steinberg says he’s encouraged “by just the notion of a fresh start in a new legislative session” in January.

“The glass is at least a quarter full here. Maybe it’s an eighth full.”


He’s hopeful that the next governor and Legislature will shift power and responsibility from Sacramento to local governments — something Jerry Brown is campaigning on — and reform the tax structure so it isn’t so volatile.

But the immediate task for both legislative houses is to finally pass a record-late state budget that is embodied in roughly 20 bills. On Friday, the state will have sputtered along for 99 days into the fiscal year without a spending plan.

The negotiated deal closes a $19-billion deficit — on paper anyway — and calls for total general fund spending of roughly $87 billion, a tad higher than last year.

Normally at this stage in the games-playing, renegade legislators and monied interests that influence certain lawmakers would be peddling the votes necessary to reach a two-thirds majority. You could call it bribery or extortion.

“Those days, I hope, are over,” Steinberg says.

That, of course, is way too optimistic.

Says rookie Assembly Speaker John Pérez (D- Los Angeles): “I’m looking at [the budget agreement] as a cut deal. But politics is politics.”

Hopefully, however, any would-be extortionists will look at the politics of the Legislature’s poll ratings being in the Dumpster and stop screwing around.


This deal basically should have been cut three months ago. If it had been, the three sides — Gov. Arnold Schwarzenegger, Democrats and Republicans — could have held their heads high and crowed about some achievements. With it being so late, they should be sheepishly hanging their heads and mumbling.

Here’s what each side gets out of it, besides an embarrassing tardy slip:

--Schwarzenegger: He vowed not to sign any budget unless the Legislature produced budget, pension and tax reforms. He got mild versions of the first two.

Legislators agreed to place a measure on the 2012 ballot to strengthen the state’s “rainy day” budget reserve, a softer version of Proposition 1-A that voters rejected last year. But Prop. 1-A also would have extended a tax increase.

Democrats agreed to repeal a 1999 law that greatly sweetened state pensions. Retirement pay will be rolled back to the pre-1999 level for new employees. Current employees will contribute more to their retirement.

--Democrats: They agreed to $7.5billion in program cuts but fended off the governor’s and Republicans’ efforts to slash $12.5billion, including the complete elimination of state welfare.

Perez contends Democrats saved 400,000 jobs — public and private — by resisting the GOP’s proposed program butchery.

The governor, with his line-item veto, still can whack more spending before he signs the budget Friday.


Additionally, Democrats persuaded the governor and Republicans to delay a business tax break — the net operating loss carryover — for two years. That will save $1.2billion annually.

--Republicans: They get to brag about a budget that doesn’t raise taxes. Some may contend that postponing the business tax break is, in effect, a tax hike. But I don’t. It doesn’t raise taxes any higher than they already are.

Plus, the GOP made off with some smaller tax breaks for a North Coast timber company and the cable and software industries. And penalties for underpaying corporate taxes were lightened.

Those kinds of corporate tax breaks are a big reason why business lobbyists fear losing the two-thirds vote requirement for budget passage. They sell the needed votes of friendly lawmakers to benefit their clients.

As for holding down spending, well, we’ve seen how well the two-thirds vote does that. A bipartisan citizens commission concluded in the mid-1990s: “There is no evidence that it does anything to slow the increase in state spending.

“Instead, it encourages horse trading [and] pork-barrel legislation.... Stories abound of ‘buying’ votes to reach the two-thirds.”

Proposition 25 on the November ballot would reduce the vote requirement for budget passage to a simple majority. It also would permanently strip legislators of their pay for each day a budget isn’t passed on time.

Prop. 25 would retain the two-thirds vote needed for tax hikes, despite the false claims of opponents. A state appellate court, in fact, rejected the opponents’ contentions.

But until the system can be partially reformed with a majority vote for budgets, legislative leaders will need to fend off the extortionists and resist offering bribes of pork. That should begin now.