Claremont Insider: Sacramento Report

Tuesday, July 7, 2009

Sacramento Report

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The state's budget impasse continued over the 4th of July weekend. California, as you have heard, has begun issuing registered warrants, or IOU's, because the state legislature and Governor Schwarzenegger have been unable to reach an agreement on how to bridge the budget gap. The IOUs began going out after the 2008-09 Fiscal Year ended on June 30.

Local governments, including the City of Claremont and the Claremont Unified School District, will just have to wait to see how much of a hit they're going to take once all the dust settles. Incidentally, while the bickering in Sacramento dragged on last week, the state's budget deficit rose by a couple billion dollars, from $24.3 billion to $26.3 billion. Hey, guys and gals, you're going the wrong way!

And some of our fearless leaders aren't going anywhere, right way or wrong way. State Assembly Speaker Karen Bass (D-Los Angeles) yesterday boycotted a meeting of the "Big 5" (the heads of both parties in the State Assembly and State Senate, plus the Governor). According to the Sacramento Bee, Bass is complaining that the Governor is pushing things unrelated to the budget crises (things like permanent fixes to avoid this situation in the future):

The Republican governor and legislative leaders are still discussing various permanent changes to state health and welfare programs that would tighten eligibility and Schwarzenegger believes would combat waste and fraud.

Democrats and labor unions insist that the governor is overstating the extent to which the state can save money from such changes, such as fingerprinting In-Home Supportive Services recipients and providers. But Schwarzenegger believes that such changes can bring in real cash, as much as $400 million to $500 million in IHSS alone -- and $2 billion in 2009-10 for all of his various changes to state programs.

Bass boycotted this morning's meeting on grounds that Schwarzenegger is demanding these changes in exchange for agreeing to fewer cuts. She said these reforms are "unrelated" to the $26.3 billion deficit and that leaders should instead work on other solutions that would bridge that gap, with a promise to consider the permanent program reforms later. She also warned she may not attend the afternoon Big 5 meeting.

Bass' concern about any cuts in health services is understandable. Groups like the Service Employees International Union are some of the biggest donors to Democratic candidates, and any reduction in state health spending means fewer SEIU members. So Bass' willingness to tolerate a little waste and fraud makes sense when you see where her money comes from (what's a few billion between friends?). Hence the bait-and-switch: let's just patch things over and work out a real fix at some indefinite future time. Bass (and a good number of Republicans as well) doesn't want to admit that the budgetary landscape has shifted dramatically and that yesterday's political games are so, well, yesterday.

Meanwhile, as the debacle drags on, Fitch Ratings has cut California's long-term bond rating from A- to BBB. As a result, Californians will have to pay much more in interest in order to float bonds for things like big public works projects. The SacBee tells us how much more:
State Treasurer Bill Lockyer last week warned that a rating downgrade to BBB+ -- one grade higher than California's new BBB -- could result in an estimated $7.5 billion in interest costs over a 30-year period. California last had a BBB rating between December 2003 and September 2004, when the state grappled with a significant budget deficit.

Lockyer spokesman Tom Dresslar said that California will pay higher costs the next time it tries to borrow money for public works projects. He said he the state could be saddled with a lower credit rating for some time.

"The last time we got downgraded in this type of environment when we issued IOUs, it took years to recover," Dresslar said. "So even when we adopt a budget solution, our rating probably won't go up magically overnight."

The New York Times Magazine last Saturday surveyed the contenders for California's 2010 gubernatorial election, and the budget impasse formed the backdrop to the piece, which was titled, "Who Can Possibly Govern California?" The NYT Magazine piece described what Californians already know to be the root of the problem:
Passing a budget or increasing revenues in California is dicey in the best of times. The state constitution requires that two-thirds of the Legislature agree on a budget or higher taxes — the kind of overwhelming political consensus, in other words, usually reserved for amendments to the federal Constitution. (California is one of just a handful states that require a two-thirds vote to pass a budget.)

Complicating matters further, the major parties in California are both effectively controlled by their most partisan elements, a byproduct of gerrymandered voting districts that force lawmakers to appeal to their ideological bases. After many earlier failed efforts, a ballot initiative championed by Schwarzenegger finally passed last year that will redraw the districts. But that won’t take effect until after the 2010 census, so for now the two parties are largely controlled by what Bruce Cain at Berkeley calls “the Taliban.” The result? Gridlock in Sacramento, a standoff between the parties of “no more taxes” (Republicans) and “no more cuts” (Democrats).

The Taliban! You have to love that truth of the term and its emphasis on the blame both parties and the interests that back them share for this mess.