State Budget Deal Reached
Friday, July 24, 2009
California legislative leaders reached an agreement to close the state's $26.3 billion budget gap earlier this week. How will the budget deal impact city and county governments in the state? And, will the new budget deal create any long-term changes in California government?
GLORIA PENNER (Host): I’m Gloria Penner. I’m joined by the editors at the roundtable These Days in San Diego. Today, we’ll examine the pained reactions to the California budget, what’s next for those seals now that the judge has set aside his order to scare them away with barking dog sounds, and the impact of Comic-Con on San Diego’s economy and possible expansion of the downtown convention center. The editors with me today are Tony Perry, San Diego bureau chief for the Los Angeles Times. Tony, it’s good to see you again.
TONY PERRY (San Diego Bureau Chief, Los Angeles Times): And it is good to be seen again.
PENNER: By me?
PERRY: By anyone.
PENNER: Oh, okay. Tom York, editor of the San Diego Business Journal. Well, we welcome you back of course, Tom.
TOM YORK (Editor, San Diego Business Journal): Yes, always good to be here.
PENNER: Thank you. And we welcome, for her debut on Editors Roundtable, Barbara Bry, associate publisher and opinion editor of San Diego News Network. Barbara, we’re delighted you could join us.
BARBARA BRY (Associate Publisher, San Diego News Network): Thank you for inviting me, Gloria.
PENNER: You’re welcome. Now our call-in number if you care to join our conversation, and I’m sure you will on these very hot topics, is 1-888-895-5727, 895-KPBS. Well, early this morning, California’s Senate approved a package of bills that would balance the state budget by closing a $26.3 billion dollar shortfall, considered a major threat to our state government’s finances. Now the legislation must still be approved by the state Assembly before going to Governor Arnold Schwarzenegger. So, Tony, the Senate finally bit the bullet. What’s holding up the Assembly?
PERRY: All night they bit the bullet and finally either spit it out or swallowed it, depending on how you look at it. This is complex enough. This is 31 bills, take from this, give to that, pull in some more tax money, cut local government, cut social services, strike at public education, and then find some money by borrowing, quote, unquote, from public education. This, as they used to say at the Yolo County Board of Supervisors that I started covering some 900 years ago, this is – these are farmers trying to act as engineers. By exhaustion, they’re designing what kind of government the largest state in the nation’s going to have in the next 12 months.
PENNER: That’s quite dismaying to hear your description of it. However, at least the Senate has passed something. And I’d like to ask our listeners whether you are feeling somewhat uplifted by the fact that one house of our state legislature has come to a decision. What that decision is probably won’t be solidified until we hear from the Assembly. Our number is 1-888-895-5727, 895-KPBS. We’d like to hear from you. All right, two of the most contentious issues, Barbara, on this are oil drilling off the coast, which would be for a fee, of course, and borrowing from local governments. So how have those been handled so far?
BRY: Well, so far local governments have, you know, been very active going up to Sacramento to lobby the legislature. You know, Jerry Sanders was up there with the mayor of L.A. and others and it looked, early on, like they might be successful in getting the legislature to not take money from the cities but in the current version, it looks like San Diego and the other cities could lose significant sums of money for San Diego. Jerry Sanders was recently quoted as saying it could be up to $100 million, and this is at a time when our city, of course, is having to cut the budget because of the recession and the drop in sales tax and property revenues.
PENNER: Just clarify for me, would that be a permanent loss or would it be, quote, borrowing that would be…
BRY: It would be borrowing so technically the city would get the money back with interest at some later date. The oil drilling, it’s unclear whether that really is going to happen. I didn’t get to read what, you know, happened in the latest version that passed early this morning…
BRY: …by the state Senate.
PENNER: All right, let’s get back to the local issues a little bit on this, Tom. A $100 million, I mean, I’m – I don’t really remember exactly how large our general fund is in the City of San Diego but this is a big percentage of that and we’ve already had major problems cutting. I mean, where else can we possibly cut? More layoffs?
YORK: I think that’s what’s coming down the pike here, is I think if the state goes ahead and raids city coffers for $100 million – it – The sum is anywhere from $44 to $100 million, is what I was told by the mayor’s office. That’s a large chunk of change and it would have to come out of the, you know, the budget for this coming fiscal year. So I think layoffs would be in the works, more restructuring. The City already spent a year, you know, putting together a budget that required $43 million in cuts, so it’s – this is drastic action.
BRY: Gloria, you know, one thing I think the City has talked about is they may be able to borrow, if the state comes and takes the $100 million, the City may be able to go to the public markets and borrow $100 million, in a sense, because the state has to pay it back. So, you know, it may not be as terrible as we think it’s going to be if the City is able to access the public markets.
PENNER: When you say public market, you mean like selling bonds?
BRY: Selling bonds.
PENNER: And do we – Does the City of San Diego have a decent credit rating so it…
BRY: Yes, they do have a decent credit…
PENNER: …it won’t cost us an arm and a leg in interest rates to sell those – to get those bonds sold?
BRY: Yeah, we do have a decent credit rating right now. I don’t know what, you know, the impact will be of everything that’s happened in Sacramento in the last few weeks.
PERRY: And, of course, there’s talk of litigation, always there’s talk of litigation. Cities and counties from Yreka to San Ysidro are talking about litigating with the state legislature to block this. As Supervisor Ron Roberts said, hey, theft is illegal except in baseball. So I think he’s leaning towards signing on to some sort of lawsuit. On the other hand, if government by ballot measure, which is what we have in California, is bad, government by litigation probably is worse. We…
PERRY: …we’ve been through that in San Diego before where the Board of Supervisors was suing the State for years thinking we were getting shorted. I don’t remember it being very successful.
BRY: Well, yeah, and the employee unions in the state are also talking about litigation because of the furlough days.
YORK: This thing, this budget that they passed by exhaustion and that the Assembly may do the same, could be a full employment act for lawyers.
PENNER: All right, Tom, I know you want to respond to this but I’d like for us to go to our callers because they’re lining up. They want to get into this conversation. We’ll start with Diana in Encinitas. Diana, you’re on with the editors.
DIANA (Caller, Encinitas): Good morning…
PENNER: Good morning.
DIANA: …and thank you.
PENNER: You’re welcome.
DIANA: I called because I feel that the legislature and the Senate of our state has been guilty of dereliction of duty and ignoring the important issues in our state and not working as they were elected to do for the citizenry.
PENNER: Well, you know, interesting…
DIANA: So my feeling is that at the next election, they should all be kicked out and we can get some new, hopefully, more dutiful and conscientious legislators.
PENNER: Okay, hang in there for a second, Diana. Would you – Do you think that you’re going to remember this in 2010 when the next election rolls around? Or are you going to find that the public, which seems mobilized now to change state government, won’t remember that in a year or year and a half. What do you think, Diana?
DIANA: Yes, I feel strongly about it and I’m sure I will remember.
PENNER: Okay, Tony Perry.
PERRY: With all due respect, I’m going to disagree with our caller. The legislators are doing exactly what they were elected to do. The problem is that in different districts, they were elected to do wholly different things. We have gerrymandered districts, very safe Republican, very safe Democrat, wholly different views of how government ought to work, and they go up to Sacramento, there’s no inclination to compromise. They both stand on their three square inches of virtue, the Democrats saying better services for the people, and the Republicans saying no more taxes, in fact, lower taxes and fewer employees. And they butt heads all summer and we have this very unique two-thirds requirement for a tax increase and that’s why we have what we have. This year it’s exacerbated by the worst financial situation since the Great Depression. So with all due respect, I disagree. They were sent up there to do exactly this.
PENNER: Okay, so Tom, but you had a comment.
YORK: Well, I was going to say that the budget, as being discussed in the state legislature right now, is basically predicated on a wing and a prayer. It’s, you know, things are going to be bad this year but, hopefully, things will get better in subsequent years and, therefore, some of the spending can be restored such as borrowing money from local governments and repaying it, borrow money from the schools and repaying it. But, you know, this recession is – it’s deep and it’s pernicious and there’s no promise that things are going to get better a year from now or two years from now. So I think that, you know, we’ve got more pain ahead of us. I think we have to come up with more permanent solutions than what’s in this budget.
PENNER: I thought it was really interesting that one of the elements of the agreement that Governor Schwarzenegger and legislative leaders arrived at, and I don’t know whether it’s still in there in the Senate version, was that the final period, pay period, which ends of June thirtieth of 2010, would be moved one day into July first, 2010, so it would go into the next fiscal year…
YORK: Right, right.
PENNER: …and so all the money that they would normally be spending to pay state workers on – in this fiscal year, instead would be moved into next fiscal…
YORK: Right, right.
BRY: Right, and so then you’ve – that’s like an accounting trick, and then next year do you do the same thing? Another number that was very interesting was, you know, it took them, you know, 17 to 20 extra days to pass a budget and apparently that’s like an extra $425 million and that’s the cost of an extra furlough day. So if they could’ve settled this issue sooner, you know, the state employees would only have two furlough days a month instead of three.
PERRY: And you have these really…
PENNER: Tony, I’m going to interrupt you because I do want to take a caller before we get into the break and she has a very interesting point to make. And it’s Lauren in Mission Hills. Lauren, you’re on with the editors.
LAUREN (Caller, Mission Hills): Thank you. I don’t want to dispute two days versus three days of furlough but what I’m seeing is a little bit more of a global issue. It seems draconian to me to cut all the – Well, I’m a psychologist and all our MediCal patients in the state and particularly the MediCal patients I see in our county have had their vision cut, so no more eyeglasses, their dental cut, no more dentistry, their psychology services cut and these are people with mental disabilities, mental illness, and the schools. So to cut our children and our patients and our poor and our disabled when we have Goldman Sachs making record profits, executives in banks and in investment corporations making record profits, there’s a disconnect that is so tragic that if we don’t look at this as a nation, you know, we are trying to save money here and there and cutting our schools and cutting our universities and cutting our poor and our disabled when we’re hearing about record profits on Wall Street and in banks.
LAUREN: So I would – I would volunteer one partial solution which could be as in Canada, there’s a big tax on alcohol and nobody seems to be mentioning that…
LAUREN: …and our booze is very cheap here.
PENNER: Okay, well, Lauren, you’ve raised a good – a really good series of issues. Let’s start with the taxes on – the proposed taxes on tobacco and alcohol. Tony, why didn’t they get approved? I mean, they seemed to be like the thing to do, the sin taxes.
PERRY: Because they lobby, that’s why.
PERRY: When you take it upon yourself for a legislator to impact a perfectly legal industry then you’re going to find people from that industry trying to get the best deal possible. But what is – what I find really interesting is the budget working at cross purposes. We’re going to push welfare recipients, women—let’s say it like it is—mothers of small kids, we’re going to push them off of welfare, get them out there, force them to get jobs, just as we are cutting child care support for them. So we want them to work but we – I’m not quite sure what we’re going to do with those kids. That’s all over the place. Now even though we are cutting, our services are still going to be better than most states. Let’s say it like it is, although a lot of states are able to expand their health services, for example, this current year. We’re not. But even though we will cut, California still will offer its citizens more than a lot of states.
PENNER: Okay, well, we’ll get responses to Tony’s comments from the editors, from Barbara Bry and from Tom York and also we – I want to continue to respond to Lauren right after the break. This is the Editors Roundtable on KPBS. I’m Gloria Penner. And we’ll be back in just a moment.
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PENNER: I’m Gloria Penner. This is the Editors Roundtable. I’m at the Roundtable today with Barbara Bry from San Diego News Network, and Tom York from San Diego Business Journal and Tony Perry from the L.A. Times, and with you. We’re talking about the state budget. This is a moving target right now actually. The state Senate has approved the agreement that the governor and legislative leaders arrived at earlier this week. The state Assembly has not yet approved it; apparently they’re still debating up there in Sacramento, at least we’re told they’re debating. Who knows? And, meanwhile, we are sort of analyzing what we do know, so we’d love to hear from you at 1-888-895-5727, 895-KPBS. We just heard from Lauren who had some really interesting points to make. She basically was saying that this budget now is balanced on the backs of the most vulnerable of our citizens and what does that really say about our society, Barbara Bry?
BRY: Well, I think what it says, and this is pretty crass, the poorest citizens in our society don’t contribute to political campaigns and that’s why the legislature was able to do what it did. And the Republicans were adamant about no new taxes, didn’t matter what. Didn’t matter if it was alcohol, cigarettes, they were just – they were going to walk out of this – Sacramento saying, no, we didn’t impose any new taxes on the citizens of California.
PENNER: Okay, Tom York.
YORK: Well, in February, we just had the largest tax increase in the history of the state so, I mean, we need…
PENNER: Well, tell us about it.
YORK: Well, I mean, we basically increased taxes, like the sales tax went up. You know, we approved that. You know, this legislature approved that so I think that, you know, there has been a balance. I think the lost group here is the taxpayer. No one seems to represent the taxpayer. There’s all these special interest groups, the labor unions, you know, the people that are impacted by the budget but the taxpayer, in my opinion, as a business journalist, is horribly overlooked in this discussion.
PENNER: And who should represent the taxpayer?
YORK: Well, the state legislature should represent the taxpayer but the districts are so gerrymandered that what you have, you have these very shrill partisan people in power who answer only to those people in their districts and they don’t have a larger view of the state in their – in their world view.
PENNER: Okay. So I’m going to go off topic for just a minute because earlier I mentioned the fact that the public seems mobilized to change something and that they’re rather dismayed at what’s happening in Sacramento. And there certainly are initiatives being prepared for the ballot to change things and, certainly, already in place is a different way of deciding on the district lines.
PENNER: In other words, a panel will decide that instead of the legislators themselves. Do you think the public memory is going to sustain? What do you think, Barbara Bry?
BRY: Yes, I think the public memory is going to sustain because the economy’s in the worst shape that it’s been since the Depression. It isn’t going to change soon. And I think we’re – the public is only starting to feel the impact of what the state legislature did and many of the things they had to do. I mean, if state employees are working – are getting paid less, they’re going to spend less. That’s going to impact merchants. You know, all those – You have teachers are working less, are getting paid less, and healthcare providers are getting paid less. This is going to have ripple effects all through the economy and I think it is going to result in, I don’t know, the, quote, citizens wanting change, whether that’s a constitutional convention, whether that’s ballot initiatives that lower the approval that you need from 66% to some lower number, even 60%, I think, would have been easier to get this time around. But I think…
PENNER: To – to approve a budget for.
BRY: To – to approve a budget and to approve new taxes. But I think this time around – I mean, people are making permanent changes, I believe, in the way they live, in their spending habits even if they have a job. And they – everybody’s been impacted in some way. Their 401(k) is worth less, whatever.
PENNER: Okay, let’s hear now from Emily in Clairemont. Emily, you’re on with the editors.
EMILY (Caller, Clairemont): Hello?
PENNER: Hi, Emily, we’re waiting for you.
EMILY: Hi, I’m here.
PENNER: Go ahead.
EMILY: Can you hear me?
EMILY: Well, I specifically am frustrated about their Early Start, the push for Early Start dollars and to take that away. I think that it’s going to cost us a huge amount of money in the long run because right now we are – we’re identifying children with problems and special needs very early on, we’re helping those children and we’re getting them into an inclusive setting in kindergarten before they’re – You know, we’re catching those problems right away. And I think that the new thoughts they have, the new ideas that they have, there’s – it’s going to open up the sieve, it’s going to be harder and harder to catch those children and I think that in the long run we’re going to pay more because we’re going to be playing a catch-up game in their education.
PENNER: Okay, thank you very much, Emily, and, you know, certainly that’s proved to be, unfortunately, true in the past. If you don’t take care of it at the front end, you have to take care of it at the back end. Garrick in Ocean Beach is with us now. Hi, Garrick, you’re on with the editors.
GARRICK (Caller, Ocean Beach): Thank you for taking my call.
GARRICK: I think the Democrats need to strongly come out for raising taxes on people that make over $300,000.00 a year as individuals and $500,000.00 a year as couples and on the corporations, the large corporations, not small business. The people at the top of this country, the wealth is concentrated way at the top. One percent of the people in the country own 40% of the wealth and we need to strongly call for increased taxes even if it won’t go through, even if the two-thirds requirement stops it. We need to let the people know that the Democrats are strongly for raising taxes on the top income people and the big corporations.
PENNER: Okay. Thank you, Garrick. So there we’ve had it, a couple of back-to-back comments, and I’d like your final comments. We’ll start with you, Tom York.
YORK: Well, I would just like to say that at the federal level, one percent of the taxpayers pay 40% of the taxes so I think the rich have already been hit pretty hard. Why not hit them some more seems to be the attitude.
PENNER: Well, they’re obviously still earning, aren’t they?
YORK: That’s true.
PENNER: Yeah, okay.
YORK: But the rich are entitled to their money, too, I would think, so…
PENNER: Okay, well that’s from Tom York, who is the editor of the San Diego Business Journal. Barbara Bry, final comments. Do you want to talk about raising – Democrats…
PENNER: …becoming the party to…
BRY: …I don’t think anyone wants to run for reelection or election on a platform of raising taxes. I think, hopefully, what this will do is force everyone to sit down and say what are the priorities for this – for the state, what services should we be providing? We can’t look at it piecemeal, we really have to step back now and look at one, two, three, four, five. What are the most important things should we be doing and how can we allocate the limited resources that we have? And I think this unfortunate situation has given us an opportunity to do this in a rational way.
PENNER: Okay. Logical thinking, we certainly need a little bit of that this morning, don’t we, Barbara? Okay, Tony, you get a chance to wrap the whole thing up.
PERRY: I would disagree with Tom. I think both parties, Republicans and Democrats, in their own way represent the taxpayers. Unfortunately, their definitions of how to do that best are wholly at odds. Is it in the taxpayers’ interest to keep tuition low at the state universities so that we get a very educated populous? Or is it in the taxpayers’ interest to make the folks that are getting the direct benefit of that education pay more? We could go all day and debate that, and that’s what they do in Sacramento. There are wholly different ideas on how best to govern this big, diverse, crazy state of ours.
PENNER: Well, maybe you and Tom will have a chance to debate this further when we do San Diego Week tonight on KPBS Television. The two of you are going to be on, so that will be interesting.