Gov. Jerry Brown released a balanced state budget Monday that cuts $12.5 billion in spending, raises billions in taxes, includes an 8 to 10 percent cut in pay for most state employees, and proposes a restructuring of government that purports to “return the power to localities.”
During his gubernatorial campaign Mr. Brown promised straight talk and no smoke and mirrors, reiterating those promises several times in recent weeks.
He also spoke of the need for the state to make excruciating choices. By most accounts, the budget he proposed Monday has delivered just that.
“It is an adult budget. … There are no games, no smoke and mirrors, which is what he promised, and it is very painful,” says Barbara O’Connor, director of the Institute for Study of Politics and Media at California State University, Sacramento.
There is no shifting of funds with the prospect of future payback when the economy recovers, she says, and no borrowing, methods which were used in recent budgets by Arnold Schwarzenegger’s administration to at least get the state to appear solvent on paper.
'Tough budget for tough times'
Governor Brown called the spending plan “a tough budget for tough times” that will close the state’s structural deficit and provide a “strong and stable foundation” to meet future needs.
“Without decisive action, the state’s severe budget problems will persist, threatening economic recovery, job growth, public education and the quality of life in California,” he said. “The adoption of this budget will position the state to lead the country as it slowly recovers from the Great Recession.”
To eliminate a budget shortfall estimated at $25.4 billion, Brown’s budget proposes $12.5 billion in spending cuts, $12 billion in increased tax revenues, and $1.9 billion in unspecified “other solutions” to close the gap and provide for a $1 billion reserve.
“Everyday Californians should understand that there is something here for everyone to hate, little for anyone to like … a tough budget for a tough economy,” says Jessica Levinson, political reform director for the Center for Governmental Studies in Los Angeles. “Democrats will scream at the top of their lungs about the cuts in this and Republicans will abhor the tax increases.”
In order for Brown’s budget to be adopted, California’s Legislature will have to push through changes to certain current laws by March, while other ballot measures will have to be approved by voters in a special vote in June.
'Realignment' will a tough sell
According to analysts, a major challenge to Brown’s ability to sell his plan to voters and local governments is the portion of the plan known as “realignment,” which shifts responsibility for the administration and funding of some state programs to local government.
“Renewed talk of realignment makes those of us in local government very nervous,” write Los Angeles Board of Supervisors Zev Yaroslavsky and Gloria Molina in a dual-bylined piece in Monday’s Los Angeles Times. “While realignment sounds great in theory, the devil is in the details.”
The piece recounted a scheme approved in 1991 by then-Gov. Pete Wilson and the state Legislature, which shifted $1.7 billion in state program costs to the counties. State appropriations for local governments were replaced in part with funding from vehicle license fees. The net result seemed to benefit local governments at first, but over time, as subsequent legislatures reduced the license fee rate, counties found themselves in fiscal trouble.
“Brown will need to sell voters on whether or not to shift power to the counties, and that’s a big ‘if,’ ” says Ms. O’Connor. “They have real, legitimate concerns and have been burned in the past.”
Steve Levy, director and senior economist at the Center for Continuing Study of the California Economy, says that Brown has done exactly what he needed to do by facing directly what previous governors have refused to.
At least on paper, the new budget is “sensitive and balanced and honest in the sense that the math works,” Mr. Levy says, emphasizing the he is an economist, not a politician. “I’m impressed with the very direct way he has handled this without assessing blame or pointing fingers but literally dealing with what needs to be done. These are going to be painful cuts, but that’s what comes with honesty.”
Others worry that Brown’s proposals will severely injure California in the long run.
“California is going to be put at a competitive disadvantage relative to other states if it adopts what Brown is proposing, which amounts to the largest tax increase in American history,” says Jon Coupal, spokesman for the Howard Jarvis Taxpayers Association. “California is struggling to come out of the recession, but the imposition of these taxes, coupled with California’s hostile regulatory climate, does not bode well for the state’s future.”
As he promised voters when he said there will be no tax increases without voter approval, the revenue component of Brown’s budget proposal will be voted on in June. Voters will be asked to maintain current personal income and sales taxes that were set to expire at current levels and approve the Vehicle License Fee rate for five years.
Some analysts say that the pain of instituting budget cuts may give Brown’s idea leverage with voters, because implicit in their disapproval of the tax measures would simply be a return to the prospect of more cuts.