California’s fiscal follies

The atmosphere in the Capitol was thick with anxiety, even dread, as the clock ticked toward midnight June 30, 1969. At the stroke of 12, California would enter a new fiscal year for the first time without a state budget.

No one knew what would happen. Without a budget, the state had no authority to spend money. Would prison guards walk off the job, leaving the convicts to run amok? Would Highway Patrol officers park their cruisers and chaos take over the highways? Would hospitals turn away Medi-Cal patients?

In fact, nothing really happened. Or nothing that couldn’t be quickly fixed with an infusion of cash as soon as the new budget was passed, which it was on July 3 that year.

That was the good news. The bad news is that governors and lawmakers since then have realized that failure to pass a budget by the state’s constitutional deadline would not bring about Armageddon. It has been more typical to miss the June 30 deadline than to make it.

Today, the state is a month into the new fiscal year without the constitutional authority to pay its employees, fund programs or otherwise spend money. The Assembly passed a budget July 20 and went on vacation. The Senate remained deadlocked late Wednesday. Alas, there is no real sense of urgency -- or shame -- about all this.

There should be. Adopting the budget bill is the single most important annual responsibility of the governor and Legislature. In crafting a budget, state officials chart the course of government for the coming year. This is where the state sets its priorities.

This is how the process now works: State officials come before the Assembly and Senate budget subcommittees to argue their cases for more money for their programs. The lawmakers balance those requests against others and within the context of projected revenue from taxes and other sources.

In the really good old days, the Legislature would decide how much a program would cost and then raise the money for it, often through tax increases. Today, no one dares even mention a tax increase.

The single major reason for so many budget deadlocks? California is one of only three states that require any spending bill, including the budget, to pass with a two-thirds majority vote. Even Congress needs only a simple majority to pass appropriations bills or raise taxes. Because no party has controlled both houses by two-thirds in modern times, this allows the minority party to block passage of the budget until it “negotiates,” or blackmails, legislative leaders into giving it what it wants.

This year, Assembly Republicans demanded about $500 million in tax breaks for business, including research and development tax credits, even though such credits in the past produced little or no benefit. It’s ironic that conservative Republicans are demanding a “balanced” budget while they are increasing spending by giving away $500 million in tax breaks.

Ideology is playing an increasing role in the budget process. A few years back, for example, the Republican minority leader acknowledged that as many as 15 to 20 of his GOP colleagues would never vote for any budget that contained funds for abortions for poor women. Those members automatically abdicated their basic responsibility to pass a budget for all of California. That is not serving the public good.

For many years, governors and Democratic leaders would be able to “buy off” enough Republican votes to gain budget passage by promising to include spending for special projects in their districts -- in other words, pure pork.

But in recent years, it has been harder for governors to persuade minority Republicans to break ranks on the budget. Those “moderates” who did got punished in their party primaries. So far in the Senate this year, not a single Republican has been swayed by Gov. Arnold Schwarzenegger’s arm-twisting.

Democrats certainly would be working the same sort of extortion if they were in the minority.

Also gumming up the budget process: an archaic tax system based heavily on sales taxes, which doesn’t provide enough revenue; term limits, which discourage long-range thinking or planning; and a redistricting system that favors polarized politicians and leads to deadlock. It was the moderates in both parties in past decades that brokered sound budget decisions -- on time.

There are all sorts of excuses for the budget stalemate. But the flow of money is beginning to dry up, and people are beginning to be directly affected. The sticking point is, in fact, only a tiny portion of the $145-billion spending plan. That gap could be closed within an hour with a little political will, face-saving and leadership in Sacramento. Rather, we have political ego games.