State Budget

Shane Goldmacher at the Sacramento Bee has this excellent item about the problems being created for the November election by the legislature and governor's ability to reach a budget deal. Such a deal would likely include a ballot measures, and the deadlines have been blown. State and county officials are worried about the ability to print and ship ballots. A politically important deadline is upon us. Next Friday, Sept. 5, is the day that international ballots go out to troops serving overseas.

Now California's legislative leaders support Gov. Schwarzenegger's call for a special election in 2009, which came after a call by your blogger for just such an election. Memo to the consultants, pollsters, mail firms, etc.  who profit from ballot measures: As you're writing out your thank-you notes, please remember there is only one "t" in Mathews.

There's nothing more fun for blockbuster democracy types than a special election. In such cases, the initiatives are the real stars. And, apparently leaping at a suggestion first offered on this blog, Gov. Schwarzenegger on Thursday put the possibility of a special election on the table, saying he might have to call one if the budget drags on.

Why? Because ballot measures changing the budget process -- and perhaps the state lottery -- likely will be part of any budget compromise. And the deadline for adding measures to the November ballot appears to have passed.

Most political consultants I know think that Schwarzenegger would be crazy to call a special election. It would remind people of the 2005 special he called (For you non-Californians out there, it turned into a debacle: all eight measures on the ballot went down to defeat, including four that Schwarzenegger championed). Measures that otherwise might garner support could have a tough time on an '09 ballot simply because they are associated with a special election.

But I think a special could be a healthy exercise. It would force the state to focus on its budget problems. And it also could provide an opportunity for the public to consider badly needed tax reform measures. If there is to be a special, Assembly Speaker Karen Bass ought to insist that any constitutional changes produced by her tax reform effort be a part of the ballot line-up.

John Matsusaka of the Initiative & Referendum Institute at USC had an excellent piece on the state's budget problems. One important point he makes: the ballot initiative is not to blame for our budget troubles. He notes that the legislature would spend about half of the budget on education without Prop 98, and that all the other initiatives ever approved lock in only about 2 percent of the state budget. Matsusaka points to spending growth -- and the power of interest groups that demand more spending -- as the root of the problem.

California is stuck. More than two months have passed since the constitutional deadline to adopt a state budget for the '08-'09 fiscal year, and there's still no budget. What's worse, potential compromises all involve adding measures to this November's ballot. And the deadline for adding such measures already has passed -- it was Saturday. It's unlikely that legislative Republicans, who as the minority party are able to hold things up because California requires a two-thirds vote for budget passage, will relent on their demand for a rainy day fund and some sort of spending limit. Such changes are constitutional and require a vote of the people. Plus, Democrats are banking on money from borrowing against lottery revenues to pay for programs. Since the lottery was enacted by ballot initiative, these kinds of changes to the lottery require another vote of the people.

So what's the way out? Here's a fearless prediction: California's legislature will pass and the governor will sign a budget sometime in the next month. And that budget likely will include ballot measures on spending and the lottery as part of the compromise. But those measures can't appear on this November's ballot. Time has run out. Instead, they'll appear on the next scheduled statewide ballot -- in June 2010. In effect, the California's '08-'09 budget fight might not end until then. 

California is one of only three states -- Arkansas and Rhode Island are the other two -- to require a two-thirds vote to pass the budget. This has been a constitutional requirement for 70 years, when Democrats forced its introduction during a brief time of Democratic power in a long run of Republican dominance. The super-majority makes it hard to pass budgets, and California's is more than two months overdue. But the bigger problem is that the super-majority requirement limits accountability. It's nearly impossible to tell who is responsible for budget problems -- the Democratic majority or the Republican minority, which has just enough votes to block a budget. Legislative majorities should have to own the budget, and accept political punishment for any problems. But such ownership and punishment is impossible in California.

As for the political prospects of a change, well, let's put it this way. These legislative Democrats want to eliminate the two-thirds requirement. Your blogger wants to become a billionaire and hang out with Halle Berry. My chances are better.

It's two months past the deadline, and still no deal on a new California budget. Midnight Saturday was the Secretary of State's deadline for the legislature and governor to add measures to the November ballot. Some measures would need to be part of a budget compromise. You'd think all sides would spend that time in the Capitol. You'd think wrong. The legislature reconvenes today for a bit of grandstanding and meaningless votes on the budget.

Since our elected leaders seem so unwilling to put in the time in Sacramento and reach a compromise, I offer a modest proposal in Sunday's LA Times: relocate the state government to Monterey.

Yep, Aug. 11 and California still hasn't passed a budget for the new fiscal year, which is 42 days old. And things could get much worse this week. California's budget negotiations are complicated, and a potential compromise could include the addition of various measures to the November ballot. Among possible measures would be a rainy day fund and some mechanism to change the lottery to clear the path for borrowing against future revenues. 

But there's a problem: time. Legal deadlines and printing deadlines for the November ballots are upon us, so time is short for adding new measures. The Secretary of State has identified this coming Saturday, Aug. 16, as the deadline for adding new measures to the ballot. There may be a little bit of give in that. (I could see the secretary of state agreeing to a short extension of a few days if legislators and the governor are close to a deal). But not much. So if there is no budget deal this week, the framework for negotiations would vanish. And California's budget stalemate could continue for many more weeks.

We should adopt it immediately. Of course, it' s far too conservative--Democrats would label his plan draconian if Schwarzenegger proposed it. Here's how the former Assembly Speaker described it in his San Francisco Chronicle column.

"George Shultz asked me how I would solve the state's budget impasse.

My answer: Just pass last year's budget again. That way you have a spending plan in place.

Then take all the extra revenue that is coming in at 3 to 5 percent over last year and put that extra money in a pot.

If any department or program needs more money than they got last year, then have them come in, apply for the money and prove they really need it.

Then start the process of real budget reform."

I have written about this topic before - policymakers lament trying to find dollars to help get more people health care, yet millions of workers reap overly generous tax benefits when their employer pays all or part of their health care coverage.  These generous tax benefits represent dollars from the federal and state budgets that could be used for other purposes. And, the problem is even worse because having so many insured employees not directly involved in how much their health care coverage costs tends to make them get too much health care at times, which drives up costs for everyone.

Here are prior posts:

• Health Care Spending versus Extending 2001/2003 Tax Cuts - Tough Issues
• Tax Reform and Health Care Reform

On 7/31/08, the Senate Finance Committee held a hearing on Health Benefits in the Tax Code: The Right Incentives.

Each of the three witnesses commented on the exclusion for employer-provided health insurance. Joint Committee on Taxation Chief of Staff Edward Kleinbard noted: