'Cutting alone really doesn't do it,' says governor

5:30 PM, May 14, 2012   |    comments
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Governor Jerry Brown offered doses of both optimism and realism in unveiling his latest state budget proposal Monday, urging legislators and voters alike to get on board -- or else.

"Cutting alone really doesn't do it," he told reporters.  "And that's why I'm linking these serious budget reductions, real increased austerity, with a plea to the voters."

That plea, of course: pass his November tax initiative.

Overall, the budget presents about $16.7 billion in solutions, enough to balance the books and provide a $1 billion reserve.

Some of the newly revised budget proposals are no doubt head scratchers to those unfamiliar with the complexity of state finances. Tops on that list: a spending increase, at least on paper, for K-14 education relative to Brown's January spending plan.

Here's why: the new budget says the gap between tax revenues this fiscal year (through June 30) and next has widened. That gap - which makes next year's revenues look even bigger than before - also triggers another $1.2 billion guaranteed to schools under the voter-approved Proposition 98 funding guarantee.

Confused? We're not done yet.

Brown's November tax increase, if approved by voters and if it pencils out, would boost Prop 98 guaranteed school funding by another $2.9 billion (the general rule of thumb is that K-14 education gets about 40 cents of every tax dollar in the state's general fund).

All of this allows the governor to essentially protect schools as long as the tax hike passes - thus providing a nice political incentive for education interest groups to help campaign for the November 6 initiative.

Of the true cuts in this May revision, the lion's share are in health and human services. That's not surprising, because unlike other parts of the budget, there aren't provisions in the state constitution to protect HHS funding levels -- whereas there are such barriers, erected by voters, in areas ranging from schools to local government.  Almost $3 billion of Brown's proposed cuts are to programs impacting the poor or disabled.

But some of those cuts continue to be resisted by legislative Democrats - and tops on the list seems to be any reduction to the welfare-to-work program CalWorks.

"We will work assertively," said Senate President pro Tem Darrell Steinberg, "to find some alternative."

The Senate leader said that he was also disappointed, but resigned, to the governor's proposal to sweep into the state budget tax dollars once earmarked for now defunct local redevelopment agencies (RDAs). Steinberg has been pushing a proposal all year that would have used those funds to both protect affordable housing programs in communities and incentivize anti-sprawl growth.  But he conceded today that those are more wishes than needs, at least on a temporary basis.

The governor's reliance on one-time fixes certainly conjures up images of budgets past, which often were crafted in a way to avoid dealing with painful, long term realities. But Brown told reporters that this time around, it's justified... because so much of the now deeper budget hole is temporary.

His budget advisers are largely treating weak income and sales tax revenues during the final few months of the 2011-12 fiscal year as an anomaly. And there's been disagreement among Capitol forecasters all year long over why revenue numbers have been so out of whack.

Brown said Monday that revenues will bounce back. Income tax revenues, his budget assumes, will grow at an average annual rate of 7.7 percent.

The political lines over this budget will start to take shape in the few days. Yes, that's days. Why? Because legislators won't get paid if they don't send a spending plan to Brown by midnight on June 15 and election year politics don't favor a protracted budget stalemate. 

Republicans are calling the budget a reflection of the optimistic assumptions made last year -- the first budget passed by a simple legislative majority under 2010's Proposition 25. Democrats, though, will have to quickly wrestle with what cuts in social services they're willing to accept. 

And Governor Brown will have to decide how much of the optimism he espoused at Monday's budget press event will carry over into the assumptions written into a new spending plan. He urged anyone with better ideas to come forward; but what's a "good" idea... and what's not... is often in the eye of the beholder.


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