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Calif. Faces $20 Billion Deficit. Does That Sound Familiar?

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Aired 12/2/09

What's the latest news on the state budget deficit? Will Democrats put up a fight over Republican Sen. Abel Maldonado's nomination for lieutenant governor? We speak to John Myers, from "The California Report", about the top stories in Sacramento.

MAUREEN CAVANAUGH (Host): I'm Maureen Cavanaugh, and you're listening to These Days on KPBS. Well, if you thought the end of 2009 would also bring an end to the budget shortfalls in California, you were sadly mistaken. A new budget analysis finds our state again falling billions of dollars in the red. This is as we head into a big year in state politics, with the governor's seat and the U.S. Senate seat on the line. It also seems that even during all this turmoil, Governor Schwarzenegger tells the press he's found a soulmate in the form of his appointee for lieutenant governor, the man who was his one Republican vote in the Senate, Abel Maldonado. Joining us with both the serious and the slightly crazy stories from the state capitol is my guest, John Myers, Sacramento bureau chief for the California Report. John, welcome.

JOHN MYERS (Bureau Chief, California Report): Thank you. Serious and crazy. Good morning.

CAVANAUGH: Well, let – We’ll start with the serious and actually the pretty scary. The legislative analyst Mac Taylor recently released a $21 billion estimate for the state budget deficit. What are the details of that estimate? Is that for this year and next?

MYERS: It is. It’s an 18 month look at the state’s finances. And, you know, it’s interesting. I mean, clearly Californians have heard this so many times before, you’ve got to imagine there’s budget deficit fatigue when we talk about it on the news. There’s budget deficit fatigue in the state capitol as well. I mean, already in 2009 you’ll remember that we had a budget deficit debate and a solution that had to be agreed to back in February then another one in July. That was about $65 billion worth of solutions already before this new one that you just referenced. So, yes, we’re now looking at another $21 billion problem over 18 months, about four – about $6 billion of that in the current year which goes through next July, about $14 billion in the year beginning next July first. That’s a big problem and you know what’s interesting I think, too, that really shows what’s been going on and the difficulty of finding a real solution is that the legislative analyst says that if you look at that $6 billion problem that we have in the current year, in other words over about the next 8 months, a good $3 billion, a good half of that, is solutions that really never came to pass that you wonder whether or not were gimmicks, including a cut in prison funding that the governor’s administration has never found a way to cut that money, a cut in MediCal funding that we thought we were going to get more money from the feds that we didn’t get. A highly debatable plan as to whether it was actually ever going to happen, to sell off portion of the state’s Workers Compensation Insurance Fund. That plan is now all but officially dead because, frankly, it probably can’t happen. Those kinds of budget gimmicks written into the budget really do, I think, not only push the problem into the future but do again reflect this ongoing inability to solve this revenue expenditure problem here in Sacramento.

CAVANAUGH: Well, since $3 billion of the current year’s budget deficit is made up of things that couldn’t be done by the legislature when they were trying to cut the deficit last time, what are – Do they have some ideas that – now for reducing this current $ 6.3 billion debt?

MYERS: We’re not hearing a lot of them yet. Part of that is because the legislature is technically in a recess mode until after the holidays, until January, so you’re not seeing the lawmakers up here debating this yet. We also are awaiting the governor’s budget proposal, which we get every January and so I think that’s kind of the typical starting gun for a lot of these discussions. But, you know, what we have heard so far, in terms of just general terms, is we’ve heard the Democratic leadership in the legislature say we have cut everything we can cut. And, again, you hear Republicans say we’re not going to tax, so that becomes the familiar back and forth on that issue. But on the issue of cuts, I think it’s worth pointing out to people that it will be more difficult – it is true that it will be much more difficult than ever before to solve this problem completely through cuts, and here’s why. A good chunk of state spending is attached to federal stimulus dollars this year. We’re getting a awful lot of money from the federal government, billions of dollars in education, in healthcare for the poor, and – actually, in education, I should say, both K through 12 and higher education. Those dollars from the feds only come to us if we maintain a bare minimum level of spending that we’re already at in those programs. If you take all of the education components and all of those healthcare components, you’re talking about a little more than half of the entire state general fund, and so as you can see, you can’t really cut in those programs unless you want to forfeit billions of dollars in federal stimulus funding. So it’s a very difficult problem this year, unlike years past in that sense.

CAVANAUGH: So the options for cutting get smaller and smaller. What about that word that nobody likes to use: taxes? What about the idea of raising taxes? Anybody talking about that?

MYERS: Only the most liberal. A lot of folks saying, you know, we don’t want to do that. As I said, legislative Republicans say no way and, of course, you need their votes to get a tax increase. I mean, I think really that’s going to be key in this, is to watch the governor, and the governor continues to insist that the only tax increases he supported were last year, we’re not going to do that again. But it’s going to be very interesting to watch where the governor is on the issue of taxes because if he concludes that, in fact, you cannot solve this through cuts alone, which currently he hasn’t said that, so I want to be careful to point that out…

CAVANAUGH: Umm-hmm.

MYERS: …but if he does point that – if he does conclude that at some point then what becomes – what pressure becomes (sic) on legislative Republicans to perhaps go along with something? How does he get the votes? And, again, you know, we did have a very large tax increase in the budget back in February and those taxes have been there, a sales tax increase, an increase in the car tax. Those are still on the books. They’re slated to be there for about another year and a half, two years. But, yeah, we’re going to have a tax debate again. I think that’s safe to say.

CAVANAUGH: So as everybody’s wringing their hands over this current debt that we find ourselves in, is anyone talking about long term fiscal strategies for perhaps preventing this cycle of debt that California seems to get into?

MYERS: There are people talking about it but I think the reality is that the legislature doesn’t have much of an ability to do long term thinking. You know, and I think that’s an ongoing frustrating issue for a lot of Californians. You know, why doesn’t the legislature look long term? You know, some of the reasons are, I think, are safe to say ones that have been talked about before. We do live in a term limited legislature. There is no – The long term vision is not there when your job only lasts six years or eight years. But beyond that, too, the problems have been so big that it’s been difficult to look down the road because you’ve got this immediate bleeding of the state budget right in front of you. And I think also, too, you know, and this is one that we’ve talked about before and it – and you really will hear a lot about government reform in 2010, I believe. I mean, it’s going to be the big buzz term of the year, of reforming state government. But, you know, the fundamental question we’ve talked about before is Californians have a bit of a problem reconciling the spending they want with the taxes they want. And, you know, until, I think, you know, Californians themselves decide what they’re willing to pay for, I don’t think their elective representatives here in Sacramento are going to do a much better job.

CAVANAUGH: Well, let’s move on to an interesting story, one that you can get perhaps your mind around a little bit better than the budget woes, and that is the governor recently nominated State Senator Abel Maldonado to become the next lieutenant governor. First of all, tell us why we need a new lieutenant governor, John.

MYERS: Well, I think some people would wonder why we need a lieutenant governor at all but that’s probably a slightly different angle on this. The Lieutenant Governor John Garamendi, who was last elected in 2006, Democrat from up here just outside of Sacramento, was elected to Congress a few weeks ago in a special election to fill a seat in the Bay area region. So now Congressman Garamendi is gone; the office of lieutenant governor is vacant, and that, according to state constitution allows Governor Schwarzenegger to appoint someone to fill the remainder of the term, which is only about a year because we know we have an election next year. So he appointed Abel Maldonado, a moderate – somewhat moderate Republican from the central coast, from Santa Barbara County. And the question now is does Maldonado get the job? Because the real power in the whole process lies in the hands of the legislature and that is a majority Democratic body. So Democrats in the legislature now get to decide whether to accept the nomination or reject the nomination. They have 90 days to do that. That takes them to about late February. And so it’s going to be very interesting to figure out, you know, where the Democratic majority in the legislature lies in giving a Republican the number two job in the state.

CAVANAUGH: One of the headlines coming out of this nomination was that the governor referred to Maldonado as his soulmate during the press conference announcing his selection for his lieutenant governor. Did anyone realize the governor had such a high regard for Senator Maldonado before then?

MYERS: Well, you know, I don’t know. I mean, you know, the governor – We know that Arnold Schwarzenegger loves to use these very large, grandiose – describe things in the biggest possible way he can. And so I guess soulmate was his jump to explain the friendship level. But, you know, Arnold Schwarzenegger and Able Maldonado have not always been the best of friends. Maldonado who, again, is a Republican legislator, has sought a statewide office before. He wanted to be state controller in 2006. He ran in a Republican primary and before that primary he had carried a number of pieces of legislation that were key to the governor, a minimum wage increase, for example, is one of them. And when it came time for the primary to roll around, the governor did not endorse Maldonado, did not help him get the Republican nomination. Maldonado was unhappy and lashed out at the governor in the LA Times saying that, you know, Arnold Schwarzenegger only thinks about himself, you know, very hurt feelings there. This was back in late 2006. Well, fast forward to now, all of a sudden they are soulmates here. But the question is what does that really mean? I mean, they don’t have exactly the same political philosophy. A greatest example is Maldonado, as a state Senator, voted against the global warming law, AB-32, that the governor continues to tout and will be talking about when he travels to Copenhagen soon for the World Climate Summit. So it remains to be seen what a soulmate is in the eyes of Arnold Schwarzenegger but clearly this is a somewhat more moderate Republican who the governor believes does reach across the aisle. Maldonado did vote for the budget, did vote for the tax increase this year, and so the governor believes this is the kind of Republican he wants to support. And I should point out very quickly that Maldonado, by being a Latino, is a very important component, that is as well for the Republican Party which has had a very hard time reaching out to the Latino community in California.

CAVANAUGH: Well, let’s move on to some of the races ahead next year. Of course the big governor’s race. Is this shaping up to be a competitive race, John?

MYERS: I think it is. I think it’s going to be a fascinating one to watch. I mean, this is really an open seat race and that hasn’t happened for a while. The recall of 2003, you know, was the last real flash we had of someone who wasn’t in the office. But this is going to be a competitive race. Jerry Brown is the only person apparently on the Democratic side at this point, and he hasn’t even officially said he’s running for the job again to give himself a possible third term. The Republicans have a contested nomination. Meg Whitman, a former CEO of eBay, Steve Poizner, the incumbent state insurance commissioner and Tom Campbell, former lawmaker, former budget director for Governor Schwarzenegger. Very fascinating race there. Whitman and Poizner are both fabulously wealthy themselves, could spend a lot of money in this race. Jerry Brown, on the other side, an icon in California politics. It’s going to be really fascinating to watch.

CAVANAUGH: And is there – What issues do you think this governor’s race will boil down to?

MYERS: Economy…

CAVANAUGH/MYERS: …economy…

MYERS: …economy…

CAVANAUGH: Yeah.

MYERS: …budget, economy. I mean, it’s – I really do think that Californians are going to want to know what this person will do to solve our problems. Our unemployment rate is very high. And also this fundamental systemic budget problem, what will this governor do? I can’t see many other issues being as big as those two.

CAVANAUGH: And another potentially competitive contest next year is for U.S. Senator. We have former Hewlett Packard CEO, Republican Carly Fiorina challenging Barbara Boxer for her Senate seat. Why is Fiorina shaping up to be such a strong competitor for this seat?

MYERS: Well, I have to be careful to say that Fiorina doesn’t have the Republican nomination yet.

CAVANAUGH: Yes, well that’s very true.

MYERS: I mean, she’s going to be contested…

CAVANAUGH: Yes.

MYERS: …against Assemblyman Chuck Devore from Orange County, who is a very conservative conservative, and so that may play to that party base. Fiorina is an unknown commodity in California Republican politics so we’ll have to see whether she can get that nomination. Should she get it, it would be a very fascinating matchup against these two women. Barbara Boxer, Carly Fiorina, very different in philosophical positions on the issues and on government and on where America should be going. That could be a big race, and Boxer knows it, too. Boxer has been raising money. She knows that she could be vulnerable sometimes. And Fiorina, you know, again has a bit of a mixed record at Hewlett Packard. Let’s not forget she did not leave on her own terms.

CAVANAUGH: Right.

MYERS: She was ousted from that job, so business experience is her resume builder there. You know, some people will wonder, does that count?

CAVANAUGH: Sounds like you’re going to be busy next year, John.

MYERS: It is, indeed. Very busy.

CAVANAUGH: Thank you so much for speaking with us.

MYERS: Thank you. You’re welcome.

CAVANAUGH: I’ve been speaking with John Myers, Sacramento bureau chief for The California Report. If you’d like to post a comment, please go online, KPBS.org/TheseDays. Coming up, the vanishing art of science reporting. That’s next on These Days here on KPBS.

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