Governor Agrees To Democrats' Budget Plan

Governor Jerry Brown appears ready to sign a majority-vote budget crafted by state Democrats, thus ending his efforts to broker a bipartisan deal in the legislature. We speak to KQED's Sacramento Bureau Chief John Myers about the key elements of the budget plan, and the impact it could have throughout California.

Guest

John Myers, Sacramento bureau chief for "The California Report"

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CAVANAUGH: Democrats passed an $86 billion budget late last night when Governor Brown signs the package, it will be the first on time California budget in years. But it is not the budget that Governor Brown wanted. It's not bipartisan, and it does not include the tax extensions Jerry Brown fought for since taking evidence. Joining me is John Myers, Sacramento bureau chief for the California report. Hi John.

MYERS: Nice to talk to you.

CAVANAUGH: How does this budget close California's $9†billion budget deficit?

MYERS: Well, a little bit of everything. I think even back from that, Maureen, we should look at what the state was facing in January. A $26†billion shortfall over an 18-month period. I think if you look at it as a macro, of that 26, $15†million in spending reductions, a few delays of payments, a couple billion dollars there. Then the rest, better than expected revenues. If you look at what happened since January, the forecasting of state revenues has gone much, much higher than people projected. I still wonder whether some of that was Jerry Brown asking his budget watchers back in January to be conservative about their estimates. And so now it looks like it was a huge wind fall when maybe they were being overly conservative. But the last 9 or 10 billion you're referring to was the last sticking point. The governor originally wanted to close that with an extension of sales taxes, vehicle taxes, income taxes. That plan he spent five months of this year trying to negotiate with Republicans to get on the ballot or to approve conditionally. In the end it didn't happen. Those better than expected revenues, more cuts, and some delays in payments mainly to schools, and you've got a budget.

CAVANAUGH: Let's talk about those cuts. There are deep cuts in this budget.

MYERS: Yeah. I think a couple things to highlight in particular, one, higher education really does suffer real cuts. And a lot of times, we have this debate in Sacramento over what is just a reduction in spending. Meaning you didn't necessarily cut the program, you just cut the growth in the program. And what's really an actual cut. Most people will tell you that the cuts to the UC and CSU systems are real. $650†million of cuts to each program. 650 to UC, 650 to the cal state program in this budget. That could get higher. This budget is crafted in a way that in some of those revenues do not come in, there will be automatic cuts, and that will further cut the UC and CSU systems. And I think the other cuts that are noteworthy here, about $5†billion cuts in health and human services programs. Welfare, child care, cuts to healthcare for the poor. Those are cuts that are gonna be felt by those who obviously have the least mean.

CAVANAUGH: Our largest school district in San Diego did their budget last night, included layoffs. They say they are watching the building. But they're also concerned about the provisions you were talking about, those trigger provisions that if the revenue expectations don't meet what this budget calls for, what happens?

MYERS: For K-12 schools it means a one and a half billion dollar cut which the Brown administration says translates into seven fewer school days a year. That could be on top of school days that have been cut already in districts around the state. That would give us one of the shortest school years in the western world. That is of great concern of course. And I think also of concern to educators, if you listen to people in school districts are these delays in payments, these deferrals. There's almost $3†billion of deferred payments. That's not as bad as a cut because of course they're promised they'll get the money at some time. But in the interim they have to find ways to make ends meet. You've got districts borrowing money and getting their financial problems tighter and tight are. So those are tough times, and a lot of schools are complaining about it and worried.

CAVANAUGH: As I said, Governor Brown is expected to sign this budget. How is this budget proposal different from the plan the governor vetoed two weeks ago?

MYERS: The biggest difference, Maureen, are these trigger cuts that we've been talking about. Education, higher education, social services, prisons. This budget is the democratic budget that he vetoed minus the most egregious gimmicks, gimmicks that assumed money coming into the state that is tied up in court, money coming from the federal government that the feds have given us no indication they're about to given us. So the governor insisted those gimmicks be taken out. And in their place better than expected revenues and these triggering cuts if the revenues don't materialize. [CHECK AUDIO] that they in there are words, in their own spin on this budget, that they fought back additional taxes or tax increases as they would call them, which the governor thought were necessary to put the budget on proper footing.

CAVANAUGH: And what are those additional taxes?

MYERS: The governor fought for taxes that are set to expire on Friday. He fought to extend them. So a 1% increase -- or 1% portion of the sales tax that will new expire on Friday. So the sales tax around the state will go down by $0.01. He fought to extend that. He fought to extend the vehicle registration fees, the car tax fees that now will go down by a small tick for every car owner. And he had fought to extend a surcharge to income taxes that had been put in a place a couple of years ago that also now expires. Some estimates are that it could save some families as much as a thousand dollars, that of course fends on your spending habits, Republicans believe that's the right move, the governor insists we need those revenues for long-term fixes. He has a plan to move some state government to the local level. Public safety, realignment that kind of thing. And the governor believes it needs to finance a paying down of debt built up over the last decade, because so many of the budgets have borrowed rather than cutting or spending.

MAUREEN CAVANAUGH: And we may see those state tax increases reborn in the 2012 election; is that right?

MYERS: Well, the governor seems intent on having the voters weigh in some way in 2012 on the budget process. He's talking about this realignment of services which would require voters to amend the state constitution. He is talking about the taxes as he envisions then. Once we get into an election year, you're gonna have a lot of groups putting forward a lot of initiatives that they want on the ballot. Perhaps an increase in taxes on oil production, an increase on higher income earners, and you're gonna have similar fights from the conservative side. The governor side a few months ago, if his budget didn't move forward, and it didn't, he saw a war of all against all in California politics. And I think a lot of people think we're gonna have a very combative year in 2012.

CAVANAUGH: Let's get back to this budget plan, John, what's gonna happen with state redevelopment agencies? That's a huge contentious issue in this budget.

MYERS: It is. Obviously there in San Diego as well because your own redevelopment agency there in the City of San Diego has been leading the charge to fight the governor's plan which would abolish redevelopment agencies. The plan in this budget is a modified version of Jerry Brown's plan. It would abolish all local redevelopment agencies as they exist now. It calls for taking $1.7†billion of local property taxes which is what redevelopment uses, and transferring them to the state for one year to solve the state budget problem. Then it tells redevelopment agencies, you can continue to do your work if you change the way you do things and you start sharing property tax revenues with schools and fire districts. The redevelopment folks say this is illegal. They have already threatened to take this to court as soon as the governor signs the budget. I think you're gonna see it in court. If in fact the Courts believe that the redevelopment agencies like San Diego are correct, then that's a $1.7†billion hole in this budget. And that's a fight yet to come.

CAVANAUGH: If I'm correct about this, there are a number of potential lawsuits that are swirling around this budget. Lawsuits perhaps over fees, questions about whether school funding can be diverted in the way that this budget does. Do you expect to see any of that legal action take place?

MYERS: I do. At least the filing of the lawsuits. And I wrote a story about this for the California report this morning, that that is one of the real questions here, that you could end up blowing a hole in this budget deal by $2†billion or more. The redevelopment is the biggest part. There's a plan to assess homeowners a fee who live in rural areas to help defray the costs of state firefighting, because the state does the firefighting services in rural areas. That's a vehicle registration fee of 12 bucks that some say should have been a tax but needed Republican votes. The joke in Sacramento is, it wouldn't be a budget if you didn't have lawsuits. I do think we're gonna see these files. Then the question is if any of them do get a foot hold, what does the governor do? Does he continue to fight that in court or do something else?

CAVANAUGH: Governor Brown has basically come out and said this is not his budget, not the budget that he would have chosen. But it sounds as if he's going to sign it. Could this be viewed as a Los for the governor?

MYERS: Well, I think loss or victory is somewhat in the eye of the beholder, independent of where you sit on the political spectrum. I think the governor clearly wanted a different budget. I think he believed that -- I don't know, maybe it was the power of his persuasion, his experience in politic, that he could find a center common ground between Democrats and Republicans in the capitol. And he tried all year long, he tried to get Republicans move on taxes, Democrats to move on some reforms that Republicans wanted, you be the judge as to who walked away first. That's a fight that will never end. I think the governor finally realized he had to be more pragmatic than what he was doing. And the real question is now that the governor has seen the distinction for what it really is in state politics, what does he do? Continue down the path of trying to bring people together? Or hey, I can't fix that, let me go fix something else? We're all fascinated to watch what happens to his governing if style after the budget he wanted didn't happen.

CAVANAUGH: If the governor does sign this budget, let's say by 12: 00PM tomorrow, I'm wondering, what are you all gonna do in Sacramento all summer long without a budget battle to report on?

MYERS: It's kind of an annual event here as you watch summers fade away as you stay at the state capital and wait for a budget. And we all believe the governor is going to sign it. He told everyone on Monday that he had mended fences with Democrats after the veto. So they're all on the same path, and every indication the governor will sign this into law. I think he has to decide again what issues is he gonna focus on, and does he believe the state's finances are okay in the short term? Does he push for systemic reforms? What does he do about public employee pensions. And I would say that one of the happiest groups about this budget being in place are legislatures because they will start getting paid again. Remember, they have not been paid since June†15th, and the passage of a budget and the governor signing it into law means they get paid again. Not very popular in the public, but popular in Sacramento.

CAVANAUGH: I've been speaking with Sacramento puree chief John Myers. John, thank you very much.

MYERS: You're welcome.