Pay to Play
California’s got a $26 billion budget deal.
Thursday, July 23, 2009
California finally has a budget deal. After weeks of heated negotiations – and with the state’s credit rating nearing junk status and its coffers relying on IOUs instead of cash – Gov. Arnold Schwarzenegger and legislative leaders agreed on a plan to balance the $26.3 billion deficit late Monday night.
“This is a budget that will have no tax increases… [and] around $15 billion in cuts,” Schwarzenegger told reporters in front of his office July 21.
At press time the plan had not been formally released, but according to lawmakers it consists of $15.6 billion in cuts, about $2 billion in borrowing, $3.9 billion in new revenues (including $100 million annually to allow oil drilling off of Santa Barbara, see “Updates,” this page) and about $2.7 billion in accounting tricks, like waiting until 2010 to send out some paychecks to state workers.
It also includes an $875 million reserve account and saves 88 percent of state parks, including all of those slated for closure in Monterey County.
The Legislature is expected to adopt the budget bills Thursday, July 23.
Democratic lawmakers laud the deal for avoiding wholesale cuts to California’s welfare-to-work program, health insurance for kids and in-home support services, but each of these programs still take big hits under the proposal: $528 million from CalWORKs, $1.3 billion from MediCal and $211 million to IHSS. It avoided suspending Proposition 98, which guarantees state funding for education, but it also cuts billions of dollars from public schools: $6 billion from K-14 education, which includes community colleges, and $3 billion from the UC and CSU systems. Prisons lose $1.2 billion (but Californians won’t see a mass early release of inmates). And local governments shoulder a $3 billion burden – the plan includes taking redevelopment and gas-tax money, and borrowing $2 billion in property taxes, which will be repaid starting in 2013.
“It represents a compromise. It represents a budget that does not include any new revenues,” says Central Coast Assemblyman Bill Monning, adding that the Dems, earlier proposal included a tobacco tax and oil-extraction fee, and would have closed corporate tax loopholes. “But we don’t have a two-thirds vote in either house to support new revenue. This is an all-cuts, all-borrowing solution to a $26 billion problem.
“The best elements: The budget protects safety-net programs, those life-and-death issues. The worst components include offshore drilling in Santa Barbara and borrowing from local governments.”
Still, the deal doesn’t sit well with teachers, police officers, SEIU members or local cities and counties. On Tuesday, the League of California Cities called it a “Ponzi scheme” and threatened to sue the state if the Legislature adopts the budget plan.
“This budget proposal is a reckless Ponzi scheme because it depends on unconstitutional seizure of billions in local revenues that the voters dedicated to specific purposes and questionable borrowing provisions,” said Chris McKenzie, League executive director. “We have assured state officials we will see them in court the day after a budget is signed if it contains illegal provisions.”