What a California ‘budget gimmick’ is and isn’t

By all accounts, the era of California state budget gimmicks — fiscal maneuvers criticized as avoiding the kind of choices everyday taxpayers have to make in their own households — ended on June 16, 2011.

That was the day that then-Gov. Jerry Brown vetoed a spending plan designed to erase a $10-billion deficit because he didn’t think it passed the smell test.

“For a decade, the can has been kicked down the road and debt has piled up,” Brown said in a video he posted online that night. “California is facing a fiscal crisis. And very strong medicine must be taken.”

But with the state now facing an economic crisis unlike any other, it seems fair to ask: Are all budget gimmicks inherently bad? Aren’t some of them better than the painful alternatives?

We’ll get a first look at where Gov. Gavin Newsom comes down on this on Thursday.

A $54.3-billion budget deficit and counting

Newsom didn’t wait for the official presentation of his revised budget to deliver the bad news, instead making public last week the calculations of his fiscal advisors: a $54.3-billion deficit over the next 13 months. The governor’s budget staff believes most of that will come from a sharp decline in tax revenues, made worse by a significant increase in demand for social safety net programs and in costs to combat the COVID-19 pandemic.

“The United States, every state in this nation, will be struggling with unprecedented shortfalls that happened in such a very short period of time. And California is no different,” Newsom said on Thursday.

Cut spending, raise taxes and ... then what?

It’s probably unfair to brand anything that’s not a traditional cut or tax increase as a “gimmick” when it comes to crafting a state budget. After all, a fair amount of flexibility is needed when relying on economic forecasts that stretch out a year or longer.

But some creative ideas went further than anyone could have imagined. In 2003, then-Gov. Gray Davis proposed selling bonds to pay the state’s contribution to the pensions of government employees; the idea fizzled. Two classic gimmicks were enacted in 2009 by Democrats and then-Gov. Arnold Schwarzenegger: a revised timetable for those paying estimated personal income taxes and a one-day delay in paying state employees. Both maneuvers simply shifted around the accounting of cash from one fiscal year to the next, distorting the counting of tax revenues.

Other creative solutions were less subtle. Schwarzenegger convinced voters in 2004 to borrow up to $15 billion in deficit bonds. It took 11 years and $4.8 billion in interest payments for the state to pay off the debt.

Brown himself employed a creative budgeting tool, albeit more structurally sound: He convinced lawmakers to pass a budget in 2012 that assumed voters would pass a big temporary tax increase, Proposition 30. If the ballot measure failed, some $6 billion in education cuts would automatically be triggered. Proposition 30 passed, and the cuts were avoided.

Which brings us to the current deficit projection. Newsom and legislative leaders have made it clear they will depend, in part, on a big unknown: more help from the federal government. President Trump and congressional leaders have already sent California $15.3 billion in short-term aid, with a significant portion going directly to the state’s most populous communities. Help, too, is expected in reimbursements from the Federal Emergency Management Agency to cover a number of coronavirus response costs.

Some budget purists will insist that any estimate of federal help written into the spending plan state lawmakers will enact by the June 15 constitutional deadline will be a bit gimmicky, in that it may be far from a certain thing — regardless of the current insistence by House Speaker Nancy Pelosi (D-San Francisco) and others that more help is coming. But California has gone in a matter of weeks from expecting a cash surplus to grappling with a shortfall more than three times as large as its cash reserves. The size of the cuts or taxes needed to resolve that, absent some expectations of TBD solutions, is all but impossible to achieve.

(An epilogue: Last year, Newsom officially ended the one-day-payroll gimmick for state workers. And when I asked him about it that January, he seemed to know that desperate times call for desperate measures. “If I use it in six years, in a recession, forgive me,” he said with a smile.)

National lightning round

— One of Vice President Mike Pence‘s closest aides tested positive for the coronavirus Friday, making her the second White House staffer known to have become infected in a week and raising questions about the president and his family’s safety.

— Newsom endorsed Joe Biden for president on Friday, saying he was “enlivened” by his candidacy as he headlined a virtual fundraiser for the presumptive Democratic nominee.

— A digital ad crafted by a coalition of anti-Trump Republicans gets under the president’s skin and increases the group’s visibility.

— The decision to shelve detailed advice from the nation’s top disease control experts for reopening communities during the coronavirus pandemic came from the highest levels of the White House.

— In a case originating in Torrance, the U.S. Supreme Court will be asked on Monday whether Catholic school teachers are like “ministers” of the faith and thus not protected by anti-discrimination laws.

Essential California politics

— A special congressional election on Tuesday in Southern California offers Republicans a chance to flip the seat back into the GOP column. But for how long?

— Citing public health concerns over millions of Californians showing up at voting locations this fall, Newsom on Friday ordered ballots to be mailed to the state’s 20.6 million voters for the November election while insisting there will also need to be new rules for anyone who participates in person.

— The first California governor to fully embrace social media while in office and unleash it as an extension of the bully pulpit, Newsom has capitalized on viral moments, enlisting celebrities as his surrogates to persuade the state’s residents to abide by his stay-at-home order and touting his frequent television appearances to discuss the pandemic on Facebook and Twitter.

— Newsom’s administration sent a clear warning this week to rural counties defying the state stay-at-home order to fight the spread of the novel coronavirus: Keep it up, and you’ll lose disaster funding.

— Six weeks after closing field offices to the public because of the coronavirus, the California Department of Motor Vehicles reopened 25 locations to people with appointments on Friday.