Valuation of tax measure adds to uncertainty

by Brian Leubitz

In case you were asleep for the past few years, we have a revenue problem with our budget.  Namely, we don’t have enough cash coming in to pay for our state’s priorities.  Gov. Brown is hoping to clear the field for his own measure, but it seems he has a lot of work to do on that front judging from the news of the day.

First, Molly Munger dropped half a million dollars on her own measure that aims to raise $10 billion for schools. Her measure raises the entire tax structure in a progressive fashion.  You can read more here, but this is the type of measure that progressives would ordinarily support. However, given the need for budget flexibility, there will be substantial pressure on this measure to get out of the way.

However, Molly Munger is no lightweight. She’s a veteran civil rights litigator who also happens to be the daughter of Warren Buffet’s longtime business partner, Charles Munger.  Her brother, Charles Munger, Jr, spent a bunch of money ($12mil) on Prop 20 to get Congressional redistricting into the commission. Molly Munger has not indicated how deep her pockets on this one will go, but if she’s willing to put up $500K, will she drop the other million or two to get it on the ballot?  As Peter Schrag has said, shepherding this thing through the whole process will be quite the challenge for Ms. Munger.

The other big news today was the joint LAO/Dept. of Finance estimation of the Governor’s proposed revenue measure.  Suffice it to say there are a few problems:

The Democratic governor is counting on a voter-approved tax increase on sales and the wealthy to generate $6.9 billion for the 2012-13 budget. But the nonpartisan Legislative Analyst’s Office says Brown’s plan would raise only $4.8 billion in the first budget cycle.

The Analyst’s Office and Department of Finance included their separate projections in a joint letter to Attorney General Kamala Harris that is required for ballot preparation. (SacBee)

In other words, more uncertainty for a Capitol building that is rife with it now.  Of course, trying to project the economy right now is somewhere between ridiculously hard and impossible right now, but the $2.1 billion gap is larger than the Gov. would have liked to see right now.  We’ll have to see what kind of contingency plans the governor makes for this extra whole that he now will have to make up.  

Might we see “Return of the Triggers”?  If the Governor thinks that the $6.9 estimate is worth gambling on, the situation ends up being remarkably similar to where we found ourselves last year, waiting on cash to come in.  One would hope that the triggers don’t become a regular feature of our budget cycle, but it might be, once again, the easiest way out of a box.

Or, you know, some other random number will pop out of the sky in a few days and the whole scenario will change.  Heisenberg pretty much rules Sacramento these days.