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Sacramento Update: Budget Deficit, Ballot Measures, Gov’s Race

Audio

Aired 6/28/10

California is facing a $19 billion budget deficit, and the governor is proposing to reduce state worker pay to minimum wage until a budget deal is reached. We talk to John Myers about the latest on the budget deficit, the governor's race, and a couple of the propositions that have qualified for the November ballot.

MAUREEN CAVANAUGH (Host): I'm Maureen Cavanaugh, and you're listening to These Days on KPBS. Another fiscal year, another budget deficit and another summer of quiet desperation in Sacramento. California is facing a roughly $19 billion budget deficit. Once again Governor Schwarzenegger and most Republicans want deep cuts in state programs to close the gap. The majority Democrats have two budget plans, which are quite different and don't agree with each other. In the meantime, the new fiscal year begins this Thursday. State workers may be facing a significant cut in pay until a new budget is in place, sometime later this summer, we hope. I’d like to welcome my guest, John Myers, Sacramento bureau chief for The California Report. John, good morning.

JOHN MYERS (Sacramento Bureau Chief, The California Report): Good morning, Maureen.

CAVANAUGH: You know, it feels as if we’ve had this conversation before, John. The state is facing a multi-billion budget deficit for the next fiscal year. So what ideas has the governor proposed for cutting the deficit?

MYERS: Well, we have had the conversation before…

CAVANAUGH: Yeah.

MYERS: …and I think that’s, you know, one of the most difficult parts of what’s going on in California, is that we have been facing these multi-billion dollar deficits it seems like for all of the past decade, and the projections are we’re going to be facing them for a while, which is why I think there’s a lot of discussion about systemic budget reform. But back to your main point about what’s going on this time. Yeah, the governor’s plan, you know, I think, you know, which was put out in May, I think can be fairly characterized as cut, cut, cut your way out of the problem, it’s not $19 billion in cuts but it’s a very large majority of it is cuts, including elimination of some programs including wholesale elimination of the Welfare to Work program, CalWORKS, elimination of the program that does in-home care for the disabled, elimination of child care subsidies for the working poor, and the list goes on and on and on. Reductions into how much money K-thru-12 schools thought they were going to get. You know, the governor’s plan is about austerity, about cutting back and just dealing with what you’ve got to deal with. And that’s not a plan that has gone over well with Democrats in the legislature and, as you referenced, there are a couple of ideas floating around from them but there’s a lot of work to be done to be sitting here on June 28th with the new fiscal year beginning on Thursday. There’s a lot of work to be done that’s not going to be done in time.

CAVANAUGH: I was going to ask you what’s left to cut but you’ve told us the – entire programs are left to cut.

MYERS: And that’s the difficulty, is that all of the, you know, a lot of – I don’t want to say all of the easy cuts but a whole lot of the easy cuts have happened over these last few years. I mean, there is a debate as to whether there is any more, as we like to say too many times, the cliché, low hanging fruit to pick off of the tree. Now there are some who think that there are still things that could be done, you know, consolidations of programs, consolidations of agencies and all these commissions and boards. The reality is, that doesn’t get you anywhere near the $19 billion you need. And so, sure, those things could be done but you’d have to do a whole lot more, which is why the governor is, you know, talking about great big cuts.

CAVANAUGH: Now, State Senator Denise Ducheny from Chula Vista is chair of the Senate Budget and Fiscal Review Committee in the joint legislative budget committee. What role will Senator Ducheny play in the budget negotiations? Has she proposed any budget fixes that are worth mentioning?

MYERS: Well, she’s played a real key role. And I should say, you know, Senator Ducheny is really considered to be the budget expert in the legislature and there are a couple of reasons for that. One, as you referenced, she is the chair of the Budget Committee, she’s the chair of the Budget Conference Committee of the two houses that…

CAVANAUGH: Right.

MYERS: …meeting now to piece together a budget plan. And some of that, too, is because she has had a long career here in the capitol. She’s at the end of her career, and this is one of those issues about term limits people talk about. When people like Senator Ducheny leave after being removed by term limits, you know, will you have that institutional memory that knows the budget line by line the way she does. So she’s been involved quite heavily in trying to piece together where they’re going to go. The conference committee continues to meet as to, you know, what cuts they’ll accept and not. She is part, I think, of the Senate Democratic plan that basically is talking about some tax increases but also has put forward this plan that we can talk about in a moment of realigning services that the state currently provides and pays – or the state currently pays for, I should say, on to the local governments. But Senator Ducheny also has been a champion of, when we talk about systemic budget reform, has been a champion of changing the initiative process, most specifically saying if you’re going to put an initiative on the ballot that proposes to spend money, that proposes to spend more than $25 million in a new program, you need, initiative proponents, to identify a source for that money. And, you know, that’s one of those reforms people talk about, is that we continue to put things in law that mandate spending that we don’t have a place to find the money.

CAVANAUGH: Now, before we get to some of the systemic changes that are being proposed, there’s an idea floating around in the state Assembly to take out a $9 billion loan from Wall Street to be paid off over the next two decades. It’s an effort from Democrats to try to prevent state worker layoffs. Can the state do that? Take out a loan to pay down the deficit?

MYERS: Well, that’s tough, and I should tell you I think that that Assembly plan to solve the budget problem without a lot of the deep cuts the governor’s proposing, that that plan is really on life support right now, at least in its original form. It’s not looking very good. It’s received a couple of big blows, namely the Attorney General’s office, Attorney General Jerry Brown’s office, said that they don’t think that they can offer a clear, unqualified legal support of it for the very reasons that you talk about, about financing a deficit. And State Treasurer Bill Lockyer said last week if the attorney general can’t offer unqualified support, he can’t sell those bonds on Wall Street. And it’s a very complicated proposal. It’s effectively saying that we would get a loan, we would get a cash advance, I think, actually’s the best way to think about it if you’re an average person, that you’d get a cash advance on money you know you’re going to get over 20 years. You get it now and you pay that back over 20 years. The challenge is—two challenges—one, do you want to take 20 years to pay back all of the fixes for one year’s deficit problem? That’s the year that we’re in – about to come up on on Thursday.

CAVANAUGH: Right.

MYERS: And the second one is, is this legal issue, too. I mean, in 2004 the voters passed Proposition 58 which said we would do no more borrowing to finance a deficit. And now the Democrats in the Assembly believe that this is not that, that through a legal interpretation, their own legal interpretation, but others have said, yes, this is clearly borrowing money that pays back a red ink problem this year, and so I think that plan has got serious challenges moving forward. They say they’re going to rework it but I have a hard time seeing it moving forward in a substantive way to do a lot of borrowing to solve this problem.

CAVANAUGH: Well, speaking of legal challenges, the governor is proposing to cut state worker pay to minimum wage until a budget deal is reached. What is the logic behind that and how is this idea being received?

MYERS: Well, this one is huge. And this one has been brewing for several years. It actually even predates Governor Schwarzenegger because there has long been a discussion, and I’ll try to do the shorthanded version.

CAVANAUGH: Sure.

MYERS: I don’t want to have people’s eyes glaze over on Monday morning about budget particulars. But there has long been a discussion about when the state enters a new fiscal year without a budget in place, what bills can be paid, what ones cannot be paid. The state government operates differently than the federal government and so we do have some things that continue to get paid even when the legislature doesn’t take action to authorize it, and one of those things has been state worker paychecks. But there’s been a long legal battle that was simmering for a long time about whether or not the state had the authority to pay state workers their full paychecks without a budget in place. The governor has taken that simmering and has turned up the heat on it, especially this year, I think, largely, too, to make a point with Democrats in the legislature who have a lot of political ties to the labor unions that represent state workers, and so this court case is now pending and the governor believes he’s on firm ground that the state does not have the authority to pay full pay. And so the only thing that the state would have to pay then would be federal minimum wage, which is lower than the state…

CAVANAUGH: Right.

MYERS: …minimum wage which is, you know, in the $7.00 a hour range, which would be a huge thing for, you know, tens of thousands of state workers across California. Now the problem for the governor is he doesn’t control all the levers of power in California on this issue. The State Controller, John Chiang, who is independently elected by the voters, is the guy who actually sends out the paychecks and puts his name on them. The State Controller says he’s not going to do that until a court forces him to do so, and so I think you’re going to have a showdown probably in the California Supreme Court sometime later this summer. And, of course, the question is, you know, does that play in the middle of this budget debate? But it is an interesting question that does need to be resolved. What can the state do or not do in the absence of a budget? And only here in California will we never have a budget on time do we really have to have that resolved.

CAVANAUGH: I’m speaking with John Myers. He’s Sacramento bureau chief for The California Report. And we are talking about the California budget for the next fiscal year which hasn’t happened yet. John, as you say, we are so used to not having a budget in place on time that I think that we forget about what problems that causes. Can you give us a really concise answer on what kind of…

MYERS: Yeah.

CAVANAUGH: …impact it has to have no budget when we need one?

MYERS: Well, I would say that the biggest things that people need to remember are, first of all, there are payments that go out every month, and we’ve been talking about state worker paychecks. Those have always gone out. But there are payments that go out every month the Controller cannot make in the absence of a budget. Those are often to like community colleges, to local governments. That means that those entities have to find money somewhere else in their budget to keep their finances going until things get solved in Sacramento. The other problem, too, is, I think, is reputation of the state on Wall Street, in financial circles. It doesn’t make us look good when we don’t have our act together. And then the third one that has come up in the last couple of years is that as these impasses go on and on and on—you’ll remember we had one a couple of years ago that went until after Labor Day…

CAVANAUGH: Yeah.

MYERS: …until late September, we had to issue IOUs. That’s another real fear because at a certain point the state doesn’t fiscally have enough cash without a budget in place. So those are our real, real challenges. And I think, you know, a lot of people watching this debate this year do not think it’s going to be resolved quickly, which means we could be back in a cash crunch for the state government.

CAVANAUGH: Before we move on to the governor’s race, I do want to talk about one of those systemic solutions that are being proposed in Sacramento for our continuing budget deficits and that is to move some of the services, public service and Health and Human Services, move those programs away from the control of the state and to the counties. How is that being received?

MYERS: Well, you know, it’s been a long discussion here in Sacramento, Maureen, and I think there’ll be more discussion about it, and certainly more programs that you and others and we can do to talk about these. I mean, I think the reality is, is that the state had – you know, state government and local governments kind of did a patchwork fix in the aftermath of Prop 13 in 1978 and other decisions that have really kind of made it very confusing about who controls money. Who raises money? Where the revenues are raised? Who controls them? Who controls the services? And so there’s a push right now, mainly by Democrats in the state Senate, to say, look, let’s make those services more fixed on the local end. You know, if the local people are going to provide it, let them control the money and let them have the ability to raise revenues if they think they need more money in their community to provide social services, education services, other kinds of things that local governments often provide. And that’s a little bit separate from schools, even though I did say education.

CAVANAUGH: Right.

MYERS: But realignment is very complicated, it’s going to take longer than a summer to do it. And even that does not solve the state government’s $19 billion problem. So that’s another remaining thing. If you do all of that, you still have a few billion dollars in solutions you need to find to solve this year’s problem.

CAVANAUGH: We had a program last week about alternative energies and one thing that came up was a measure that’s qualified for the November ballot that is a proposal to delay the implementation of AB-32…

MYERS: Yeah.

CAVANAUGH: …the state’s greenhouse gas emission law. What are the details of that proposal?

MYERS: Well, the reality is that proposal would effectively kill AB-32. The proponents will tell you otherwise but when you look at the language of that initiative that has qualified for the November ballot, it effectively says that AB-32, this global warming law passed in 2006, cannot go into effect unless the state’s unemployment rate reaches a very low level and sustained low level for a few years in a row. And the level is so low in the language of the initiative that it would effectively kill AB-32 for the time being. I mean, that the unemployment rate has not been that low and sustained that low for a long, long time. And that’s what the backers believe, they believe it is bad for business. The governor is going to fight that tooth and nail. He sees that as a legacy issue of his and I think you’re going to see a very big fight about the future of energy, the future of the environment. I think you’re going to see a discussion of the Gulf oil disaster in the middle of this. I mean, you’re going to be bombarded, I think, and the voters are going to be bombarded by a big discussion about global warming and the environment and what do they value come November.

CAVANAUGH: Speaking of being bombarded, we’re already getting a lot of ads. I’ve seen, personally, a lot of ads against Republican Meg Whitman in the governor’s race. It seems that both of them have recently released competing television ads. It sounds like this governor’s race is really going to be a bit of a war, John.

MYERS: Yeah, it’s going to be a blockbuster. I mean, you know, Meg Whitman has already spent over $100 million just to win the primary. Upwards, we think, maybe of $150 million more than that, as her campaign has hinted. Brown has not put those ads that you’ve seen on the air yet, Jerry Brown, but backers of Jerry Brown and labor unions that are forming independent committees have put some of those ads up against her. This is going to be an expensive, ugly race and, you know, hopefully that this’ll be a race at some point that circles back to the fundamental question Californians really need to know about when they’re picking their next governor, what are you going to do to fix the state’s problems? You know, it’s one thing to talk about somebody’s past, somebody’s business dealings or, you know, what happened 30 years ago, what are you going to do next year, 5 years from now, 3 years from now? That’s what the voters are going to need to know. And, you know, I hope we’ll get it. It’ll be interesting to see.

CAVANAUGH: Well, it’ll be interesting to see these two together, Whitman…

MYERS: Yeah.

CAVANAUGH: …and Brown. In the minute that we have left, John, can you tell us when we might see them together in terms of debates?

MYERS: Stay tuned. I mean, there have been a lot of debates proposed. I have seen proposals probably for four or five or six different debates. I don’t believe that Meg Whitman and Jerry Brown will agree to that many. I can’t see more than two or three statewide, televised debates going on, but, hopefully, sooner rather than later. The earliest I have seen them now if from about Labor Day but I think in late September, early October, you’re going to have to see these two go head to head and really explain what they want versus the other person and, you know, hopefully, the voters would tune in to see, you know, who the right one to pick is.

CAVANAUGH: Exactly. I mean, maybe you’ll be there, John.

MYERS: I would love to be.

CAVANAUGH: John Myers is Sacramento bureau chief for The California Report. Thank you so much.

MYERS: Thanks, Maureen. Appreciate it.

CAVANAUGH: We’ve been speaking with John Myers, and if you’d like to comment, please go online. That’s KPBS.org/thesedays. You’re listening to KPBS.

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