State Budget

Freda Poundstone, a Colorado politician and lobbyist best known as author of a constitutional amendment that limited Denver's ability to annex land, has filed a ballot initiative that would reduce state taxes on cars and income, bringing the latter down -- bit by bit -- from 4.5 to 3.5 percent. The initiative has received a less than friendly reception by state leaders who are trying to balance an out of whack budget, the Rocky Mountain News reports.

The holiday surprise in California this year was that Gov. Schwarzenegger didn't wait to the usual date -- often January 9 or 10 -- to release his budget proposal for the 2009-10 fiscal year. Instead, the proposal was released on Dec. 31. And in another departure from protocol, the governor wasn't there to do the releasing. He was at his vacation home in Idaho with his family. Finance director Mike Genest handled the chore.

The release seems to be a way to accomplish two political goals: 1) to show urgency (we're releasing the budget early) while 2) burying the news of a horrible budget proposal that includes big spending cuts, borrowing and tax increases, many of which represent a reversal from previous Schwarzenegger positions. Shaking things up is a good thing, but I'm not sure if this early budget release accomplished much. The proposal itself is unlikely to spark fast action by a dysfunctional legislature. But it's not clear if there's any force in the universe that can force consensus in the California legislature.

It's not just California. The Associated Press looks at how voter-approved initiatives are adding to the budget headaches in several cash-strapped states.

We asked Leif Wellington Haase, director of New America's California Program, and Micah Weinberg, a research fellow in the California program, to fill us in on the latest developments on health care in California, particularly the possible cuts to funding the state’s Healthy Family Program for low income kids.

This blog has documented the flurry of activity in health reform in Washington in recent weeks. Senator Max Baucus has floated major new proposal to overhaul the delivery and funding of care and Sen. Edward Kennedy is working on a related initiative. Former Senate Majority Leader Bill Frist has urged Republicans to work with Obama to make helping the uninsured an “immediate” priority.

But will immediately be soon enough?

He has called a press conference for 3 p.m. Pacific, apparently to do just that.

Both houses of the legislature passed the budget compromise, giving official sanction to a document full of billions in hidden borrowing and non-existent revenues. The document's budget reforms are also phony, an expansion of a current rainy day fund that has no real protections.  I'm told reliably that the governor's top advisors want him to veto it. He should, if only to preserve some credibility on budget issues. It appears likely that the legislature would override his veto. Any lawmaker who votes for this should worry about being struck by bolts of lightning if he or she ever uses the words "fiscally responsible" again.

If Democratic legislators were willing to surrender and adopt a largely fictional budget based on hidden borrowing and accounting gimmicks, why did they wait until mid-September to do it? Such a gimmick-based budget could have been passed weeks ago, without the pain suffered by programs and people who depend on the state in recent weeks. Putting folks through that kind of difficulty, pain and uncertainty only makes sense if you have a strategic endgame that makes material improvements to the state's budget situation. But there clearly was no coherent strategy. There was merely a surrender--as this private email turned up by the Sacramento Bee makes clear.

As details trickle out this morning, the state budget compromise seems to be the worst of all worlds. It's not clear that it has the kind of strong budget reforms that can reduce the state's boom and bust cycle on revenues. (Democrats don't like those reforms). While it closes some tax loopholes, It doesn't have the responsible tax increases that could help balance revenues and spending. (Republicans don't like taxes). While there are some cuts, It doesn't have enough cuts to bring the budget into balance -- in fact, it raises education and health care spending. So what does it have?

Details of the budget deal reached today by legislative Democrats and Republicans have not been officially released, but the leaks have begun. Republicans are saying the budget is a "no new taxes" budget. Of course, that's not the truth.

Tax rates don't increase under this budget, but that doesn't mean the budget doesn't raise taxes. Instead, this budget will rely on borrowing and gimmicks that inevitably force tax increases in the future. In fact, this unbalanced budget will add to the state's debt and debt service costs, which cuts into the amount of the budget that can be spent on actual government services. In the end, people will pay the same tax rates, but they will get less in services. That's right -- less services for the same money. That's a tax increase in disguise.

And if you want to maintain services -- and the public wants to maintain levels of services, eventually taxes will have to be raised to cover this borrowing and the service level. Bottom line: it would be more accurate to call this a "No New Taxes While The Current Republican Lawmakers Are Running For Re-Election" budget.

The office of Assembly speaker Karen Bass says there's a tentative agreement between Democratic and Republican legislative leaders. A vote on a budget is set for Monday. Details to come.

I recently mused on Facebook about which might arrive first: Christmas or a new budget agreement for California, which is already more than two months late. A conservative friend quickly responded with his hope that Christmas would come first.

You might call the Republican legislative strategy in California the Doomsday Approach. And it's not a threat. Republicans seem more than happy to usher in the closing of state government. California will run out of cash within a month. It's not at all clear that the governor could keep the state open if that happened. But for Republicans, there might be very little to lose. The party is already terribly unpopular in the state. There's little hope of any change in that. Nearly all of the Republican legislators are insulated from being kicked out of office in November by a gerrymander. And Republicans have little hope of gaining any new seats from Democrats because of the same gerrymander. Republicans already have thrown their best-known, best-liked politician, Arnold Schwarzenegger, under the bus, all but dismissing him as a Democrat. The California GOP is stuck at the bottom of the pit. So why not blow up the state? There's nowhere to go but up.