Legislature Home Stretch Update

There's lots of significant news in the Legislature's last week regarding various bills, and it's extremely difficult to keep up with it all, probably by design. I should point out that, while the legislative calendar has an end date, there's no actual reason for some of the forced bottlenecks that result in hundreds of bills being passed at the last minute. It creates a shroud of secrecy in which special interests rule, and saps the public trust. A Democratic leadership actually interested in positioning government as somewhat decent would remove these forced bottlenecks from the internal legislative rules and allow bills to be approved on a rolling basis. That said, this is the system we have now, and here's a bunch of news about various bills:

• A new bill would exempt non-General Fund workers from furloughs. This would reverse one of the dumbest provisions in the budget bill, the practice of forcing furloughs on workers not paid by state government, saving almost no money and depriving people of needed services. Of course, the Governor will probably veto this one, because he hates admitting how wrong he is.

• Democrats on that vaunted water committee have decided against floating a bond to pay for any restoration or overhaul of the Delta. This means Republicans won't vote for it, and very little will come of this very important committee thrown together at the last minute. Some conference committee reports are here, but a deal looks remote, as it would need votes from some of the empty chairs in the Yacht Party.

• One bill that has cleared both chambers would set up "Education Finance Districts", "in which three or more contiguous school districts can band together to try to increase local taxes." This is a small step to make it easier for districts to pass parcel taxes to fund schools, but at this point every little bit helps. The 2/3 rule for approving such taxes would remain.

• With all the talk of health care reform, it's notable that an anti-rescission bill has once again passed the legislature. The bill would also simplify insurance forms. Last session, Arnold Schwarzenegger vetoed it. There's something you don't hear much about from the Democratic leadership - Arnold Schwarzenegger vetoed a bill that would have banned insurance companies from dropping patients after they get sick. He sided with the forces of insurer-assisted suicide. This is your modern Yacht Party on this issue:

"Any of those who have read the various exposés in the Los Angeles Times and others . . . is aware that health insurers have admitted and acknowledged they engaged in a form of post-claims underwriting," said Sen. Mark Wyland (R-Escondido). "It is unethical and, considering what some of these people have endured, it really borders on the immoral."

However, Wyland said he would not vote for the bill because the Department of Insurance has proposed new rules to solve the problem, and he wants to see how they work.

Hey, give 'em a chance to see if the immorality stops! If not, we can think it over.

• The Legislature may extend a homebuyer's tax credit passed in a previous budget agreement that was nothing but a bailout for developers. It only credited new construction, and was structured only to benefit high-income households who could afford new construction. By the way, sales of new units have fell since this was enacted, so it's not even meeting its intended purpose. But it's a giveaway to a special interest, so off the money may go, even though we cannot afford it at this time.

• A bill to ban bisphenol A (BPA) from children's products was delayed after the Assembly couldn't muster 41 votes. The debate in the Assembly last night was pretty fierce.

• Cities and counties reacted angrily to a proposed bill to slow local government bankruptcies until vetted by the California Debt and Investment Advisory Commission. On the merits this looks to be a bill that would install more control on locals from Sacramento, although there are arguments on both sides. But mainly it's about the fate of union contracts in local bankruptcies, I don't think either side would deny that.

• A roundup of other bills passed yesterday can be found here.

The $3 Million Dollar-A-Day Delay

Despite the assumed end to the prison crisis, there's still no bill to clarify the $1.2 billion dollars in savings assumed from cuts in the July budget. The Assembly passed a bill that fell $200 million dollars short and had almost no prison reform in it (some parole reform, but no prison reform), and the Senate has yet to take that bill up. After word yesterday that the Senate would do so, Darrell Steinberg backed away from it, seeking to give more time to the Assembly to add more reform and more cuts into the bill. Because the bill only requires a majority vote, it takes effect 90 days after passage. Which means that every day with no bill costs the state $3.3 million dollars. This is the consequence of so-called fiscal conservatives in the Yacht Party, as well as their higher-office-seeking bretheren in the Assembly Democratic caucus, wanting to look tough on crime. As the State Worker notes, this delay is taking a daily hit on the savings gained from furloughs:

Here's one way that furloughed state workers could look at this: The CDCR budget impasse is whittling away at savings from furloughs. If you take that $3.3 million and multiply it by the 70 days from July 1 through today, you realize the state has burned through $231 million.

A single furlough day cuts about $61 million from the state's payroll, although not all of that savings is in the general fund. (The rounded math: $2.2 billion divided by 36 furlough days in the fiscal year.) If you narrow it down to just salaries that the administration defines as being in the general fund, one furlough day equals about $35 million. (Double check our rounded numbers: $1.3 billion divided by the 36 furlough days.)

In other words, this budget-stalemate-in-miniature has squandered the equivalent of about four furlough days for everyone or nearly seven furlough days if you look only at general fund employees.

Other states have used smart on crime policies to reduce spending without any loss in public safety. They are taking new looks at non-violent offenders, relaxing draconian sentencing policies, targeting parole resources to those who need supervision and concurrently lowering recidivism rates through rehabilitation. Right now, California has the exact wrong set of policies on prisons.

In fact, California is nationally known "for having the most dysfunctional sentencing and parole system" in the country, according to Stanford University professor Joan Petersilia, a criminologist who has spent years working with state officials trying to implement reforms.

"We're too harsh and too lenient. Simultaneously," Petersilia said.

Our mix of tough laws and fixed terms doesn't give prison officials the flexibility to push low-risk offenders toward rehabilitation and keep dangerous criminals behind bars.

But reform efforts haven't gained public traction because we're too busy trying to keep people behind bars -- with Jessica's Law, Megan's Law, the three-strikes law -- to take a hard look at whether locking up more people actually makes us safer.

"The public doesn't understand how illogical the whole system has become," Petersilia said. "We think that somehow we've created something that is able to call out the most dangerous people, send them to prison and keep them in for a very long time.

"And the public is willing to pay whatever it takes to get that type of crime policy."

I disagree with the last sentence. The public is willing to be frightened into initiatives that do nothing for public safety and just spend money needlessly, because they've seen no leadership on the other side for an alternative conception of how to protect the public sensibly and best manage our cirminal justice system. Nobody has argued in public for a more intelligent system for so long, that the public willingness to believe in its possibility has atrophied. We can keep the lock-em-up policies or we can look to a better future. Either way, we're blowing $3 million a day while some Assembly Democrats go on a desperate search for their spines.

Pushback: SEIU Potential Walk-Out, Corporate Tax Cut Repeal, Court Overturns Medi-Cal Cuts

Rumors ran rampant yesterday that state employees, pushed too far by yet another salary cut (totaling 20% over the course of the year), would potentially strike.

Doug Crooks, Director of Communications with the Service Employees International Union’s local 1000, which represents more than 95,000 state employees, declined to confirm the rumor but said any decision would be made by the employees through an authorization vote.

“In the first place, that decision hasn’t been made yet,” said Crooks about the plan to strike. “That decision hasn’t been made yet. We are definitely going to strongly oppose and do everything we can to prevent the governor from imposing a fourth furlough day. But check back with me Monday.”

“The bottom line is we negotiated with this governor in good faith and we agreed on a contract that would save $340 million dollars immediately, and if applied to all state employees it would save the state a billion dollars. That’s billion with a ‘B.’ And for the governor to undermine that contract now is beyond irresponsible. He’s made the state employee a pawn” in the state budget negotiations.

“Well actually, it’s a five percent cut on top of those three furlough days,” explained Alicia Trost, a spokesperson for Senate leader Darrell Steinberg. “It’s simply a scare tactic by the governor, yet another, and we feel the state workforce has already paid their fair share. What’s worse is that it would have a horrible effect on the economy if state workers were to lose up to 20 percent of their buying power.”

By the way, Mr. Stogie just lost a furlough case, with a judge tentatively ruling that he cannot furlough the legal staff of the State Compensation Insurance Fund, which has emboldened the larger pool of workers in SEIU. But more to the point, in the world of Arnold Antionette and the Yacht Party, workers making a median income getting 20% salary cuts while the largest corporations doing business in the state get a massive corporate tax break is considered "everyone paying their fair share."

Speaking of which, Lenny Goldberg offers the text of an initiative to repeal the negotiated-in-secret corporate tax cuts and save the state $2.5 billion dollars a year. Opponents typically respond with race-to-the-bottom rhetoric about businesses leaving the state, which isn't true, by the way.

Finally, a federal appeals court ruled that California cannot cut Medi-Cal reimbursements, in an opinion written by a George W. Bush appointee. The familiar pattern of breaking the law to cut the budget often runs up against judicial review, and so the criminals in Sacramento - considering what they're attempting, I don't consider that hyperbole - will have to try something else to achieve their long-sought destruction of the social safety net.

It's Now A $26 Billion Dollar Problem

According to Mike Genest, the Governor's Director of Finance, the $24.3 billion dollar problem expanded by $2 billion dollars last night. He's not taking into account the interest on IOUs, of course, or the expanded borrowing costs. But he's factoring in the education spending that now cannot be cut below a certain level because of "maintenance of effort laws." Genest said that higher education has agreed to keep their books open an extra month, until July 31, meaning that the $1 billion in higher education cuts to the 2008-09 budget year could still be enacted. This is basically fuzzy math, since the additional expenditures due to the Governor's stubbornness do not get addressed.

What the Governor wants to do now, to recoup those cuts under Prop. 98, is to suspend the law. Once again, the reckless lawlessness of the Governor and his allies, out of an unwillingness to deal with budget reality, exposes itself. In addition, the Governor has backed off on the outsized budget reserve as well as eliminating vital programs like welfare, state park closures, children's health care and student grants. Of course, this has been replaced by unrelated items like cutting public employee pensions and social services fraud inspections, both of which would do nothing to the deficit in the near term.

The Governor has declared a state of emergency, under Prop. 58 rules. This means that the legislature has 45 days to come up with a solution on the budget, and if they fail to do so, they cannot adjourn or act on other bills. This is a moot point, since the Governor has vowed already to veto any non budget-related bill until a solution is reached. This just brings the legislature into special session (the fourth since December, I believe).

In addition, the Governor announced three furlough days a month for state employees to save cash, which amounts to a 15% pay cut. And IOUs will get issued tomorrow. They will have an interest rate for the banks which accept them of between 2-5%.

Here was my favorite part of his press conference:

Guv gets booed by some who watch him leave press conf and walk back to his office.

By the way, there's a new hashtag to find all budget news on Twitter: #cabudget.

Fed Up

Late last week I received a statement from an anonymous state employee working at the Employment Development Department, which included some pretty stunning allegations about how Arnold Schwarzenegger and the Legislature are dealing with state workers. For example, the Governor would reduce all state employee salaries by 5%, including ones not paid out of the General Fund but through other dedicated resources, including federal dollars. Our budget deficit is a General Fund crisis, not a crisis of those other resources, and so there is absolutely no necessity to reduce those salaries. In addition, the Governor has proposed furloughing such workers, an illegal action since state law excludes Special Fund workers from these types of job reductions. The State Compensation Insurance Fund just successfully sued the Governor over this matter.

Perhaps worst of all, the Governor and the Legislature have in recent years used special fund money to balance the budget. This is EXACTLY what Props. 1D and 1E would have done, moving dedicated funds into the General Fund. And yet the Governor and a compliant legislature goes ahead and does it anyway when the funds at risk are more murky and have lower-profile champions. This parallels the Governor, despite failing with Prop. 1A, budgeting a $4.5 billion dollar reserve for the upcoming fiscal year, despite the "rainy day" we're currently facing, essentially moving forward in violation of the will of the voters with a spending cap.

Democratic lawmakers are floating a plan to use that projected reserve, but resist augmenting that with new revenues, leading to $19 billion in additional cuts and borrowing from local governments, really a terrible plan considering the alternative options on fees. The unions are getting impatient with the lack of leadership, and advocacy groups seem more interested not in working with them but just going the heck around them. This note at the bottom of the LAT piece from Lenny Goldberg is the buried lede:

The next step for unions could be going directly to voters. One labor-backed group, the California Tax Reform Assn., has prepared a possible ballot measure to repeal the three corporate tax cuts Democrats agreed to in the last year to get GOP support for the budget.

"It's ready to go," said Lenny Goldberg, the group's executive director.

Reading the statement from the state employee, which I've posted below, gives you some of the reasons why workers feel they have no allies in Sacramento anymore.

*************

I'm a California State Employee and I'm currently working approved overtime in the middle of a state financial crisis. I work for the Employment Development Department (EDD). EDD is conducting massive hiring. In the two months alone, my office alone has hired 30 trainees and is continuing to hire. This action is allowable because approximately 90% of EDD's budget is paid directly with federal dollars. The majority of the remaining balance is paid by seven other special funds. Only one quarter of a percent derives from the General Fund.
Gov. Schwarzenegger would have Californians believe that all state employees are lumped into one sole classification. In reality, state employees work for departments that fall into one of two categories: General Fund or Special Funds.

Special Funds Departments budgets are allocated by either self sustaining revenue funded entirely on fees or premiums and/or have been designated for a sole purpose by California Voters or funds from the federal government. There are 51 state departments whose budgets are derived from the Special Fund. The current State financial crisis is a General Fund crisis, NOT a Special Fund crisis. Politicians and the media fail to emphasize the distinction. They would have you believe that there is one state indistinguishable budget.

For example, The Department of Alcoholic Beverage Control, The Department of Community Services and Development, and The State Council on Development Disabilities and are funded entirely out of federal dollars and receive no General Fund dollars. The Department of Motor Vehicles and California Highway Patrol are funded entirely out of special funds.

I and my co-workers are at a loss to understand why the governor is proposing to reduce all state employee salaries by 5%. His action is illogical. Special Fund employee salaries are not paid out of the General Fund. This is wasteful management of resources and of personnel. There is no justification for this action. Why reduce an employee's salary when there is no necessity to? Why continue to hire if the state is in cash flow crisis? Anyone can review the State Personnel Board's web site (http://jobs.spb.ca.gov/wvpos/search_p.cfm?showAll ), and can see for themselves that the State is still hiring. There are currently over 2000 job vacancies with the State of California.

On top of the proposed 5%, the governor implemented a two day furlough for all state employees. The reality is that I am mandated to report to work on my furlough days to meet public need and not get paid for it. The official policy is that the furlough days are accrued and can be taken at a later date. However, due to the high work load, requests for time off in exchange for furlough days are denied. There is a deadline for which all furlough dates must be taken: June 2010. Use it or lose it. The California Attorneys, Administrative Law Judges and Hearing Officers in State Employment have filed a lawsuit on behalf of its Special Fund Employees as being unlawful. Interested parties can read the brief at http://www.sacbee.com/static/w...
The lawsuit cites how each department is funded and its impact on the General Fund.

My co-workers and I work overtime to recoup lost hours just to pay for my necessities of life, such as my food and my mortgage. Contrary to popular opinion, the average employee does not make six figures. In issuing furloughs and the proposed 5% cut, the state increases its budget deficit in that it loses income tax revenue from state workers.

In recent years, the governor and the legislative branch have dipped into the Special Funds Budget to cover the General Fund deficit. Gov. Schwarzenegger balanced last year's budget by borrowing $574 million from various special funds. Where does this money go? How is it repaid? No one truly knows. Californians rejected his budget measures in the May 19 special election to shift money from special funds for mental health services and early childhood care and education. Why is this practice still being continued?

On February 5, 2009, The Los Angeles Times reported that the U.S. Labor Department objected to EDD employees being furloughed since the salaries were primary paid with Federal dollars. (http://articles.latimes.com/2009/feb/05/business/fi-unemploy5) The Labor Department notified the governor that the furloughs could impact EDD's performance in meeting criteria for the timely handling of unemployment claims and appeals. The Labor Department notified the EDD that failing to comply could violate Social Security laws. The governor was unmoved.

Similar to 911, this is a game of power and politics. It is a tactic to instill fear in the general public to justify actions that would not normally be endorsed or approved. The governor should follow the President Obama's lead and use a scalpel rather than an ax to make precise cuts. The governor can not have budget reform without the trust of the people and without providing the state with crucial and vital details of the nature of the budget.

Signed
Employee Proudly Serving the State of California

The Furloughs Didn't Work

Incredibly, forcing people to take off two days a month against their will not only lowered morale and increased inefficiency at state agencies, it didn't put much of a dent in the budget crisis. Revenues are still coming in short and will for the forseeable future. So the Governor put the hammer down.

Gov. Arnold Schwarzenegger will move to lay off as many as 10,000 state workers if lawmakers fail to pass a plan to close California's nearly $42-billion deficit by the end of the week, an administration spokesman said this morning.

Schwarzenegger's press secretary, Aaron McLear, said at a media briefing that the administration would send out pink slips Friday, absent a budget deal. The layoff process generally takes about six months for state employees due to union rules and other legal considerations, and bureaucratic procedures the state must follow. The move would save the state $150 million annually if the jobs are eliminated by July 1, according to McLear.

This would have been a good thing for the Governor to be working on, I don't know, yesterday, instead of jetting to Idaho. It turns out that Arnold was making a scheduled appearance at the Special Olympics - but he cancelled a similarly scheduled appearance at the Republican National Convention when budget talks were ongoing last year, and if anything the crisis is worse now. This is another case of Arnold making stern pronouncements in the media instead of doing his job. He is a failed governor and frankly the press are the only people who will listen to him.

...I should mention that George Skelton came out yesterday for lowering the 2/3 requirements for budgets AND taxes, albeit on the latter he added a caveat that tax increases can't be used to grow government above the rates of inflation and population growth. I'm not much for the caveat, but Skelton is a bellweather for the media elite in California, so this is important.

Hope There's Fresh Powder, Governor

Sources say that Gov. Schwarzenegger is spending the day in Idaho. Now, he normally visits Idaho to ski in Sun Valley, so I'd have to assume that's the reason for this trip. But we're in the midst of secret budget negotiations, and right when a deal is nearing, the Governor leaves for the ski lifts and the hot cocoa?

Here are some images of Californians who won't be making the trip out to Sun Valley now or probably any time in the future. First, the jobless who will be lucky just to receive their benefits:

California not only has the nation's third highest unemployment rate but its Unemployment Insurance Fund has taken a bigger beating than any other state, a new report from the National Conference of State Legislatures indicates.

California's UIF dropped from $639.2 million to just $71.8 million during 2008 as unemployment soared to about 1.5 million workers, forcing it to join six other states in borrowing money from the federal government to keep the checks rolling out to the jobless.

Then there are the state employees, who got their own vacation last Friday, albeit one of the "forced and unpaid" variety, and the effect on the cities that serve them was immediate and negative:

An unpaid holiday for its largest employer was the last thing Sacramento needed Friday.

Already suffering under 8.7 percent unemployment, the region endured its first day of state-worker furloughs. Most state offices stayed closed, while an appeals court denied a last-ditch union petition to block the furloughs.

The effect was immediate. Traffic was light through much of downtown and midtown Sacramento, where tens of thousands of employees normally congregate, and business was down at numerous restaurants and stores.

"It's tough to be a small business downtown, and for them to take out a Friday," said Ryan Rose, manager at Zocalo restaurant east of the Capitol. Friday is usually his busiest day for lunch, and though business was better than he feared, it was lighter than usual.

And then there are those serviced by county governments, who are seeing those services vanish due to the delay in payments from the Controller because of the cash crisis.

What exactly is the controller withholding from counties?

The controller is getting ready to delay the state's February payment to counties for social service programs. Meanwhile, the Schwarzenegger administration is proposing to defer payments for up to six more months as part of a new state budget agreement.

How much money are we talking about?

The state controller is looking to delay $172 million in payments to counties for February, according to the California State Association of Counties.

What is that money for?

That money is for social service programs like foster care, food stamps, child welfare, adoption programs, adult protective services and more.

What happens in March if counties don't get their state payments this month?

It depends on the county, but many will not be able to cover the cost of state- mandated social service programs. Sacramento County spent most of its reserves in recent years and doesn't have enough to pick up the tab.

With the state at rock bottom and some kind of deal urgently needed, it's curious that the very man who railed against lawmakers for dawdling and dithering and leaving the state during budget negotiations for years is doing the EXACT SAME THING himself.

Happy Holidays!

Welcome to furlough day, that time of year twice a month where state workers take a (government-imposed) break, stopping to smell the roses, think about the good times, and just be.

Scores of state offices will be closed today as more than 200,000 workers take their first unpaid day off in response to California's deepening fiscal crisis.

That means Californians won't be able to take a driver's license test or conduct business at some state office buildings [...]

Among the closed offices will be all Department of Motor Vehicles outlets, Fish and Game, Food and Agriculture, Social Services and the Commission on Teacher Credentialing.

The Department of Mental Health will be closed, but mental hospitals will remain open. Workers Compensation offices will be closed.

State parks, which generate revenue from entrance fees, will remain open, as will state courts, the secretary of state's offices, California Highway Patrol offices and campuses of the University of California, Cal State and California Community Colleges. Public safety employees are exempt from the Friday furloughs and can schedule their days off differently.

I particularly enjoy that the Governor's Office of Emergency Services is closed. Good thing no emergencies happen on a Friday! I'd ask Arnold's press secretary about that one, but he's probably not working today.

The other offices that are closed are the Employment Development Department and the Unemployment Insurance Appeals Board. The salaries of those employees are largely paid by the US Department of Labor, and so, while very little or no money will be saved, the jobless will find it harder to collect, which is probably the point.

Over the objections of the federal government, workers handling jobless assistance claims and appeals have been ordered by Gov. Arnold Schwarzenegger to go on furlough -- even though nearly all their salaries are paid by the U.S. Labor Department, and their days off will save the state very little or no money.

In a letter late last month, the department warned that furloughs could worsen the state's current "below standard performance" in meeting criteria for the timely handling of unemployment claims and appeals.

Failure to comply with the department's demands could violate Social Security laws, said the letter's author, Richard C. Trigg, regional administrator in San Francisco of the Labor Department's Employment and Training Administration.

The governor's office said it was unmoved by the federal concerns.

Now that's the spirit of the furlough holiday season!

Somebody should ask Arnold if he's closing the unemployment office so people can't get their benefits. Maybe on Monday. Because, you know, he's a state employee, so he must be off today.

...I would actually be OK with a 4 day, 10 hour work week that would save on energy and transportation costs and increase employee satisfaction as well as recruitment for state jobs. And if employees staggered their time off, government offices could stay open full-time. But this furlough is nuts.