It’s very rare to hear the problems of the state’s budget and cash crises discussed correctly, particularly in the wider media.  The journalistic fetish of “balance” and making sure the only valid opinion is perfectly situated in the middle of any argument means that the go-to “experts” for the traditional media are always these Solomon-like High Broderists with advice like “the legislature should just get together for drinks more often.”  Thus the breadth of opinion on a show like Warren Olney’s ranges from California Forward to a beat reporter.  And the problems of the state are always ascribed to “the legislature.”  Not the fact that we have a majority vote for elections but a 2/3 vote for any tax and budget issue, making it literally impossible for the elected representatives of the state to do the job entrusted them by the voters.  No, that would be too simple.  It must have to do with Democrats and Republicans not drinking together enough.

Two more examples of this today.  First, the California Alliance for Jobs, which actually helped lead the fight for Prop. 1A’s high-speed rail bonds, has a couple radio spots out today with “funnyman” Will Durst blaming “the legislature” for stopping all those infrastructure projects and hurting the state.  The MP3 is here.  Amazingly, Durst spoke for 60 whole seconds and didn’t make a Monica Lewinsky joke.  But he also failed to make clear in any way that any particular political party is responsible for budget gridlock.  Durst says that we need a responsible budget with cuts and revenues, without mentioning that the Democrats have PROPOSED AND PASSED that.

Then wet noodle Gray Davis offers his wisdom on the crisis:

“It’s deja vu,” Davis told a cluster of reporters after listening to Schwarzenegger’s somber address. “California has experienced feast-or-famine budgeting as long as I can recall, and (it) will go on for all eternity until the people pass a genuine rainy day fund.”

Yes, THAT’S the problem.  Not having revenues too closely aligned to the boom-and-bust cycle.  Not ratcheting down property taxes so corporations pay less for their space than an average suburban couple in Nebraska.  Not Yacht Party obstructionism.  It’s all about that rainy day fund (which, by the way, was PASSED but which the Governor has continually raided).

The sad thing is that Davis knows he’s lying, but he’s either unable to or incapable of admitting it.  And so the bipartisan fetishists say “can’t we all get along” without recognizing that their rhetoric, which doesn’t assign blame or give any citizen a roadmap to what the problem really is, sends the state careening into disaster.  I have nothing but contempt for these people, even more than the Yacht Party in many ways, because they so blithely abuse their own power.

I will be discussing the budget crisis tomorrow morning at 7:00am on “The Morning Review,” with Roy Ulrich on KPFK 90.7 FM in Los Angeles.  You can listen live online here, and if you miss it in the morning an archive is kept here.

While I appreciate all these mailed-in press releases reacting to Arnold’s State of the State Address (shorter Arnold: not my fault!), I find them to be astonishingly ineffective.  Maybe they provide a good pull-quote or two for state media, but they do little to educate citizens about the state of affairs, because they are dryly forwarded to the same places to be seen by the same news junkies and nobody else.

In this respect I have to commend Assmeblywoman Nancy Skinner for an innovative way to connect with constituents and deliver a quick but important message on the budget crisis.

As your State Assemblymember from the East Bay, I am concerned about how the economic downturn is affecting our California communities. Job loss and foreclosures are at an all time high and our neighborhoods are hurting.

In Sacramento, I am working with state leaders on budget solutions that will preserve vital services, protect our children’s schools, and restore funding to shovel ready infrastructure projects that can put people back to work up and down our state.

With the enormity of Californias budget deficit such a solution requires a balanced package of spending cuts and new revenues.

But Governor Schwarzenegger has not been able to lead his own party to a reasonable compromise.

We can do better.

Join me, tell the Governor we can fix Californias budget problems without rollbacks to worker and environmental protections or devastating our schools.

Together lets move California forward.

Yes, it has the look and feel of a campaign ad.  And that’s the point.  This is a PERFECT way to use off-cycle messaging to make the case for a responsible budget solution.  And with a local cable buy (CNN, MSNBC, CNN Headline News, CNBC, Fox News, and Comedy Central), it is relatively cheap for Skinner to do so.  It’s not surprising that Skinner’s Chief of Staff is former California Progress Report editor Frank Russo.  He understands well that this kind of direct communication has been sorely lacking over the past few years.

In the coming months, as the crisis grows bigger, there’s going to be an effort by the Governor to use the bully pulpit to cast the whole thing as a problem of “the legislature” instead of laying the blame where it belongs.  It is crucial for progressives to push back against that, and Skinner has shown the way.  Of course, her Bay Area audience doesn’t really need to be convinced.  The Speaker or the Senate President Pro Tem or even the CDP should take this model and push it out in areas with close Assembly races last cycle or even just Republican communities.  That would be some forward thinking that would make the case for a responsible budget instead of ceding the territory to talk radio or worse.  It’s time for Democratic leaders to fill the news gap and begin to educate Californians.

(KQED here in the Bay Area will be airing live coverage at 10, as well as an hour of “pre-game” coverage on their Forum program at 9.  You can listen live here.  The California Channel will be covering it live as well. – promoted by Brian Leubitz)

Arnold Schwarzenegger delivers the State of the State Address at 10am this morning.  Typically he has done this speech to coincide with the evening news.  This year he’s trying to hide it.

I don’t blame him.  As David Greenwald discusses, people pretty much know the State of the State already.

As Governor Schwarzenegger prepares to report on the State of the State tomorrow, California’s families today declared that “the State of the People” is increasingly grim with a record number of Californians having lost their jobs and health care and their homes. California educators, students, health care workers, seniors and people with disabilities said more state budget cuts are exactly the wrong prescription after they’ve suffered the consequences of more than $16 billion in state budget cuts to critical services over the last 3 years.

“California families are here to report what you won’t hear from the Governor tomorrow: budget cuts over the last three years have deeply wounded our families’ health and well-being, diminished our children’s opportunity for the future, and damaged our economy.” said Evan LeVang, Director, Independent Living Resource Center of Northern California.

Californians who have personally been affected by budget cuts detailed the severe consequences that the cuts, including $10 billion in cuts already this year, have had on California families who have already been hit hard by the nation’s economic meltdown.

“Before our elected leaders slash another dollar from our hospitals, they should think about what health care would be worth to them if their husband, their daughter, or their father needed care. Because every patient that comes to our hospital is someone’s parent, spouse, or child,” said Beverly Griffith, an environmental services worker and SEIU member at Summit Medical Center in Oakland. “While longer hours and staff shortages caused by budget cuts have been rough on hospital workers, they’ve been unbearable for our patients.”

And of course, this is bound to get worse.  It’s important to split the two major problems into their discrete parts – we have a budget crisis AND a cash crisis.  Even if the budget hole is at least partially filled (and with any luck, we’ll be able to access some federal stimulus money, either through direct payments or tax revenues on increased economic activity, by February), the cash crisis would persist, and we could see IOUs even after a budget deal because of the inability for California to go to the bond markets and borrow.  And the converse is also true.  In sum, it’s a different problem which needs a different solution.  The LAO is obscure here, but I believe “restricted funds” refers to Prop. 98 money:

The Legislature’s budget analyst, Mac Taylor, says that schools, colleges and bondholders will have first call on the state’s money if its cash flow crisis hits home in a few weeks.

But Taylor says in a report on the looming cash flow crisis that even if the Legislature fails to reach agreement on closing the state’s budget deficit, the cash crisis could be relieved with some emergency legislation to allow more internal borrowing of restricted funds.

Gov. Arnold Schwarzenegger and legislative leaders have been conducting closed-door negotiations this week on both the budget and the cash crisis, which are related but separate issues. Controller John Chiang has said that the state will be forced to curtail state disbursements sometime in February unless there’s rapid action on the budget and/or cash flow-related legislation […]

The administration has asked the Legislature to approve measures that would free up about $2 billion in restricted funds that could be borrowed by the state general fund and thus stave off the cash crunch. It’s also said that rapid action on the budget would allow the state to defer more than $1 billion in payments to schools that otherwise would have to be made.

As a budget solution would at least have some impact on loosening the bond markets, this could be the intent of Schwarzenegger’s delay – so he can raid dedicated funds for schools and health care.  It’s important for us to start figuring out Arnold’s gambit.  When I talked to State Senator Fran Pavley at one of the election meetings last weekend, she said “It’s hard to negotiate with someone if you don’t know what they want.”  My next several posts here will seek to figure that out.

Anyway, you’re not going to hear it at 10am, I gather.

Those who read this site understand the effects of a budget crisis – on teachers, firefighters, cops, state employees, public health clinics, practically everything that regular citizens interface with on an almost daily basis.  I write about the real-world consequences often.  However, it’s very easy to be oblivious to these facts, especially when daily life is so understandably difficult that just getting through it is a struggle.  It’s hard to know for sure, but this SacBee article is probably pretty accurate.

Gov. Arnold Schwarzenegger is to deliver his State of the State message Thursday in hopes of galvanizing public opinion to pressure lawmakers to agree on a budget to keep California’s government from going broke.

But his challenge comes as many Californians are too busy and too worried about effects of the larger national economic calamity to be consumed with details of budget wrangling in Sacramento.

Sacramento lobbyists, state worker unions and advocates for health, education and welfare may think of little more than the state’s financial mess. Yet the Capitol isn’t being overwhelmed by calls or letters from average Californians demanding a budget […]

“Certainly voters are aware of the (state budget) problem,” said California Field Poll Director Mark DiCamillo. “But it hasn’t really reached their own pocketbooks or own lives in a direct way. You’re just waiting for the train wreck to happen.

“At the point when the state stops paying its bills or starts issuing IOUs to creditors, that’s when this will really hit the fan.”

I wouldn’t discount this.  People have a hard time connecting the specific hardships they face to a specific failure of the state legislature – many couldn’t tell you the responsibilities between the state and the feds.  In fact, as economic anxiety increases, people retreat more into self-preservation mode and neglect the larger issues at play.

There are a variety of reasons for this.  No public demystification of the process is certainly one.  Without a responsible media detailing the consequences instead of the “pox on all of their houses” attitude that is neither informative or true, I wouldn’t expect citizens to comprehend this very well.  The state party and individual lawmakers have a communications role to play in this as well – just because it isn’t election time doesn’t mean it’s not a time for effective communication to people outside the base on what is happening and why.  The veil of secrecy around Sacramento disheartens people who might otherwise believe that their knowledge of it would make a difference.  In addition, the relatively few members of the legislature (40 Senators for a population of 38 million is bigger than a Congressional district) further dislocates and alienates the population from their government.

As DiCamillo says, when those expecting a tax refund get an IOU, when the state files for bankruptcy (a very real possibility), there will be some recognition.  And the dynamic of the state will change, perhaps quite drastically.  People will want to find answers, maybe a scapegoat.  Hopefully, people are thinking about that moment.  It will either be an opportunity or a prelude to a nightmare.

If you’ve been watching California politics for a while you may already know this to be true, but for those who ask me why the Republicans are so intransigent and inflexible when it comes to the budget, hear former Assemblyman Ray Haynes (h/t CapAlert) explain to you the reason.  It’s really really simple and intuitive.

The key problem, I said, was that the Governor and the Democrats were asking Republicans to betray a key principle of a key constituency and get nothing in return.  The result to any Republican who voted for that tax increase would be the end of their political career.  I know, because, I said, I would do everything in my power to make sure of it for anyone who voted for that tax increase, and I know there are a lot of Republicans who think like me […]

Democrats are asking Republicans to end their political lives, but are not willing to end their own.  Democrat constituency groups are asking Republican constituency groups to sell out their core principles, but are not willing to sell out any of their own.

This is an example of the Iron Law of Institutions, which states: “The people who control institutions care first and foremost about their power within the institution rather than the power of the institution itself. Thus, they would rather the institution “fail” while they remain in power within the institution than for the institution to “succeed” if that requires them to lose power within the institution.”  It is an expression of self-interest over the greater interests of the state.

You can hardly blame them.  Republican primaries in California can get nasty, far worse than their races against Democrats.  And the last time Republicans crossed over in any numbers to pass a sensible budget, the far-right fringe of the party punished them – and reinforced the Iron Law.

Democrats and their constituency groups have already made it clear that they are giving up nothing for ending your political career.  You had better get a lot personally for it, because once it is done, and you are out of office, they will forget you ever existed.  Just ask Mike Briggs, Brian Setencich, Anthony Pescetti, Dave Kelley, Paul Horcher, and Dick Dickerson.  They gave the Democrats what they wanted, and they are now enjoying their time in the private sector.  You will too.

What’s significant here is how Haynes uses this kernel of truth to promote a bigger lie – that Democrats have “given up nothing” in a grand bargain to save the state.  This is simply not true.  For years and years they have made painful cuts to key programs, have expedited projects by waiving environmental restrictions, and have gone at least halfway on the budget.  In Haynes’ conception of the Iron Law, Democrats have to be willing to do something that would lose them their seats in office in order to get cooperation.  He is asking, in essence, for a suicide pact.  The fact that Democrats control the majority and one would think are actually entitled to enact their policies, and subsequently get called to account on the effects of those policies periodicially by the voters, doesn’t enter much into Haynes’ thinking.  He alludes to it here:

Getting a political majority does entitle groups and people to certain policy gains.  That is what getting power is all about.  Winners get to enact their policy initiatives.  They don’t get to whine however when the minority has the opportunity to advance their policy initiatives, and the majority has to give up something to get what they want.

Of course, the majority HAS given up plenty to get what they want.  But what Haynes calls “whining” is simply pointing out that a democracy with majority rule in elections might want to take the same course in governing, lest a tyranny of the minority take hold and create a hostage situation.  I assume he wouldn’t see it the same way.

There are only a couple ways to break this.  One is to reform the rules that gridlock the state so that every member can continue to vote their conscience without punishing the citizens in the process.  The other is to make those members of the Yacht Party institution MORE afraid of their general election than their primary election.  We have made small strides toward a 2/3 majority, but essentially have failed in the past two cycles, which were promising for Democrats nationally.  Only by growing the party and breaking the working conservative majority in the legislature will the rule of the Iron Law become irrelevant.

“Borrowing $23.3 billion for state budget won’t be easy, analyst says”

I would replace “easy” with “possible.”  Banks are hording money from the bailout because they will need to raise fresh capital in 2009.  The short version is that nobody will be investing in fuck-all for the near future.  This is the entire thinking behind the federal recovery package, that government has to be the spender of last resort.  So any budget package that fills the gap with $23 BILLION in borrowing is about as realistic as a budget based entirely on tourism revenue gained from the new unicorn park in Gilroy.

You could potentially borrow some money, but it would either be against ourselves (by pushing the debt into the 2010-11 fiscal year, though at some point that would need voter approval because it’s somewhat illegal) or by giving borrowers a federal guarantee against default, which is the whole reason why investors are wary of California right now.  This is what John Chiang has called for repeatedly.  To Arnold, we can just show up to market with a bunch of worthless “revenue anticipation notes” and scream “COME AND GET IT!!!”

Of course, we could also listen to Rep. Devin Nunes and enact a part-time citizen legislature while throwing every business regulation out the window.  

Congratulations to those brave souls who managed to win Assembly delegate elections over the weekend.  Your first state Convention, scheduled for Sacramento in April, should coincide nicely with the mass protests from folks who got IOUs instead of their expected tax refunds, the first double-digit employment numbers in the state in a generation, and essentially the near-total shutdown of state government, by design, from a working conservative majority that uses outdated and anti-majoritarian rules to destroy the state for their own ends.

I have a hard time arguing with the deep pessimism from Dan Walters today.

What, if anything, will come next to pull us out of recession and return California to prosperity? Some think it will be biotechnology, services to baby boomer retirees or solving global warming.

Lurking in the background, however, is a nagging worry that there won’t be anything, that the state’s endemically high costs, political dysfunction and long list of unresolved dilemmas, from transportation to water to education, have made us uncompetitive in a global economy. Just last week, a new federal survey found that California has the nation’s highest adult illiteracy rate.

We have tended to take the future for granted. No matter how moribund the economy may be at the moment, we think, we have the weather, the entrepreneurial spirit and the strategic location to regroup and prosper.

We may have. But then again, maybe we aren’t so special. Maybe we’re not immune to the societal afflictions that have beset other states. Maybe we are a rust-belt-to-be on the left coast, a Michigan with winter sunshine.

This is not a failure of entrepreneurship or a lack of a desirable consumer base.  It’s quite simply a failure of politics, a series of compromises and capitulations that have led the state into a blind alley.  Because legislative Democrats have never effectively rid the process of the constraints of the past, they have made the future impossible.

The biggest burst of meaningful political activism in recent history was the crusade to defeat Arnold’s special election in 2005.  That happened outside the party structure because labor felt threatened and needed to lead an effort, working together with the grassroots and the party establishment to fight back.  There was a singular mission and nobody brought their own single-issue buckets to the table.  Their public relations strategy and the activism they encouraged was nothing short of brilliant.  But it was primarily a defensive maneuver.  Now the CTA is trying to add a penny to the sales tax in a more offensive maneuver to secure funding for schools.  This is precisely the wrong way to go.  It carves out another dedicated funding source for one area while imposing a regressive tax on the state’s most burdened citizens.  Single-issue money grabs will not do the job.  Unity is the great need of the hour.

At one of the AD meetings I attended this weekend, my Assemblywoman, Julia Brownley, got up to speak.  I would call her a pretty mild-mannered woman.  She practically pleaded with everyone in attendance, saying “We need your help… the Governor is breaking this state… we need you to throw your shoes at Arnold.”  She was sending out an urgent call for the kind of unified activism that broke Arnold’s back in 2005.  It’s a heavier lift because it requires something proactive rather than reactive.  But without labor, grassroots activists and the party establishment working in concert, this is going to be the worst 2 years of all these newly-elected delegates’ lives.

There are going to be two Democratic legislative initiatives this week: a request for a federal government loan to ensure our unemployment insurance fund doesn’t go broke, and legislation putting a moratorium on foreclosures, which cost roughly $250,000 each to the greater economy in opportunity costs and property value reductions.  There is help coming in the form of hopefully $5-7 billion dollars from the federal recovery package, earmarked for state and local government relief.  But eventually, we’re going to turn to the ballot.  In June of this year, there’s going to be a host of initiatives, and we need there to be more than simply signing off on the bad budget of last year, but real structural reform, whether to do with 2/3 or expanding the budget cycle to 2 years or even the tax increases in the Democratic budget (The LAO thinks that election should happen earlier to relieve this crisis of confusion).  These MUST get on the ballot, and they MUST pass, with a coalition of every progressive in the state working toward that passage.  The survival of the state hangs in the balance.

So good for you, winners.  Now make sure you don’t get picketed during your first convention.  Because if you don’t, I’ll be the first one out there with a sign.