Majority-Vote Budget Solutions Creep Back Onto The Table

I think the sand has come out of the eyes of most everyone in Sacramento, and seeing their May 19 solutions sinking, the legislative leadership has returned to the drawing board, where a deficit somewhere between $14-$16 billion dollars for FY 2010 must be wrestled with. Unsurprisingly, conservative lawmakers and the media have foregrounded cuts as the first among all other options.

So where might they look?

For starters, the state would spend down its $2 billion reserve, Steinberg said.

State leaders are eyeing a possible $5 billion reduction in school spending allowable under the state's constitutional education guarantee when revenue drops. Education groups say that could threaten valuable programs and prevent schools from rescinding layoff notices they issued this spring.

"Schools would have to look at extracurricular programs, library hours, transportation," said Scott Plotkin, executive director of the California School Boards Association. "An awful lot of things not required by the law that are desirable are going to start falling by the wayside." [...]

Schwarzenegger aides have warned public safety groups he may propose an early release of up to 38,000 prisoners, split between 19,000 undocumented immigrants and 19,000 low-level offenders. The governor may also seek to house those who commit "wobbler" crimes in county jails rather than in state prisons.

The plan would save an estimated $335 million in 2009-10 and $849 million in 2010-11.

It proposes to hand over undocumented immigrant prisoners to United States Immigration and Customs Enforcement, though public safety officials questioned whether the federal government would agree to such a plan. The plan also would release 19,000 "nonserious, nonviolent, non-sex offense" inmates in the final six months of their sentences.

I don't see ICE terribly happy with the state plopping 19,000 undocumented immigrants in their laps.

On the flip side of this, I think it's important to recognize the solutions out there that involve no cuts, ones that must become part of the conversation immediately. For example, federal guarantees for municipal bonds would save the state billions of dollars that could be diverted to closing the budget gap. While it appeared that Congress was unmoved by this proposal, the Treasury Department could step in.

The Treasury, for instance, is working on a plan to help cities, school systems, hospitals and other agencies borrow money at cheaper rates. The credit crisis made it more expensive to get money for buildings, ballparks and other projects. The problem has been particularly acute for those with lower credit ratings, which require them to pay more for their bonds.

Officials are considering options including the creation of a federal agency that could back the bonds, aiding bond insurers that backstop municipal bonds or simply providing subsidies that could lower the rate for municipalities.

This is not a direct pass-through to the budget, but the savings would be felt in future scorings of overall revenue and spending.

More important, the Senate leader has started to talk about the majority vote fee increase once again.

But making deeper cuts into social services begins to run against logic, Steinberg said. With CalWorks, for instance, the federal match is "so significant," that to cut $1 is to turn away $4 or $5 in federal dollars.

"At some point, it makes little sense to cut even deeper," he said. "But, let's assume we make significant and broader cuts. Then, you're looking at corrections and public safety. ... I wouldn't take it as a complete given that the other side is really willing to vote for a cuts-only strategy."

If Republicans don't go along with new revenues, Steinberg said Democrats may have to resort to a simple majority vote on fees, the same tack he took last winter before Schwarzenegger vetoed the effort to force negotiations. "But we're not going to lead with that," Steinberg said.

They ought to go ahead and lead with it. The problems we face in Sacramento are governance problems, which favor solutions that kick the can down the road instead of facing up to current challenges. In such an environment, bold solutions that finally remove the structural revenue gap and end budget dysfunction are really the only step forward. The majority-vote fee increase is a bold, albeit short-term, step, certainly preferable to counter-cyclical and counter-productive spending cuts, and the pressure on the Governor to accept it will increase as the summer marches on. The long-term solution, of course, comes in building the rationale for restoring democracy to the legislature by ending the conservative veto over the process and returning to a simple majority to run government.