State goes down the budget rabbit hole

This year, there were a lot of firsts in California politics. We had the budget essentially put to the voters in May, and unprecedented public testimony at the budget conference committee. We’ve foregone the budget subcommittee process. Gov. Arnold Schwarzenegger gave what amounted to a State of the State address in June, and we got the governor’s final budget revisions weeks later than the typical May Revise. For all the talk of necessary change, it appears we’ve already gone down the proverbial rabbit hole.

Of course, the more things change, the more they stay the same. The state is still feeling cashflow pressures that have created a tight budget deadline. Negotiations are still going through the routine theatrics – complete with cut proposals that most of us know will never come to pass. And the fundamental rift remains between Democrats who still seem interested in a budget that involves both deep cuts and new revenues, and Republicans who are drawing a harder line against new state spending. Tuesday crystallized the brave new budget world that California now confronts. It began with an unprecedented June speech from Schwarzenegger to lawmakers in the Assembly chambers. The speech felt at times like a parliamentary drill, with both Speaker Karen Bass, D-Los Angeles, and Senate Leader Darrell Steinberg, D-Sacramento, briefly sketching out their budget visions before the governor made his case.

While Democrats are quibbling at the margins of the governor’s $15 billion in proposed cuts, there are signs that there may be agreement on the bulk of those cuts. Certain safety-net programs like the state’s welfare program, CalWORKS, and Healthy Families, which provides health care to about 1 million low-income children, are likely to be restored when Democrats begin making their policy recommendations in the budget conference committee later this week.

“Not all of the governor’s proposals make sense to us,” Bass said after the speech. But she added there was a good deal of agreement between the two sides on many of the proposed cuts.

Both Bass and Steinberg agreed that many of the cuts the governor proposed were necessary, and in fact likely to be ratified by lawmakers.

Steinberg said Tuesday that lawmakers may present a couple of different clusters of bills to meet the budget shortfall. And that is likely to start with deep budget cuts. “We are going to make the difficult cuts that have to be made,” he said, before adding. “And there will no doubt be a remainder” when that process is finished.

Among the first cuts likely to be made will be cuts to education programs. The administration has outlined a total of close to $6 billion in cuts to K-12 education for the 2008-09 and 2009-10 budget years.

Many, but not all, of those cuts are likely to be restored by federal stimulus dollars, according to Jennifer Kuhn, an education expert in the legislative analyst’s office.

But the budget will not be solves with cuts alone. Even after all the additional cuts proposed by Schwarzenegger throughout the month, the governor is proposing about $15 billion in spending reductions. Another $5 billion is comprised of borrowing from local governments and new fees and revenue accelerators. And the governor also maintains a large budget reserve – more than $4.5 billion that could become a target for Democrats.

In something of a role reversal, it was the Democratic leaders this week who were talking the loudest about budget reform as a vital component of this year’s fiscal problems.

Bass sent out a press release Monday touting “a joint Assembly-Senate government reform effort expected to begin in July following passage of solutions to the state’s budget deficit” And in her remarks before Schwarzenegger’s speech, she talked about a “comprehensive effort to address much of what is dysfunctional” in the state’s budget process.

Steinberg said that he is “working on a series of realignment proposals as part of the state budget” that could potentially decentralize many state government functions and turn those responsibilities over to counties. “We probably can’t flesh out every detail in the short run,” he said.

“But we can and probably have to have significant budget decisions that have to be part of a broader realignment” of government services. But there’s no doubt: Tensions have been rising in the Capitol in recent days.

At the budget conference committee Monday, Assembly Budget Chairwoman Noreen Evans, D-Santa Rosa, vented some of her frustrations at chief deputy finance director Ana Matosantos.

Noting that the governor had made three separate revisions to his May budget, Evans curtly asked Matosantos “Are we done now?”

Evans’ crossexamination of Matosantos garnered an angry reply from the administration. “We will continue to revise our budget numbers as the situation deteriorates,” Schwarzenegger spokesman Aaron McLear said. “It is our sincere hope that Assemblywoman Evans will be able to keep up.”

Evans has been clearly defensive about the possibility of the governor coming to the Legislature and imploring lawmakers to get to work. “If we keep dealing with new figures and new cuts, we’re not going to get it done,” she said. “I will not have anyone say this Legislature did not do its work on a timely basis, because we haven’t gotten the information we need from the administration.”

In recent days, the governor has introduced new budget cuts, including plans to eliminate popular state programs like CalWORKS and Healthy Families, eliminate millions in funding for state parks, and to lay off up to 5,000 state employees.

But in Monday’s conference committee hearing, Evans pointed out that the governor’s latest proposal had a budget reserve of more than $4 billion, even while proposing cuts to popular programs that would not have to be eliminated if the reserve were smaller.

McLear defended the governor’s numbers. “There’s a need to have a reserve,” he said. “The swings in revenue are so dramatic,
and we have to make sure we’re able to pay the bills.”

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