Will State Budget Problems Be Resolved By July 1?

GLORIA PENNER (Host): So that's, as you said, David Roland, the 800 pound gorilla in all California city and county budget negotiations, and how much the state will take from the local governments to help settle the budget problems in Sacramento. One idea that might affect potholes is to get that money by grabbing gasoline tax that is now used by local governments to pay for road maintenance, you know, potholes and broken guard rails. So, Elisa, you were talking more about, hey, we ain't seen nothing yet, you gotta wait until the state comes in. What do you think? How would that work? Can the state just grab that money from the cities?

ELISA JOYCE BARBA (Western Bureau Chief, NPR News): Yes, they can, actually. There's, I think it's $24 million in gasoline tax here in San Diego alone. They're talking about $2 billion from local governments altogether across the state. And, you know, various mayors have trooped up to Sacramento, Sanders and Villaraigosa and all those people, to say, you know, don't take it from the cities, it's not our fault, it's your fault, which seems to me just to be kind of a disingenuous argument. I think the problems that are going on in Sacramento are ones that are going – that affect us. It's the state budget, they're state services, it's state funding, and I think that – I don't think the mayors really have a leg to stand on in opposing this.

PENNER: All right, Chris Reed, this is – you're taking the lead on this story, so as of Tuesday, the governor said there's a $24 million budget deficit and you're going to be meeting with that governor in about ten minutes.

CHRIS REED (Editorial Board, San Diego Union-Tribune): Billion with a 'b.'

PENNER: A billion. I'm sorry. Billion. Thank you. What does the governor want?

REED: Well, the governor wants to reduce all state services to the federal minimum or close. He wants to close many, many parks. He wants to shutter the Healthy Families program which provides healthcare for poor kids. He wants to cut back all kinds of help to the poor and the disabled. He wants to continue a furlough program that cuts five percent of pay to state employees. And he wants to do just a long, long line of things that he says he has essentially no choice but to do. In this week, though, we've seen some really interesting changes going on in how the legislature's responding to this. The president of the Senate essentially says I'll go along with what Arnold wants except he has – Arnold wants a $4 billion rainy day fund and Senate president says it's crazy to establish a rainy day fund when we're in the middle of a thunderstorm. When the storm is here, we should use those funds now to prevent some of the less – the more severe cuts. But what Darrell Steinberg also said is gigantically significant for San Diego because he said he opposes…

PENNER: Yeah.

REED: …the $1.9 billion grab of money from local governments. And Assemblyman – Assemblywoman Mary Salas told me that she opposed it in an e-mail a couple of weeks ago so I think the presumption that the $1.9 billion grab goes through is questionable. But I do think it's inevitable that the city's going to lose the gas tax. Steinberg offered no objection to the gas tax. Meanwhile, the Assembly Speaker, Karen Bass, on Wednesday confirmed what a lot of us have suspected all along, that she wants a big, new round of tax hikes and that they're going to come up with all these tax hikes that they will call fees and try to pass them on a simple majority vote and essentially dare either Steinberg to block them or Arnold to veto them in a kind of a late month showdown. So it's going to be a amazing, I think, couple of weeks in Sacramento.

PENNER: Okay, so now you've explained what the governor wants, the cuts he wants and the borrowing from the local government, you've talked about the Democratic leader in the Senate, you've talked about more tax hikes. What do the Republicans want that's keeping them from settling on a budget?

REED: Well, the Republicans are largely happy with Arnold's plan.

PENNER: Ah.

REED: I mean, they – they're even more aggressive on things like selling off state assets. But the Republicans believe that this is the Arnold that they thought they were getting from 2003 to 2005, or what that they got for his first two years and not the accommodationist Arnold that they didn't like over the winter. So Republicans, I think, would be perfectly happy to just take Arnold's budget as is. And I think, actually, that in the Senate at least, the votes are there to pass it. It's just a question of how strongly will Assembly Speaker Karen Bass fight for tax hikes to cover the big red ink.

PENNER: Well, the governor is certainly, David, threatening to shut down the government before he agrees to high interest loans to tide the state over when we run out of cash, until – until a budget is settled on. Will he follow through on that threat? Do you see him stopping down state government?

DAVID ROLAND (Editor, San Diego City Beat): I don't really know what's going to happen and neither – I actually talked to Lori Saldana, Assemblywoman Lori Saldana, and she doesn't really know what's going to happen. I asked her to look into her crystal ball and tell me what the deal points were going to be in all this and she didn't really know. It's really going – As Chris says, it's going to heat up in the next few weeks. It's going to be a little bit crazy. You know, the question is whether this is really Arnold Schwarzenegger talking. Certainly – he's certainly proposed – thrown a big slab of red meat for the Republicans in the legislature. They, you know, they eat this up. They, you know, they'd be happy to completely dismantle the social safety net. I don't believe Arnold really wants to do that but I – and so it's unclear to me whether this is posturing as a response to the big loss that he sustained at the polls on May 19th when voters rejected six proposals, one of which would have extended some recent tax increases. So it's unclear to me what's going to happen. You know, I don't think even the Senate – Chris says that the Senate will – the Senate Democrats will go along with Arnold's cuts; I don't believe that they will go along with all of them. I don't believe that they're going to go along with shutting down the state's welfare system, which jeopardizes all the federal matching funds that the state gets. I don't believe they're going to shut down the Healthy Families program and that sort of thing.

PENNER: Well, one – one argument – one proposal from the governor is to sell off some of California's assets, including San Quentin and the Del Mar fairgrounds. Let me ask our listeners about that. How would you feel? I mean, we're a state in trouble. I think we're like bottom of the heap of all the states in terms of our credit rating. How would you feel about selling off some of California's assets to try to balance this budget? Our number is 1-888-895-5727, 895-KPBS. Let's hear from Rudy in Pacific Beach now. Rudy, you're on with the editors.

RUDY (Caller, Pacific Beach): Good morning.

PENNER: Good morning.

RUDY: I just wanted to take issue with Chris Reed's comment about privatizing the trash collection services. What do we do with the tremendous investment that we have in all the city's fleet of garbage disposal vehicles? You know, talking about doing away with the people's ordinance and charging for trash fees is nonsense because we pay for that through taxes then you have to figure out what you're going to do with this fleet. I don't know who or how you would dispose of all that in order to capitalize.

PENNER: Okay.

RUDY: You're still going to be paying, one way or the other, for trash disposal.

PENNER: Okay.

RUDY: Anyhow, that's my comment. I'll take answers off the air. Thank you.

PENNER: Okay. Well, we did talk about city stuff a while back but, you know, I'm not rigid. So, Chris, what do we do with that – with the fleet of trash trucks that we see rattling down our streets on – depends on what day your's is, mine is Monday morning.

REED: What a red herring that is. Oh, yeah, we'll just be stuck with this enormous fleet. We wont be able to sell it to the people we want to privatize, will we? We won't be able to lease it to them. No, we'll just be stuck with this sunken cost. Come on.

PENNER: Well, we're – what do we do with the fleet?

BARBA: Sell it.

PENNER: Sell it.

REED: You sell it to the people that you hire to do the trash services. I want to clarify, I didn't make my point well enough. David's right. I don't think the Senate would pass Arnold's budget as is but given that Steinberg is saying he's going to go – he's got a no new taxes budget of his own that limits the cuts to social and health programs, I think the Senate would vote for that in a second rather than, you know, let the state fall apart as everybody seems to think we're a month away from happening.

PENNER: Is this a functioning state legislature, David?

ROLAND: That's – that's a deep question. It's functioning. It depends on your sort of point of view on whether you think it's functioning well or not. You know…

PENNER: I mean, what are they doing these days if they're not passing a budget? How are they spending their time?

ROLAND: Well, I think they're talk – they're talking about it and it's not all of them. I, you know, they – there are other – there are other laws that they're working on that have nothing to do with the buget.

PENNER: Yeah, but I think one has to…

ROLAND: But it's – and it's really the leadership, the leadership that's working on the budget.

PENNER: Okay.

ROLAND: In fact, Lori Saldana said, you know, it's very hard to get real concrete information about what's really going on, you know, among the rank and file. It's really the leaders that are working on that.

PENNER: They're working on it and they're not imparting information to the rank and file. I mean, if you want to call a Senator 'rank and file.'

ROLAND: Yeah.

PENNER: I have one more question and this really has to do with that rainy day fund. Why is the governor so hung up on a rainy day fund? It's not as though he's going to be in office when the time comes where we have so much excess money that we can actually plunk it in for a rainy day fund.

BARBA: Well, maybe – let's – let's give him the credit. Maybe he's actually thinking ahead and wants to, you know, leave some funds aside for the next generation. I mean, he's saying that to tap into this $4 billion rainy day fund, like Steinberg wants to do, he's hallucinating, Steinberg is hallucinating, it's not going to happen. Again, Schwarzenegger is saying that we need that money in case of natural disasters, in case of earthquakes, in case of fires. But, you know, again, I have to go along with what David is saying, I think that there's a lot of chunks of red meat that are being thrown out here and I think that there is some negotiating room and I think that's – One has to see this $4 billion out there right now, given the kinds of cuts that we're looking at, and the kinds of, you know, real healthcare disaster that looms in the future, it's got to go through.

PENNER: Who's going to feel the brunt of this, Elisa? Is it going to be the poor? The kids who…

BARBA: If it goes through, if the budget goes through and looking like it -- you know, as Arnold Schwarzenegger has put it out, the poor in California are going to feel this tremendously, absolutely tremendously.

PENNER: And what about the kids? What about underserved kids?

BARBA: Underserved, underprivileged kids, absolutely, losing insurance, losing health – access to healthcare, all kinds of…

ROLAND: Also, all – all parks being shut down.

BARBA: State parks.

ROLAND: AIDS…

PENNER: State parks.

ROLAND: AIDS funding. Yeah, state parks. AIDS funding eliminated. You know, funding for medication and outreach for AIDS. The list is – we could spend the entire show just going down the list of Health and Human Services cuts that are being proposed. And what's going to happen is, getting back to the local government angle, the county is going to bear a huge brunt if all these cuts in social services happen. The county is, by law, the last resort when it comes to take – the safety net and taking care of people.

PENNER: Okay. Let's get our last word from Chris Reed. Chris, are you still there or have you…

REED: Yes, I am.

PENNER: Okay. So at this point, what do you anticipate is going to happen?

REED: I think that Steinberg will largely get his way. You know, a $4 billion rainy day fund is a great idea but he makes the point that you don't set up a rainy day fund in the middle of, you know, an ongoing disaster. So the $4 billion will allow them to cushion some of the worst cuts and allow Democrats to live with their conscience. The overall restrained spending and even some real cuts will make Republicans happy, and this will be put through. But the real question will come in coming months when we see whether the cuts in healthcare end up costing more than they save because we're going to see lots and lots of sick people get much sicker because they can't get basic care. It's just a total tragedy that we're going to see in coming months because there's no way that this is not a hugely painful undertaking.

PENNER: Okay, well thank you very much. I want to thank Elisa Joyce Barba, NPR News, from San Diego City Beat, David Roland, thank you, and Chris Reed from San Diego Union-Tribune. I also want to thank our listeners and a big thank you to our callers. And we'll be back again next week. This is the Editors Roundtable. I'm Gloria Penner.