Karen Bass, on a budget deal that closes a $26 billion dollar deficit with deep cuts, local government raids, gimmicks and offshore drilling, without any new revenues:

“I would characterize this budget as shared pain and shared sacrifice”

Yes, it sounds shared to me.

Arnold Schwarzenegger, talking about a budget that will bankrupt localities, treat the elderly, disabled and blind like common criminals, throw millions off of children’s health care and temporary assistance and ensure public education’s status as the worst-funded in the nation:

“We accomplished a lot in this budget agreement,” said Schwarzenegger, adding that negotiations at times were “like a suspense movie.”

Fun!

This flag was seen in Southern California yesterday.  That’s a distress signal.  I share the sentiment.

UPDATE: I forgot this quote from Planet Reality:

“This is the biggest step back from protecting and investing in vulnerable Californians in a generation,” said Frank Mecca, executive director of the California Welfare Directors Association.

You may have heard this by now, but we have a deal.  The #cabudget hashtag should get you your fix.  The topline stats:

$15 billion in cuts, no new taxes, $11 billion in gimmicks and borrowing

$4-5 billion in local government raids

only an $800 million reserve (initially the talks were for a $4 billion one)

$6 billion in reductions to public schools, but an $11 billion dollar payment somewhere down the road though not in writing

yes, there’s new offshore drilling in this deal, going around the Lands Commission, and without an oil severance tax for the producers

$1 billion assumed for the sale of the State Compensation Insurance Fund, which is not only unlikely but would really crush small businesses if sold

no suspension of Prop. 98

basically a reinvention of state government, more austere, and precisely when folks need the opposite.

Story here.

…three furlough days a month for some state employees still in place for the rest of the year

$500 million in cuts to Cal Works

smiles all around from Dem leg. leaders as they cheer that “we did not eliminate the safety net for California.”  Poking a big hole in it, apparently, qualifies as A-OK.

…we’re also cutting $1.2 billion to corrections without releasing any prisoners, as per the actual politics as usual.  The only way you can do that is by cutting every treatment or rehabilitation program in the prisons, or eliminating overtime for corrections officers.  In other words, we’re turning prisons into Public Storage units.

UPDATE by Robert: The main takeaways here:

• Arnold and the Republicans got everything they wanted – a cuts-only budget that protects their wealthy allies and the big corporations from having to pay their share and that makes everyone else suffer.

• California’s government is functioning as intended – producing right-wing outcomes despite large Democratic majorities. I will continue to blame specific legislators for agreeing to this shit, but lasting change will only happen when we press the reset button on state government.

UPDATE by Dave: Just to state the obvious, only the Republican leaders have agreed to this.  We still aren’t through the process where individual Yacht Party members have to be bribed for their votes.

Of course, we aren’t through the process where progressives just say “no we’re not voting for that, try again,” but I’ve never seen that process come into play.

UPDATE by Robert: More elements of the deal, from John Myers at KQED CapNotes:

• Background checks for IHSS providers

• Fingerprinting of workers and clients (so if you are disabled and cared for at home, you will be treated like a common criminal merely because you need assistance)

• “Some state parks will close” even though parks generate more tax revenue than they cost

• OC Fairgrounds to be sold

• Integrated Waste Management Board to be abolished, despite the fact that its annual cost is statistically negligible

The February deal was bad, but this is far worse.

…CalPERS reports $56 billion loss. Local governments are going to have to make up part of this shortfall – but with what money? The legislature has guaranteed mass bankruptcies for local governments with their raid on local funding, which was probably the point of Arnold’s insistence on such raids.

The latest Big Five meeting is underway, and we could see a yay deal as soon as tonight. Digby, who I’m lucky enough to call a colleague over at Hullabaloo, has a great post about the budget debacle and the collective lack of perspective in politics.  She references the 2003 special election freak show and how the media became seduced by marketing and reality-show gamesmanship into cheering on the “Who Wants To Be Governor Of California” spectacle (side note – I actually almost worked on the actual “Who Wants To Be Governor Of California” TV show produced at the time by Game Show Network).  And while turning the recall into a game, everyone forgot about the insanity of the associated issue:

The “issue” that supposedly precipitated this little tantrum was the required restoration to earlier higher rates for car registration, brought about by a weakening of the economy. The media went wild, even friends of mine who know absolutely nothing about politics pretended to be enraged that they would be forced to pay $30.00 more a year and they all went out and voted to recall the Governor and replace him with The Terminator.

That recall was a political sideshow of epic proportions, featuring porn stars, Gary Coleman and even Arianna. It was great fun. Standing in line to vote that day — the longest line I’d ever experienced at the ballot box — was like being at an American Idol party.

But check it out. In an otherwise terrible George Skelton column, he does make one interesting observation:

Schwarzenegger had campaigned full throttle against Gov. Gray Davis’ “outrageous” raising of the vehicle license fee. His favorite stunt was using a wrecking ball to smash an old jalopy that symbolized the tax.

Davis really had only bumped the fee back to its historic level: to 2% of a vehicle’s value, rather than a recently enacted 0.65%.

Schwarzenegger’s canceling of the fee hike actually amounted to the single biggest spending increase of his reign. That’s because all the revenue from the vehicle license fee had gone to local governments, and Schwarzenegger generously agreed to make up their losses by shipping them money from the state general fund.

The annual drain on the state treasury was $6.3 billion until February. Then the governor and Legislature raised the fee to 1.15% of vehicle value, saving the state $1.7 billion. But it will revert to its lower level in two years.

Cutting the car tax plunged the state deeper into debt just as Schwarzenegger was taking the wheel. To cover it — at least temporarily — the new governor went on a borrowing binge. It didn’t take much to persuade the Legislature and voters to authorize $15 billion in “economic recovery bonds.”

Passing those bonds and a companion spending “reform,” the governor promised, would mean “no more deficit financing.” They’d live within their means. Sacramento would “tear up the credit card and throw it away.”

The only thing thrown away was all the bond money, spent long ago on daily expenses — the equivalent of borrowing to buy groceries.

I’m not saying the car fee issue is the reason the state is currently in chaos. It’s far deeper and more complicated than that. But I do believe that the simplistic, downright silly approach Americans take to politics is largely to blame. It long ago became more about marketing and entertainment — and preening, shallow self-gratification — than serious consideration of responsible governance.

I would be remiss if I didn’t total up the $6.3 billion a year in lost revenue from the vehicle license fee, along with the interest on those needless economic recovery bonds, and note that the total is surely more than the current budget deficit or even the last two combined.

But Digby’s main point is correct.  When the media in this state bothers to pay attention to politics, it’s as a freak show, and they ascribe the same kind of reporting available in the sports section rather than give anyone the information they need to make serious choices about what kind of state they’d like to live in.  The so-called “car tax” was the kind of populist pitchfork-fest that was perfect for Schwarzenegger, and he repeated enough movie quotes and manipulated enough emotions to prevail.  Along the way, almost nobody challenged the thesis, nobody provided the truth about the VLF, nobody slid the debate from the zaniness of the recall – porn stars! – into the serious business of a government that works.

Digby thinks that “we are going to have to reform more than the state constitution to fix things. We need to reform politics itself somehow, convince people that it isn’t American Idol or the World Series, or the ruling class will always be able to afford to put on a show whenever they need to manipulate the folks and the folks will probably fall for it.”  And I agree with that to an extent: for one, the system cannot be reformed without a responsible citizenry understanding the reasons why.  But I’m enough of a goo-goo to believe that enough people can become energized by taking back their government so that the seriousness and the structure will be injected back into California’s system.  That’s why I believe sweeping constitutional reform is in the end the only option – because a status quo system will only empower the types of shenanigans that brought us both the Governator and hundreds of thousands if not millions of residents left with no help and no hope.  To get the circus out of town, we must offer an alternative to the sideshow that is our government.  If enough of us wish to be a laughingstock no more, it can be done.

While the all-cuts deal seems destined to pass in the near-future, leaders of every stripe are spinning. But, as Progressives, we should be watching what our own leaders have to say most intently. I don’t mean to pick

“The cuts to education have been devastating to my city and to other cities,” said Assembly Speaker Karen Bass, D-Los Angeles. “Teachers have been laid off, class sizes have grown. What’s happened to education has been terrible. The reason it’s happened is because we’ve been in the worst recession since the Depression. We haven’t exactly sealed the deal yet, but it seems as though we are reaching conclusion on how to make sure the schools are repaid.” (SacBee 7/20/09, emphasis added)

Certainly the recession is a cause of the cuts to education. But THE reason? I think not.  Bass knows from trying that the cuts to education were not the only option.  Does anybody think that if we had a system of government that worked that we would be in this situation? If we had majority rule? If the Legislature had the authority to actually control spending priorities on the entirety of the budget? It is excruciatingly clear that our system is to blame for much of this mess.

And what if we didn’t have the crazy recall system that brought us Schwarzenegger? What would the world look like right now with a Governor Phil Angelides, Westly, or umm…Bustamante? Sans Arnold and all of his flip-flopping negotiation strategies, do we build a way out of this without the IOUs? Heck, if Blakeslee can do it, it should have happened.

But, Democratic leaders cannot escape blame on their end either. Even in this broken system, they must take a share of the responsibility on their own backs. They have now agreed to what Democrats, almost universally, consider shocking, an all-cuts budget revision. They have agreed to steal $4 Billion from the local governments. Yes, they saved Cal-WORKS, of a fashion, but no Democrat should be proud of what will happen this week.

Being a Legislator these days is really crappy job. You get a series of impossible decisions and any legislation outside the budget gets ridiculed.  There are some times when you just can’t win, no matter how you vote. But being able to look yourself in a mirror, and still call yourself progressive after voting for this deal? Well, that will be a very tough job indeed.

Robert Cruickshank pretty well covers the disaster that will be the upcoming budget “deal” between legislative Democrats and Arnold Schwarzenegger.  By the way, this is BEFORE the Yacht Party tries to enact a few more goodies for the privilege of letting Democrats vote for $26 billion in cuts, gimmicks and raids on local government.  We’ll see a big sigh of relief from lawmakers over the next few days that will be wholly unwarranted.

Particularly galling is the targeting of city and county budgets to cover the state gap.  By siphoning off almost $1 billion in gas tax funds slated for cities and counties, not one pothole in California will get filled this year.  With the loss of $1.7 billion in redevlopment funds, not one project like affordable housing will get initiated.  And by taking $1.3 billion in local property taxes, lots of city and county employees, particularly in public safety, will end up out of work.  It’s really robbery on a pretty grand scale, and it will offset any economic recovery through stimulus funding throughout the state.

One of the major consequences of this cuts-only budget will be, paradoxically, higher costs for individuals and the state.  When you eliminate or severely restrict social services programs, those individuals who rely on them will have to go elsewhere for those services.  The alternatives are more expensive for everyone.

Irene Steinlage has trouble walking, getting dressed, making her bed, taking a bath. She has stayed in her Folsom home with the help of a health aide, one that Gov. Arnold Schwarzenegger says the state can no longer afford.

The governor’s plan to take away such care is meant to save money. But it could end up costing California more by forcing the 85-year-old, who has Parkinson’s, osteoporosis and other ailments — and thousands like her — into nursing homes.

“I couldn’t possibly afford a nursing home,” Steinlage said. So the state could be saddled with a Medi-Cal tab that is triple the cost of her home care worker, who receives $10.40 an hour five days a week […]

Others say the experience of governments that have closed gaping deficits with deep program cuts suggests that the price of doing so is hefty.

“It’s pay now or pay later,” said Nicholas Freudenberg, who co-wrote a study of the long-term effects of service reductions made in the aftermath of New York City’s fiscal crisis of 1975.

His 2006 study, published in the American Journal of Public Health, found that less than $10 billion in cuts to healthcare, education and law enforcement in New York City over four years led to at least $54 billion in additional costs over a 20-year period, using 2004 dollars and adjusted for inflation. Consequences included higher rates of HIV, a worsened tuberculosis epidemic and a spike in homicides.

“Those potential epidemics that are being seeded by Gov. Schwarzenegger’s cuts will not come in his term or the terms of people who are making these decisions,” Freudenberg said. “It will be several years down the line.”

The sick thing is that the Governor, and maybe even some in the Yacht Party, know this.  The consequences of program cuts are easily seen.  Eliminating the Poison Control System, for example, means that people calling the emergency number (many of whom don’t need to see a doctor based on poison accidentally swallowed) will instead go to the ER, and many of those visits will be from people on Medi-Cal, leading to higher costs.  Cutting adult day care will send many into nursing homes, at a higher cost to the state.  Losing Cal Works welfare funding will send children into foster care, at a higher cost.  Cutting the meager drug treatment and vocational training in prisons almost assures an even higher recidivism rate, at a higher cost.

This is not a difficult calculation to make.  We fund social services programs not only because we have an obligation in a developed society not to see people dying on the street, but because we can create programs that get people back to self-sufficiency at a lower overall cost.  There is only one reason not to fund such programs – because an arrogant and entitled right wing refuses to fund these government obligations in the short term, preferring apparently to pay more in the long term.  There has been enough money in the last few budgets to produce massive corporate tax cuts, but not enough to get someone with a chemical dependency the treatment he or she needs.  There’s been enough money to protect California’s unique status as the only oil-producing state not to charge corporations for taking our natural resources out of the ground, but not enough to provide long-term care services that relieve the burden of nursing home funding over the long term.  There’s enough money to keep in place useless enterprise zones that create nothing but tax giveaways, but not enough to keep the state from becoming the first in the nation to put poor kids on a waiting list for affordable health insurance.

We hear about the “generous social services programs” in California that simply had to be cut, but they’ve been reduced to the point where they are almost unanimously the worst in the nation.  That depresses the business climate, that moves bodies out of the state, that alienates the public.  And Arnold Schwarzenegger knows this, and he did it anyway, to keep a promise to what little of his base he has left.

Ultimately, this system isn’t designed to produce good budgets.  Without a media that cares, no amount of activism or public pressure can be brought to bear on a shameless and unaccountable minority.  If you need proof of the need for a complete rethinking of how to structure government in California in the 21st century, look at the last seven months.

Judy Chu was sworn into office today as the first Chinese-American woman to serve in Congress.  Her departure opens a whole at the Board of Equalization, a little-known four-member board that collects taxes and determines a lot of corporate tax policy.  The four districts are gerrymandered to produce two Democrats and two Republicans, with the state Controller making up the swing vote.  Today the Governor announced his choice to replace Chu, and boy are the richest companies doing business in California happy:

Gov. Arnold Schwarzenegger today will appoint Jerome Horton, a business-friendly former Democratic lawmaker, to the state’s tax board, an administration official said.

The pick probably will shift the balance of power on the tax panel, which, despite its low public profile, holds broad influence over corporate taxes […]

Reliably liberal Democrats have formed a solid three-person majority on the five-member tax panel in recent years. But the moderate Horton, who was known during his tenure in Sacramento for abstaining from votes to keep himself in the political center, is expected to change that dynamic.

Well, good for the business lobby, right?  It’s not like they have had multiple victories in the past year, what with getting all sorts of permanent corporate tax breaks in the past two budget agreements and pushing the Parsky Commission in an effort to eliminate corporate taxes altogether.  They needed a leg up.

Horton needs both houses of the Legislature to sign off on the appointment, but much like with Supreme Court appointments, I fail to see how rejecting him would somehow yield a better result.

In the last 18 hours, we’ve gone from stirrings of a possible deal to what has been called a “stall.” The stall, as Speaker Bass notes, is the “elephant in the room,” Proposition 98 and education cuts.

Further complicating this mess, we have more credit rating downgrades.  Moody’s now has us down to a Baa1 credit rating, and Fitch has us at BBB.  Basically, we are hovering just a step or two from Junk bond status, and in terms of the interest rates that we are having to pay right now, the difference between our bonds and junk bonds really isn’t that great.  

It is pretty clear by now that at least some part of the budget gap will be made up with more borrowing. The wherewithal for a full cuts-only budget just isn’t there, on any side really. So instead, we are borrowing from the future, not just in the pure borrowing sense, but also in that we are cutting our investment in education. However, with these credit ratings that we now have, it will be the current borrowing that will be the object of budgetary consternation for the next few years.

Of course, the fact that we have to use these IOUs has made the problem far worse, to the tune of at least $26 million in July alone. But while George Skelton can see that the Governor’s overreaching has much to do with our IOU summer, he also brazenly repeats a conventional wisdom repeatedly borne out to be inconsistent with the facts. You know the schpiel, the May 19 election was supposed to mean that the voters wanted cuts, cuts, cuts. Of course, Skelton, and most of the Broderists calling for a “mandatory” shock doctrining of the state, repeatedly fail to acknowledge the facts that most Californians want a balanced package of cuts and taxes.

But why bother noticing what California’s voters actually want when you can read tea leaves from 24% of the electorate that understood/cared about what was going on in May that they bothered to vote.  I mean John and Ken say that there is rage boiling over about taxes, and we can’t dare tax the oil companies, or the rich, or the people will explode.  Never mind the fact that it simply isn’t true, we MUST cut everything, because that is what the Real Serious People know to be true.

Will we ever default on our bonds? No, our constitution really won’t allow for that. But can you blame the credit rating agencies for looking askance at our system? They see it is broken, and in financial circles, that calls for high interest rates. But while Skelton and the conventional wisdom of the Sacramento swamp imply that we just should have cut and be done with it, there are only easy answers in a system that has lost its conscience.

Of course, we really aren’t that far away from that, are we?

Hopes for a deal on the California budget faded last night as the Big Five could not agree over the big issue of whether and how to suspend Prop. 98, the mandate for education funding.

The education money discussion is not new; much of it dates back to the February budget negotiations, which resulted in a ballot measure asking voters to offer blessings upon a supplemental payment. Voters rejected that measure, Proposition 1B.

And as with most education financing debates, this one lands squarely back at the maze of formulas and calculations that embody the 21-year old funding guarantee enshrined into the state constitution by voters, Proposition 98.

In a nutshell, the current debate focuses on whether schools are owed money in the future to make up for some of the recent spending reductions, and whether that obligation (the so-called “maintenance factor”) should be codified in law as part of the current $26.3 billion deficit deal.

“The Prop 98 law is so confusing,” said Senate President pro Tem Darrell Streinberg to a throng of reporters outside the governor’s office, “that we want to make sure that there is clarity.”

My belief is that education leaders will win this money in the courts, no matter how long Arnold and the gang put it off.  The lawsuit has already been filed.  The Democratic leadership want to just deal with the $11 billion dollars in essentially stolen money from schools inside the budget agreement by promising the money in the out years, while the Republicans and Arnold don’t.

So if you wanted a 2010 campaign slogan, you have the source material.

It looks to me like Arnold is holding out simply so he can prove a point.  His effort to insert privatizing social services eligibility at the last minute is flawed enough that even the Yacht Party might have trouble stomaching it.  The proposed cuts in the deal are really intolerable but not what the Governor promised at the outset.  It’s unclear whether the Governor will get his anti-fraud provisions, also inserted late into the process.  And it’s completely unclear, given the deal likely to come out, why we had to wait two weeks for virtually the same deal.

Whatever budget deal ultimately is passed — and in this economy it’ll only be a temporary fix, at best — virtually the same agreement could have been reached weeks ago […]

Democrats produced a stop-gap plan supported by Assembly Republicans that would have staved off IOUs. They proposed $3.3 billion in cuts to education and other programs that would have kept the cash flowing, at least for a few weeks. It would give them time to negotiate more cuts. Schwarzenegger rejected the idea and persuaded Senate Republicans to follow.

That’s where the governor began bobbling the ball, although his coaches figured he was playing to his fan base, what’s left of it.

Issuing IOUs will cost the state roughly $26 million in interest for July, the state controller’s office estimates. The IOUs also prompted Wall Street bond rating agencies to lower California’s credit to near junk status. That potentially could cost the state $7.5 billion over 30 years, according to the treasurer’s office.

Schwarzenegger, aides say, calculated that Democrats wouldn’t negotiate seriously without facing a deadline, such as the latest: most banks refusing to accept IOUs. Negotiating piecemeal would get nowhere, the governor believed.

But he might have dodged IOUs completely. Guess it doesn’t rankle much that the state he has governed for nearly six years must now pay bills with scrip.

Schwarzenegger’s clumsy attempt at the Shock Doctrine, when the deal Democrats were willing to agree to was painful enough, was about as irresponsible as a chief executive could be.

…just one more thing on this that the LAT article makes clear.  Schwarzenegger AGREES that education should be paid the money borrowed from them in the out years.  But Democrats suspect that his fingers are crossed and they want it in writing.  That’s the argument now.