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Ongoing State Budget Deficit Putting Squeeze On California Cities

Ongoing State Budget Deficit Putting Squeeze On California Cities
What challenges will Governor-elect Jerry Brown face? What can be done to eliminate California's projected $25 billion deficit for next year? We discuss options the new governor should consider, and whether the state legislature is willing to make meaningful changes needed to end the state's financial problems.

What challenges will Governor-elect Jerry Brown face? What can be done to eliminate California's projected $25 billion deficit for next year? We discuss options the new governor should consider, and whether the state legislature is willing to make meaningful changes needed to end the state's financial problems.


Alisa Joyce Barba, independent editor with NPR member stations


Kent Davy, editor of North County Times

Scott Lewis, chief executive officer of

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This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

TOM FUDGE: Our focus is on the economy and its effect on government. And let's do move to -- start talking about what's going on at the state level. At the state level, State of California, we're seeing the departure of Arnold Schwartzenegger, and the rebirth of governor Jerry Brown. He'll take officer very soon of but the thing that has not changed is the state of the budget. The State of California faces a $25 billion budget deficit. Most of that applies to the 2011 budget, but six billion applies to the current spending plan. Somehow the balanced billion, lawmakers recently approved was not so balanced. It was apparently based on faulty optimistic predictions of revenue flow. Alisa, what else would you like to say about the engage that governor elect Jerry Brown is gonna face when he takes office.

ALISA BARBA: What a disaster. Schwarzenegger walked into this and Brown is walking into it, and it's an even deeper hole. And the truth of that matter, for the last -- during Arnold Schwarzenegger's tenure, a series of, you know, a series of Bandaids, a series of temporary fixes went forward because it was politically impossible to pas the kind of reforms that across the board everybody said is needed. There's a fundament 58, what they love to term a structural imbalance. We spend more money than we take in every single year. And it's designed that way. It's set up that way. We are spending more than we are taking in. So the bottom line is is that there has to be cut in spends, major cuts in spending to bring it down, and there has knob revenue hikes to bring it up. And nobody denies that's the case, but nobody seems to move forward to do anything to adjust it. It's the same as the city.

TOM FUDGE: Well, what is causing this problem? 12 lack of political will, is it the fact that in California we have this bizarre system of district democracy which doesn't allow you to get anything done? What's causing this recurring problem.


ALISA BARBA: Well, this is not a problem that's only California's problem. And certainly, we have a uniquely dysfunctional state government, we also have a very problematic initiative system, that keeps throws things out there that are unfunded man dates of but it's a problem again, it's very similar to the City of San Diego where we have pension bills that cannot be met, we have pension funding man dates, we have [CHECK AUDIO] and we have plummeting tax revenues, we have I foreclosure crisis that has hit this state harder than many others of so that's where it all comes further federal a perfect storm for Jerry Brown.

TOM FUDGE: They say that junk rolls downhill. How is the am state problem affecting lower government.

ALISA BARBA: Because it is affecting every local government because they're getting less money from the state government. They're getting educational funding cut backs, all kinds of problems across the board, and more threatened in the future,.

TOM FUDGE: Okay. Of etheditors, Kent Davy, what could you want to say to that?

KENT DAVY: Well, issue the circumstances that California is in is caused part because of the [CHECK AUDIO] respective pieces of the political landscape with a two thirds majority required to raise taxes or until this last November to pass a billion. So that you had a structural lock that could not be over come as long as, say, the Republicans said, no.

TOM FUDGE: And you still had that structural lock when it comes to raising taxes even though we passed prop 25.

KENT DAVY: Absolutely.

TOM FUDGE: So that you can pass a budget, you just can't raise taxes to pay for it.

KENT DAVY: You can't raise taxes. And prop 13 still operates as a lid in the background as well. So you've got a whole bunch of problems that you have to tease out and untangle if you're ever gonna get to a point where somehow the middle can decide on what's a reasonable billion, what's a reasonable set of spending priorities or taxation.

TOM FUDGE: Okay, Scott, but what's really our problem?

SCOTT LEWIS: There are two big things, understand two big things, one, how big it is. Of you could cut the entire university of California and California state system and the entire prison system and not close the budget. The second thing is the concept of unintended consequences, like, you know, you could cut medical, for example, but then people might be less healthy and go to the emergency room more often and cost us seven times more. So there's, you know, you have to weigh the unintended poison pills that come with all these decisions to cut. Because the state government in particular -- and I was having coffee with assembly man Nathan Fletcher who made this point that the clientele for government services, especially state government goes up as the revenues go down. And so it's a brutal system of -- and it needs comprehensive rethinking. And you know, the prison system is a failed system. The education system is in a situation where it is losing its ground as a world class institution.

TOM FUDGE: What I really want to do here is lay blame. I want to know whose fault this is, and I want to talk about two different parties here. First of all, Arnold Schwarzenegger, and then the people of California. Let's start with the governor. Arnold Schwarzenegger came into state government when -- after the recall of governor Davis and said he was gonna fix the problem. The here it is, what? Seven years later and it's still a problem. Can we say this is a failed governor.

ALISA BARBA: I don't think -- I mean, I don't think it's so much a failed governor as it's a failed political system, as Kent laid out, with two broad extremes. I think that people put a lot of hope in the terminator, that that he would come in and he'd bust through all the roadblocks and get through, and you know, I think this was a lot of hope there because Davis was seen as pretty ineffective. But Schwarzenegger with all of his public appeal and his optimism and his charm, I don't think that he could do much to get -- to do anything to get the middle gal veteranized, when you had these two extremes.

TOM FUDGE: Well, and he actually got to the point by trying to go to the middle he got to the point where even his party didn't like him anymore. Kent, what do you want to say about that?

KENT DAVY: If you remember the -- Arnold's history 234 office, though, maybe he came into office, he proposed a whole series of fundamental government reforms for the State of California. Immediately got hit by a massive public relations campaign on the part of the nurse's union, and I don't remember what else had money in it the game. Of and it was terribly effective in driving his negatives up and his favorables down. And it seems he lost his taste for being a reform governor. . And that was the last we saw of it, and he decided to be a climate guy instead.


SCOTT LEWIS: Only Nixon can go to China, right? Still another line from Fletcher. But the point is that maybe Jerry Brown the right person to lead this out -- the Democrats in particular are going to be faced with some series decisions about whether state government is set up to provide employment opportunities and provide employment benefits or whether it's set up to deliver services better. And maybe injurier brown is the one to force that decision toward services in a different way.

TOM FUDGE: So if Nixon can go to China, maybe Jerry Brown can go to the state unions and say you're gonna take some cuts?

SCOTT LEWISS: Yeah, not cuts but some sort of better vision of how the state can deliver services.

ALISA BARBA: Yeah, I was just gonna provide translation right there. That's exactly when we're talking about, we're talking about the teachers', we're talking about the nurse's union, we're talking about the prison guard union. All of them are very powerful in this state, and all of whom are basically working on behalf -- or or the Democratic Party has been working on their behalf, or they have been working on behalf of the Democratic Party. And that's been one of the huge roadblock. And I think Scott's right. I think Jerry Brown better than Schwarzenegger can go to those groups and say we have no choice.

KENT DAVY: Tiny bit of ray of hope, I think, and that is last week, the first eight commissioners of the new districting commission, state redistricting commission were appointed. Those people, I think will then -- I think recruit 12 more out of the pool, I think it was 20 all together. Something like that. The -- I think it is there that, if there's gonna be some salvation of California's slipping into an abyss, it's gonna have to be through a redistricting that allows a competitive legislature, competitive congressional districts and allows the middle to reform.

SCOTT LEWIS: And add to that potential he term limit reform. There is a pretty persuasive argument, and I know there's two sides to it, that people that run state government have no incentive to make long-term benefit decisions, that they're there to make sure that they don't screw up and get it labeled as them having screwed up.

TOM FUDGE: But people like term limits, voters like term limits.

SCOTT LEWIS: Yes, they do.

TOM FUDGE: And I want to get to the subject of how much of it is their fault, but first let me remind folks they're listening to the Editors Roundtable, I'm Tom Fudge, and my guests are Scott Lewis, executive director -- chief executive officer of choice of San He was the last person you heard from, Kent Davy is editor of the North County Times, and Alisa Joyce Barba is independent editor with NPR member stations of listener, I'm glad you're listening. You cannot call into this particular show, but if you want to send us a comment, let's see, where is that web address? Here it is, go to round table. And Alisa, did you want to chime in with something? I saw you drawing breath. [CHECK AUDIO] [CHECK AUDIO].

ALISA BARBA: I was just gonna provide another translation, basically when Kent was talking about redistricting, the congressional districts, the local legislative districts in this state have been essentially gerrymandered into protect various political parties, and this is an initiative on the ballot that passed, which is having citizens come in, basically, between the of them, Kent say is, and they're gonna come in and draw new lines, that the hope is we will end up with a more balanced legislature, and not the two extremes.

TOM FUDGE: But the people of California, I mean, even if you fix the governor, even if you fix the state legislature, you still have the people of California who have to approve taxes. I mean, they don't absolutely have to. But under the current system we have with the need for a two thirds vote of the legislature to pass tax increases, that essentially means you have to go to the people if you want to do that. And the LA Times recently did a pole where they poled people on what they wanted to do, did they want to raise taxes, did they think that we could have spending cuts, and the only thing they agreed could be cut are prisons. That's the only thing that they said, well, you can cut some of the prisons. 70 percent of the people said closing the budget gap would only require cutting waste, and yet we don't know where the waste is. So I'm wondering even if you is political will in the governor's office and among the people, the people in at this time legislature, will the voters eventually come to the point where they will agree to raise more revenue?

ALISA BARBA: You know, we have been talking about this very -- I don't know, five years, 10 years here at Editors Roundtable. When will the budget problems really begin to affect people? And when, you know, when your water main breaks and nobody comes out to fix it, when the palm frond falls on your car and shatters your car 'cause nobody cut it down, and when your kids are faced with 50 kids in a classroom, when we're looking at the kinds of cuts that I think are -- and wee said over and over again, are more and more inevitable, there is going to be a point when people come forward and say, okay, you've cut all the teachers, you've closed the libraries, you're not maintaining the schools, what more do you need?

SCOTT LEWIS: Well, you you know, there's rational changes that could be done too. Will a comprehensive rethinking of our revenue policy. We have a high sales tax, but on the other hand, theme parks aren't taxed. Of your haircut's not taxed. There's all kinds of different reforms. I think we need a fundamental rethinking of government, the problem is, I don't know that it's set up to rethink itself. And that's the issue that we're going to be dealing with. And I don't know how to fix that. I wish I kid.

TOM FUDGE: Well, we've talked about this a little bit, I've talked about this a little bit on these days, this question of how reform happens, and there was this big plan to have a constitutional convention. That didn't seem to go anywhere of and now people are trying to make a difference by doing things like prop 25 that allows the government to pass a budget with a simple majority. Or redistricting reform. Kent, is that the way reform in California is going to happen? Ultimately? Or will it ultimately fail?

KENT DAVY: Well, I -- I guess I wouldn't prognosticate on whether it would fail or not, ultimately. I will say a couple of things. One, the [CHECK AUDIO] process was original a progressive movement to try and reform government back in what? The turn of the -- the first part of the 20th century of the initiative process, is, however, I think somewhat flawed in the sense that all you have to do is get enough signatures and enough money behind you, you can put something on the ballot, no matter how squirrely it might be, for the result of the people. That's a cross current against a constitution that's set with some sort of limitations on it. Ultimately, the risk for people in California, I think is to end up in circumstances like the prison system, where you've got a federal judge who has found that there is a constitutional flaw or there -- the state is in default, conceivably, of obligations to pay money that's gonna sit there and order and say, this is how your gonna do things. You are going to do this. Pay this.

SCOTT LEWIS: I think that's a great point. There will have to be some kind of final crisis, the darkest before dawn moment where we can't make our payments to bond holders that we owe money to, and if that comes, you know, that's the kind of situation that Ireland is in, or that Greece was in, or that other places like that where there might be a bailout that we can get but not without some serious reform and awe state measures, and that might be the ticket to everybody sitting down and fundamentally restructuring government. But we might need mom and dad to come in somehow.

TOM FUDGE: So it's not gonna be enough for me to sit in my front yard and see the palm fronds hanging from my palm tree which are not being removed by the city anymore. That's not gonna create the kind of political will that you're talking about.

KENT DAVY: If mom and dad is the Republican house and the U.S. Congress, I don't think dad's gonna be around.

ALISA BARBA: I can't see that as bailing out California. That's just not --

SCOTT LEWIS: Well, on the other hand, if municipal debt and state debt is threatened like that, that could kind of cause the too big to fail moment that everybody seems to be afraid of.

KENT DAVY: California's economy is what? 13 percent of the U.S. economy. It's an enormous piece of the economy. But California's economy is also very, very sick right now. This is a very damaged --

TOM FUDGE: And with that, let me remind folks --


TOM FUDGE: Yes, on that cheery note, and I'm waiting for that disaster to happen where the Courts come in and force us to do you will these things, that Scott was talking about. You're listening to the Editors Roundtable, I'm Tom funnel, filling in for Gloria Penner. We need to take another break. We'll be back in a minute with Scott Lewis, Kent Davy, and, Alisa Joyce Barba. So stay tuned.