Tomorrow, Arnold Schwarzenegger, reminded that he’s the governor of California and not the governor of Time and Newsweek, will walk up to a dais in Sacramento and claim that now, four years after he was elected to enact reform, the time has come to reform the budget process.  But it’s a curious use of the term “reform,” since it will be an attempt to resurrect a policy that was soundly defeated by voters in 2005.

Heading into a week in which he’s expected to deliver grim news about the state’s fiscal health, Gov. Arnold Schwarzenegger is also preparing to propose changes to the budgeting process.

The Republican governor will offer a “budget reform” plan when he outlines his goals in his State of the State address Tuesday. Such a proposal, if successful, would likely give the executive office more authority in making cuts even after the Legislature has passed an annual spending plan.

First of all, California already gives the governor the ability, through the line-item veto, to make plenty of spending cuts.  Schwarzenegger oughta know, he used it to terminate mentally ill homeless people from getting treatment.  What Arnold really wants to do is something that Pete Wilson was denied as far back as 1992.  He wants to be able to subvert the will of the voters through Prop. 98 (so much for “let the people decide”) and eliminate spending baselines for education, health care, and other government services.  This is nothing but a wank, an effort to eliminate the revenue side of the budget equation and solely solve a $14 billion dollar problem with deep spending cuts.  He’s also trying to essentially defund education right at the beginning of the already-D.O.A. “Year of Education”.

What this will also do is shield Schwarzenegger’s corporate buddies, who finance all of his travel, from the possibility of actually having to pay their fair share for access to the California market.

Considering that this is the third time Schwarzenegger has sought the ability to defund education and health care, I don’t know how you can see his legacy as anything but that.  This has been the very public agenda from day one.  Everything else is window dressing.  Let’s hope the Legislature understands that, even if the media doesn’t.

Arnold has tried to promote a 10% across the board budget cut as the cornerstone of his plan to address the $14 billion deficit – but as Judy Lin noted in a recent SacBee article, he cannot do that:

But while such efforts have been talked about in the past, budget experts say straight reductions are impossible in a world filled with legal, financial and political obstacles.

“Can he get across-the-board cuts comprehensively? No,” said Jean Ross, executive director of the California Budget Project, a nonpartisan group that advocates for poor and middle-class families. Not only does the state have to comply with various laws and court orders, it has debts to pay, paychecks to deliver, and everything from schools to prisons to maintain.

“I could go on and on and on,” Ross added.

The Schwarzenegger administration has pledged to spread cuts in a way that “no department shoulders a disproportionate share,” said finance spokesman H.D. Palmer.

Yet the governor’s aversion to taxes has left him little choice but to make cuts that are certain to attract political resistance on multiple fronts, from Democrats who control the Legislature to powerful interest groups such as the teachers and the prison officers union.

So what IS likely to face cuts when Arnold’s proposals are released next week? Education and health care.

A 10% cut to education budgets would require suspension of Prop 98, and would have a devastating effect on schools in the middle of the school year. Here I disagree with Judy Lin, the author of the SacBee article, who claims that the cuts to education would affect things like school buses and field trips – a 10% cut WILL mean cuts in classes and layoffs of teachers. There’s not that much flexibility in the budgets of most K-12 districts, certainly not in higher ed.

As to health care, Hanh Quach of Health Access California explains what a 10% cut would mean:

• A 10% cut in Medi-Cal eligibility would mean denying coverage to 680,000 of the 6.8 million Californians on Medi-Cal–largely low-income children, parents, seniors, and people with disabilities.

• A 10% cut in reimbursement rates in Medi-Cal would be hard, given that Medi-Cal has one of the lowest rates in the nation already (it’s one of the things we are trying to fix with health care reform).

• A 10% cut in benefits would mean having to deny millions of people key services. In the previous budget crises, proposals called for denying coverage for a range of benefits in Medi-Cal, including coverage for prosthetic limbs, medical equipment like asthma inhalers and diabetic test strips, and durable medical equipment like wheelchairs.

Given the likelihood of cuts being disproportionately visited on health and education, things that Californians have repeatedly demonstrated their support for protecting, it seems that Democrats have a strong opening to contest Arnold’s entire approach to the budget.

More importantly, Arnold is trying to reopen the current budget. Whereas in the summer Democrats were under pressure to get a budget done and ensure that schools and health care got the funding they needed, there is no such pressure now. Democrats can delay until July if they like and these vital public services and the Californians who depend on them will be spared. Dems are in the driver’s seat here, as long as they resist the temptation to agree to dramatic cuts so as to not jeopardize Prop 93’s chances.

What this also makes clearer is that spending cuts are not the answer – we MUST seek a revenue solution to this ongoing budget problem.

California is dragging down the rest of the country with its job performance statistics:

California gained just 900 payroll jobs last month, the state said Friday, a lackluster showing that reflects a national slowdown attributed in part to the housing slump.

The slight gain followed a revised loss of 13,500 jobs in October, the Employment Development Department said.

The slowing job market combined with declines in taxable sales and falling home prices “paint a picture of an economy that is slowing sharply,” said Stephen Levy, senior economist at the Center for Continuing Study of the California Economy

In California, a little more than 1 million people were looking for work last month, an increase of 16,000 from October and up 186,000 compared to the year-ago period.

The state’s unemployment rate was unchanged from October at 5.6 percent. It was 4.7 percent in November 2006.

Significantly, it’s the rising cost of living that is playing a part in sinking the state.  With people unable to fall back on their home equity for cash, they slash spending, and nobody’s buying any homes, which leads to declines in the construction industry.

So don’t expect payroll taxes to somehow save us from our budget woes.  And don’t expect the magic 10% across-the-board cut fix to work, either.  First of all, it’s unconstitutional.  And that’s just part of the problem.

“Can he get across-the-board cuts comprehensively? No,” said Jean Ross, executive director of the California Budget Project, a nonpartisan group that advocates for poor and middle-class families. Not only does the state have to comply with various laws and court orders, it has debts to pay, paychecks to deliver, and everything from schools to prisons to maintain.

“I could go on and on and on,” Ross added.

And this is where the recession meets up with the proposed health care reform.  Before such a program would kick in, you’re looking at a governor who may attempt to throw the health care system into more chaos than it’s in now, because it’s one of the only areas where he isn’t legally constrained against cutting:

“I think some people think that 10 percent may sound fair and it’s not that much, until you recognize what that means on a human level,” said Anthony Wright, executive director of Health Access, a statewide health care consumer advocacy coalition.

Wright said a 10 percent cut in the state’s health insurance program for the poor means 680,000 of 6.8 million recipients could be left without coverage.

If people aren’t denied coverage, Wright said the governor could slash benefits dramatically so that patients can’t get wheelchairs, prosthetic limbs or asthma inhalers.

Whether ABx 1 1 would restore all this public money or not (and the price tag is low if they think it will), the amplification of costs from two years of a lack of even the most basic care for the poor would be enormous.  Yet the Governor will claim on one day that our health care problems are solved, while on the next day slashing budgets so that they end up even worse.  This is his modus operandi, and you can’t trust someone with this track record.

Gov. Arnold Schwarzenegger won re-election in 2006 by selling himself as a problem solver who boosted California’s economy and resolved the state’s budget problems, all without new taxes.

The Republican governor declared in January that “through discipline and through new revenues that come from economic growth, we reduced the deficit over time and got our fiscal house in order.”

But less than a year into his second term, the narrative has run dry […]

“I think the problems were deeper and more structural than the governor realized when he was first elected,” said Jean Ross, executive director of the California Budget Project, which advocates for poor and middle-class families.

“There is a fundamental imbalance between revenues and expenditures,” Ross added. “Many budgets that were signed into law, including those signed by the current governor, made the problems worse, not better.”

Remember the 2004 “Performance Review,” which we were told was all that was needed to fix the budget problems (“Open up the books!  Then we’ll see the numbers!”)  Practically nothing that came out of that review was put into law.  Everything this Governor has ever said has been hype, as he plowed ahead with the same wrongheaded conservative solutions of passing off crises to future generations.

That’s why, given the fact of watching this guy operate over 4 years, it’s nearly impossible to give him the benefit of the doubt on anything.

By Dave Johnson, Speak Out California

Our ongoing Speak Out California series on the California budget is interrupted by an “emergency.”  With California state budget deficit projections rising from $10 billion to $14 billion the Governor plans to declare a budget “emergency,” saying he might propose “slashing” the state’s budget by 10% “across the board.”

But doesn’t a budget involve spending and revenues?  Why is the Governor tying one hand behind our backs?  Why is the Governor only proposing that the people who are in a position to really need our government’s help be the ones who must sacrifice in this “emergency?”

I’ll begin with some background for those readers who don’t spend their days scouring California budget news.  According to Saturday’s San Jose Mercury News story, Fiscal emergency for California,

Facing a projected $14 billion budget deficit, Gov. Arnold Schwarzenegger on Friday said he will declare a fiscal emergency, which will allow the governor and lawmakers to cut spending more quickly and also sets the stage for slashing state services and programs – perhaps by as much as 10 percent.

Who will be most affected by these cuts? The rich? The powerful?  What do you think the odds of that are?  According to the San Jose Mercury News story,

Much of California’s general fund budget, which totals $102 billion for the 2007-08 fiscal year that began July 1, is designated for education, transportation and other uses. Therefore, cuts often fall disproportionately on social services and the poor, elderly and disabled residents who rely on them.

But in an “emergency” why would the Governor make a pre-emptive announcement that takes half of the state’s budget options off the table?  A budget consists of spending and revenues.  Yet the Governor proposes to solve the problem entirely by cutting government services like education, social services and law enforcement, and is not even discussing raising taxes.  Shouldn’t half of the solutions toolkit warrant half of the discussion?

This one-sided debate on budget priorities is gaining attention.  A Dec. 9 Los Angeles Times op-ed, Why won’t The Times talk tax hikes?, by Robert Cruickshank, a political science teacher, addressed this unbalanced approach, writing, “There are ways for the governor to balance the budget without cutting spending.”  Questioning a one-sided approach to solving budget problems, he continued,

Here’s the problem. The politics of the budget crisis are in large part shaped by media coverage. When the state’s largest and most influential paper focuses on spending — while largely ignoring the revenue side — in budget articles, it implies that the solution to the budget crisis is slashing spending rather than raising taxes. That’s not balanced journalism.

Citing several pieces that discussed cutting spending but not raising taxes, Cruickshank wrote,

To its credit, The Times, in a Nov. 9 editorial titled “Red-ink realism,” correctly noted that Schwarzenegger is partly to blame for the budget mess by lowering the vehicle-license fee. But rather than call for tax increases — or even just a study of possible new sources of revenue — to pay for locked-in or new spending, the editorial offered up the bromide that California needs bold, courageous leadership to solve the budget problem.

This debate is not just happening in California.  A recent New York Times op-ed by Robert Frank, Reshaping the Debate on Raising Taxes, addressed how a reluctance to discuss taxes affects the country.  Frank wrote,

POWERFUL anti-tax rhetoric has made legislators at every level of government afraid to talk publicly about a need to raise taxes. The constituents of the few who dare speak are typically bombarded with attack ads that go something like this: “It’s your money, but your esteemed senator thinks the bureaucrats in Washington know how to spend it more wisely than you do.”

Because of our inability to talk sensibly about taxes, the United States has been sliding toward second-class status in the world economy. …

And California is well along the path to second-class status as well.  All we need to do is visit our schools or drive on our roads to see what the drumbeat of anti-tax, budget-cutting propaganda brings us.  

It is tricks like declaring an “emergency” while taking half of the possible solution off the table, while at the same time our newspapers and other information sources refuse to inform the public of all of the ways that budget problems can be addressed, that got us where they are.  This is not a sustainable path.  The day must come when the budget just breaks down: when there is nothing left to cut, the interest paid on all the bonds catches up to us, and we wake up to see that our California Dream was sold off to the lowest bidder.  It is better that we wake up now and reclaim the dream, asking those who have benefited most from the state we built to contribute their share.

Click to continue.

You may remember that in August, Gov. Schwarzenegger used his line-item veto pen to cancel $55 million in funding for the treatment and care of mentally ill homeless people.

If you don’t remember it, shame on you.  It should be the only thing you think of when you think of this governor.  He should be forever known as the “Mentally Ill Homeless Terminator.”

The claim was that Prop. 63, passed by the voters, adequately funded this need, and so the dedicated funding that passed the legislature as AB 2034 could be eliminated.  That’s not true.  What was actually going on was that the governor was trying to limit political damage by cutting funding for people who don’t vote and therefore aren’t of his concern.

Well, now some advocates of the homeless are suing this governor’s ass.

Advocates for the mentally ill filed a lawsuit Thursday alleging that Gov. Arnold Schwarzenegger subverted the will of voters when he eliminated a $55-million program for the homeless mentally ill — a program he himself had touted as a success.

The suit asks a judge to restore the eliminated funding, order the state to continue paying for the program and declare that the governor acted illegally — an important provision, the advocates said, in establishing precedent for future disputes over mental health system funding.

The suit was filed in Alameda County Superior Court, chosen because the plaintiffs include several mentally ill people in the county who credit the program with improving their lives — helping them kick a drug habit, for instance, or move from the streets into their own apartment.

Allow me to file an amicus brief:

The Mentally Ill Homeless Terminator is a callous, small man.

In light of the projected $14 billion budget shortfall, Senate leader Don Perata said late yesterday “‘it would be imprudent and impolitic to support an expansion of health care’ before addressing the state’s budget deficit and its impact on existing programs.”

Meanwhile, Fabian Núñez is “so confident that we will be successful in reaching agreement that I have called for the Assembly to meet on Monday, December 17 in order to take up and pass AB 1X.”  So where are we actually heading on this?

Governor Schwarzenegger is calling for 10% spending cuts across the board in response to the budget shortfall that everyone knew was coming.  And as Dave points out, this means everyone who can’t afford to live without government gets screwed while the rich continue on their merry way.  It also means that next year’s budget fight will likely turn this year into the good ole days of budget wrangling.  And if Perata is serious about not passing anything as long as there’s a shortfall, then we ain’t passing anything for a while cause the shortfall isn’t going anywhere.

But before we even get to that, we find out whether all the extended sessions, coalition-shredding wars over an acceptable level of health-care (I’m looking at you Shum/Maviglio), time, money and both literal and cyber ink may end up coming to nothing because Don Perata can’t see spending on an important mandate when the political leadership in Sacramento can’t figure out how to balance a budget.

This is ultimately going to encapsulate most of the Calitics greatest hits from the past year; starting with health care, this runs through privatization, water usage, high speed rail and transportation, prison reform, Núñez pecadillos, labor relations, term limits, clean money, taxes, and the 2/3 rule.  Because it all runs back to the ability of people to get elected and pass a budget.

Most of all, it’s likely to reinforce the absurd lack of strong, public political leadership in this state.  There are no advocates.  Nobody has tried to convince me to sacrifice.  Nobody has tried to convince me of the inherent wisdom in a program that I might not otherwise think was a good idea.  The art of the possible is starting to discover that, as it turns out, not very much is possible with a $14 billion shortfall and no bold attempts at change.

Perata’s statement closed by saying “The real issue now is the deficit and how this squares with everything else that we are going to do.”  Everything is back up for debate.  Now that we’re staring at the very real possibility of getting less than we started with, it might not be such a bad time for a return to the fundamental principles of budgeting and state spending.  I’m not sure it could end up much worse.

Well, it was obvious, but we apparently know how the Governor is going to deal with the massive projected budget deficit.

Faced with what his staff now estimates as a $14 billion budget hole, Gov. Arnold Schwarzenegger has decided to seek across-the-board cuts to state operations.

The administration last month asked departments to prepare hypothetical budgets based on 10 percent reductions for the fiscal year beginning July 1 in case such a move was sought.

But now, as the fiscal outlook has worsened, the Republican governor has decided to go forward, according to advocates for social services and local government the governor has summoned in recent days for budget discussions.

That’s 10 percent across the board, but of course there are some spending mandates in there, so some of those cuts will not be allowed.

Schwarzenegger also said that he is hesistant to call for tax increases because of legislative and voter resistance.  In other words, he’s hesitant to lead.  This seems like one of those classic trial balloons to check the reaction.  Well, here’s one.  It’s clear that Republican policies of creating, artificially and against the will of the majority, a structurally unsound revenue model, will not be changing, at least not next year.  And so we’ll end up with a one-sided approach to a dire budget problem, when such an approach will only put off the problem.  This is how government shrinks, this is how public confidence in government saps, and this is how a belligerent, UNPATRIOTIC minority (California and America are worth paying for) gets its way.

UPDATE by Brian: I wanted to tack Sen. Perata’s statement on health care onto this post. (h/t CapitolAlert  )He doesn’t sound very optimistic:

“I am encouraged by the progress the Governor, the Assembly Speaker and I have made this year developing a plan for extending health care insurance to the many Californians who do not have it.”

“While I still strongly favor the concept, I have been shocked by the recent revelation that next year’s budget is facing a $14 billion deficit and what that could mean.”

“It would be imprudent and impolitic to support an expansion of health care coverage without knowing how we’re going to pay for vital health programs the state now provides for poor children, their families and the aged, blind and disabled.”

“The real issue now is the deficit and how this squares with everything else that we are going to do.”

By Dave Johnson for Speak Out California

Two previous posts explored the outline of the California state budget, and the process by which the budget is developed and passed into law.  But these overviews don’t directly touch most Californians in their daily lives.  To begin to connect the budget and the budget process with the concerns of regular Californians let’s look at one department that almost every adult in California encounters regularly: the dreaded Department of Motor Vehicles, commonly known as the DMV.

According to the DMV website, the department:

…registers vehicles in California and licenses their drivers. This amounts to about 33 million vehicles registered and approximately 23 million licensed drivers.

Other major DMV functions include:

• Recording ownership (certificate of title) of the vehicles DMV registers
• Maintaining driving records (accidents and convictions) of licensed drivers
• Issuing identification cards for individuals
• Registering and recording ownership of vessels
• Licensing and regulating driving and traffic violator schools and their instructors
• Licensing and regulating vehicle manufacturers, transporters, dealers, distributors, vehicle salespeople, and dismantlers
• Administering the Financial Responsibility Law
• Investigating consumer complaints
• Maintaining records in accordance with the law
• Collects approximately $6.5 billion in revenues annually

That’s a lot.  To accomplish this for the state’s population of 36,457,549 (2006 census bureau estimate), with 23,270,087 licensed drivers and 4,248,807 ID cardholders (2006)  The total budget is $903 MILLION (proposed, 2007-2008) with 8,280 employees.

While this sounds like a lot of money and people, this amounts to only approx. $33 and only .0003 employees per license/ ID card.  How much service can you expect from three ten-thousandths of an employee?

The DMV is a symbol of state government to most people — and not often a positive one.  Few people have good things to say about the DMV, and by and large this boils down to the need to show up at the office and stand in a line, fill out forms, and regularly pay fees.

Few people understand that one of the reasons for the lines is that the DMV just doesn’t have enough people working there – just three ten-thousandths of a person for each license or ID cardholder.  When 27.5 million people are demanding services from 8,280 employees, lines can indeed get long.  

But even under these constraints, they find ways to manage as well as they have.  In fact, according to the Governor’s Budget Document, “Over the past two years, the DMV has reduced field office wait times in the largest offices from nearly one hour to 20 minutes and reduced customer telephone wait times by more than 50 percent.”  These lines were decreased because the Governor committed to additional funding (demonstrating the direct relationship between funding and good service to the public.)  

We frequently hear that government spending must be cut, but few places bring home the impact of government spending cuts as directly as the experience of a visit to the DMV.  In our example the DMV is a symbol of the state government, and the experience of the DMV is the experience of underfunded schools, roads that need maintenance and services that are approaching a breaking point.  Spending can only be cut so far.

Click to continue.

Dave Johnson of Speak Out California

Last week I began to explore California’s budget, and wrote,

Our budget reflects our values. So where do we spend our money? How many Californians even know? I didn’t know so I decided to find out.

That post outlined this year’s budget, with an overview of the departments and amounts.

This week I take a look at how we in California put together our budget.  By understanding the process more of us can begin to get involved and work to ensure that the budget really does reflect our values.

As you consider the budget process and its limitations and constraints, compare it to how your own home budget operates. What do you do if you need a new car, or need to fix up your house — or just repair the roof — or provide a good education for your kids, put healthy foods on the table, and things like that.  The state isn’t really different, just bigger.

The first thing to understand about the state’s budget is that there are constraints placed on the ability to easily alter the budget to reflect the wishes of the public.  In some ways this may be wise, like requiring that the budget be balanced — just look at the massive federal borrowing ($9 trillion so far) that has resulted from politicians pandering to a public desire to avoid paying taxes.  But in other ways these constraints limit the public from truly putting their money where their values are.  A League of Women Voters (LWV) document (PDF) on the budget process describes some of these constraints:

Proposition 13 limits the amount of property tax that can be levied; Proposition 4 of 1979 limits the amount of money that the state can appropriate.

Proposition 98 requires that a minimum percentage of the total state budget be spent on K-14 education. At the same time that limits have been placed on revenue, the state’s shifting demographics have increased demand for public services.

This returns us to our comparison with your own home budget.  How would you proceed if you had a fixed amount you could spend, with an ever increasing amount of it already committed to “non-discretionary services and payments” — like rent or a mortgage and rising credit card interest?  And what if asking for a raise is pretty much ruled out, no matter how bad you might need it?

Additionally, by the way:

The law does not permit the committee or individual legislators to use public funds to keep constituents updated on items of interest unless specifically requested to do so.

So to learn how our money is being used you have to be proactive, make contact and ask questions.

The Process:

There is a summary of the budget process available on the Department of Finance website.  To summarize the summary:

California’s Constitution requires the Governor to submit a budget by January 10 each year.  If the spending in that budget exceeds estimated revenues the Governor has to recommend sources of additional funding.

The preparation of this budget is directed by the Governor’s Director of Finance, issuing guidelines to the agencies and departments.  Current department funding is used as a base.  Then a Budget Change Proposal is developed by each department to the Department of Finance for review and analysis.

As each department puts together its budget they try to work out all of the issues, with Department of Finance participation.  Issues that are unresolved or are discussed at hearings and ultimately unresolved issues are presented to the Governor for a decision.

Then the Department of Finance puts together four documents, available at their website:

Governor’s Budget Summary — A summary volume which includes the Governor’s goals and objectives for the forthcoming year, and the policy perspectives and highlights of changes in the Governor’s Budget.

Governor’s Budget — A detailed presentation for each department for the past, current, and budget years.

Governor’s Budget Highlights — A pocket size highlights book of narrative, charts and graphs issued on the Press Conference day.

Salaries and Wages Supplement — A detailed presentation of authorized staffing and related salaries.

Next, a Budget Bill is introduced in each house of the Legislature.  The Legislature then does everything they can to prevent passing any budget. (Not really, even if it seems that way. Just seeing if you’re reading.)

These Budget Bills go before the Senate Budget and Fiscal Review Committee and the Assembly Budget Committee.  The items in the bill are assigned to subcommittees, which hold hearings, usually beginning in late February.

The Legislature appoints a Legislative Analyst who presents a nonpartisan “Analysis of the Budget Bill” and recommendations for changes to the Governor’s budget plan, and testifies at the hearings.  Staff from the Department of Finance also testify at the hearings. Also at these hearings partisan consultants, lobbyists and the public may provide testimony.

By Spring the Department of Finance develops “Finance Letters” proposing adjustments to the Governor’s budget.  Then, the subcommittees report their recommendations to the Senate and Assembly committees, which vote to adopt the budget, and send them to the full Senate and Assembly.  Each are required to pass the budget by a 2/3 vote.  Should this somehow ever happen, there is a Budget Conference Committee that works out any differences between the Senate and Assembly versions, also requiring a 2/3 vote.  The final bill is sent to both houses for passage, again requiring a 2/3 vote.

The resulting bill is sent to the Governor, who can then reduce or eliminate any item.  Both houses must again vote 2/3 on that specific item to restore it to the budget.

Finally the Department of Finance publishes three documents:

California State Budget Highlights — A pocket size highlight book of narrative, charts and graphs.

Final Budget Summary — This document is an annotated version of the Budget Act which includes summary tables, technical corrections to the Budget Act, and the effect of vetoes on the items and sections of the Budget Act.

Final Change Book — This document provides the detail of changes between the January 10 budget and the enacted budget.

Often there items in the budget are that require changes to existing laws. When this happens, separate “trailer bills” bills are introduced and are heard concurrently with the Budget Bill.

The Department of Finance provides a flowchart of this process, in PDF form, here.

This process allows everyone the opportunity to know what is going on, and input on changes they want.  However, in a state as large as California there are complexities that make it difficult to track everything.

How can you keep track of items that interest you?  

Click to continue.