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CAPITOL JOURNAL

Hand the budget to voters

May 19, 2008|GEORGE SKELTON

SACRAMENTO — Maybe it's about time for some very drastic ballot box budgeting by California voters.

Ballot box budgeting -- voters stepping in and calling the shots on spending and taxes, preempting their elected representatives -- has been the scourge of Sacramento. Initiatives that cut or raise taxes and set aside money caches for pet programs bind politicians in straitjackets and cripple their ability to set priorities.

That said, legislators currently are so spooked by voters and special interests, and polarized by political ideology, that they seem to be hopelessly heading once again into another summer stalemate of budget brawling.

The Legislature and governor have failed in 17 of the past 21 years to enact a state budget by the July 1 start of the fiscal year, creating havoc with school districts, local governments and private vendors. In seven of those years, the politicians quarreled into August or beyond.

So perhaps this year the lawmakers themselves should ask for public intervention. Extend the old budget, with some trims, through the November election and give voters a choice:

Raise taxes? Or take a machete to government -- fire teachers, balloon class sizes, lay off cops, slash healthcare for the decrepit and poor, close parks and release felons?

Capitol politicians could let their constituents decide the state's direction -- ask what they actually want and receive a direct answer.

There must be all kinds of reasons why this wouldn't be practical or even legal. But I've noticed over the years that the Capitol crowd can bend almost any rule if it wants.

Ordinarily, this would be too early in the budgeting process to be thinking so pessimistically. But the Capitol mood this spring is especially acidic. The situation is desperate -- a projected $15-billion deficit (roughly 15% of the general fund) after lawmakers already filled an $8-billion gap. The prospect for compromise looks bleak. No one seems to envision a path out of the legislators' quagmire -- one that can receive the necessary two-thirds majority vote, anyway.

Gov. Arnold Schwarzenegger tried what he regarded as a middle approach last week in revising his proposed $144.4-billion budget ($102 billion of it general fund). He butchered social programs for the needy, but kept school funding basically level. He proposed increasing revenue by expanding the lottery and borrowing $5 billion immediately -- $15 billion over three years -- against future profits.

If legislators and voters didn't buy the lottery idea, the governor offered lawmakers a backup: Raise the sales tax by 1 cent on the dollar for up to three years.

Screams and wails. No way on the social program whacks, Democrats vowed. Hiking the sales tax was out of the question, Republicans declared. The lottery plan confused minds and rolled eyes in both parties.

But it's time to get cranking on a budget compromise.

"The media should take a survey of each member of the Legislature," says state Finance Director Mike Genest, "and ask, 'Are you willing to be a member of the first Legislature in California history when the state defaults on its loans and bounces paychecks? Are you willing to let the state go bankrupt and fall off a cliff?'

"There are worse things than crossing an ideological line."

That's not just idle talk. Unlike previous summer standoffs during Schwarzenegger's reign, the state this time could run out of cash. The latest projection is that the till could run dry in early September.

Normally, the state would borrow on the short-term market by selling routine revenue anticipation notes. But to do that, it needs an enacted budget. And it must begin the borrowing paperwork about six weeks before receiving the cash. That means passing a budget by mid-to-late July.

If there is no budget, the state will be forced to rely on much more expensive borrowing, selling revenue anticipation warrants. State Treasurer Bill Lockyer estimates the warrants would cost taxpayers $100 million more than the notes in order to borrow the needed $10 billion.

"That $100 million could mean a couple thousand teachers," Lockyer notes.

Also, the state's credit rating undoubtedly would tumble, raising the cost of building projects financed by bonds. And if payments to vendors are delayed, the treasurer adds, the state will be out "tens of millions of dollars in penalties and interest."

This year, he continues, "we're really in uncharted territory."

Democrat Lockyer, a former state Senate leader and attorney general, traces California's budget woes back to the 1978 passage of Proposition 13 -- the historic property tax cut -- and Sacramento's subsequent decision to bail out revenue-short local governments and schools.

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