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Reality Takes a Vacation on the California State Budget

California Capitol.jpg By Lynn Suter
Legislative Advocate

“I come from a dizzy land where the lottery is the basis of reality.”

Reality is on vacation this week. Jorge Luis Borges wrote the quote above from “The Lottery in Babylon” in 1957. Sounds a lot like the basis of reality in our own sunny California 67 years later. Sacramento, Babylon, wherever. The lottery scam is one of the issues leaders want to settle in their meeting with the Governor today. It’s a plan that doesn’t work. There’s a whole list of other gimmicks that won’t work either, according to legislative Dems. Accounting tricks, loans, advances, detractions vs. massive billions in new taxes to get the state back on track. That about sums up the two sides in what became increasingly entrenched mind sets this week, as the four leaders suffered their first major blow-up. The Assembloids are already on semi-vacation, and Monday SenPresProTem Perata sent most of his team packing until somebody on some side cries “Uncle!” and they get back to work.

That Squeaky Fifth Wheel: The Governor took a break from his fireside chats this week to publicly berate the legislature for its inaction. This morning he called the Fearsome Four to his office for a rare Big Five meeting, where he undoubtedly raked them over more coals. Scolding the four leaders may play well on the front pages, but we doubt that tactic met with an enthusiastic response in the meeting this morning. Apparently, the meeting resulted in a stake through the heart of the lottery proposal. That will make the path up the Red Ink Mountain a little rockier. If the Gov is leading at all, he will confront Republicans who want to cut basic programs and education, invoke loan provisions of Prop 1A and Prop 42 and Democrats who insist that closing tax loopholes and raising PIT on corporations and wealthy individual taxpayers—to the tune of $8 billion or so—will put the state back on its feet. As you can see, there’s not much new around the old golden dome.

Reports after the meeting indicate it was relatively smooth sailing, and that the Leaders will, in fact, try to put something together for a vote by July 28. Whether or not any deal has a chance that soon is hard to tell at this juncture.

How Long is Too Long? Who knows? We’re into the blame game chapter of the annual summer sequel. Lots of foot stamping. Fits of rhetorical excess. The Rs flatly rejected tax increases this week, claiming they can get a balanced budget without new revenues. They’re trotting out all the old gadgets plus a few new thematic variations to prove Dems are needlessly taxing everything in sight. They blame this year’s mess on past actions by Dems, on their refusal to “shrink government” and their bloodlust for spending. “Spendaholics” was one of their favorite epithets this week. (And whose idea was that little $6 billion cut in Vehicle License Fee a few years back?) Rs do indeed have a list of multi-dimensional accounting and borrowing moves that, along with some questionable arithmetic, might almost balance the budget on paper.

They’re touting a smaller emergency reserve, and no recognition of such in-your-face expenditures as battling the Great California Blaze of July, 2008. Their voodoo doo-dads include borrowing from other voter-approved funds like transportation and public services to pay for expenditures required of the General Fund this fiscal year.

In an about-face of sorts, the Dems blame the Reeps for perpetuating the never-ending budget deficit in an era of lower economic expectations, insipid housing market and chaotic consumer debt. They insist gimmickry will only serve to perpetuate the status quo and that an overhaul of the tax system including new revenues is the only way to get the state back on track. It’s hard to argue that our kinky Personal Income Tax system doesn’t need reform. Invoking borrowing features of Props 1A and 42 will just make next year that much worse, they say. D’s say that the additional property tax shifts suggested by Rs continue California’s present propensity to mortgage its future instead of solving current and on-going structural problems. The Ds sound like the fiscal conservatives until the question of tax increase rears its expensive $8 billion head.

And so it goes.

Lynn Suter of Lynn Suter & Associates is a legislative advocate based in Sacramento. Her firm primarily represents local government entities, including counties, cities, and special districts.

Posted on July 18, 2008

Comments

Get on with rectifying the budget and get it passed by end July. They go through this BUT it must stop. Califoria is suffering enough. Get the budget passed. Both parties do your jobs.

Thank you.

Posted by: s. wakeley at July 18, 2008 09:07 AM

Politicians in Sacramento are just plain clueless.

California faces a $15 billion budget deficit and Democrats who rule the state Legislature have proposed closing the gap with a $9.7 billion tax hike on business and "the rich." There's a movie that describes this idea: Clueless.

The plan would raise the top marginal income tax rate to 12% from 10.3%; that would be the highest in the nation and twice the national average. This plan would also repeal indexing for inflation, which is a sneaky way for politicians to push middle-income Californians into higher tax brackets every year, especially when prices are rising as they are now.

Good bye AAA. Good bye Toyota.

There is already a reverse gold rush going on in California and the evidence points powerfully toward high tax rates as a culprit. Census Bureau data show that, from 1996-2005, 1.3 million more Americans left than came to California. And the people who are leaving are disproportionately those with higher incomes: the very targets the Democrats want to tax more.

Posted by: Leaving the State at July 18, 2008 09:24 PM

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