L.A. teachers walked out of their classrooms for one hour yesterday to protest proposed education cuts in the budget.  In West LA they stopped traffic.  Speaker Bass, at LA Trade Technical College for a ceremonial swearing-in event, offered support to the teachers.

State Assembly Speaker Karen Bass (D-Los Angeles) said the demonstrators — who included teachers in red T-shirts, parents with young children and students — were heard by the governor and state lawmakers wrestling with a $17-billion budget shortfall. She said Democrats in the Assembly and Senate will not accept any budget that is balanced through cuts only.

“I absolutely support the action taken by the teachers, and if it wasn’t for the swearing-in activities, I would have walked on the picket line right along with them,” said Bass at her ceremonial inauguration as Assembly speaker at Los Angeles Trade Technical College. “What the teachers did today was they sounded the alarm for the people of Los Angeles to understand how serious this crisis is.”

Of course, it would be nicer if this show of support translated into a revenue solution more robust than picking up the Governor’s ridiculous lottery borrowing idea and running with it.

Democratic lawmakers made an opening pitch Thursday for closing the state’s $15.2 billion deficit, using lottery borrowing as well as unspecified proposals to close tax loopholes […]

Assembly Democrats have supported the governor’s plan to borrow from the lottery but rejected his proposal to put the money into a so-called “rainy day” account. Instead, they would like to use the money to pay down debt.

Democratic leaders in both houses proposed giving schools more than the governor recommended. They include cost-of-living increases for teachers.

I think the move here for Bass is to get the necessary short-term revenue by whatever means necessary to balance the budget this year, and then put her taxation task force in motion thereafter and make the real fight through the next two years of her leadership.  But that’s unfortunately a shortsighted proposal.  Borrowing from the lottery means greater deficits in the future, and Californians understand this and have rejected the idea.  Every year that we fail to address the revenue side is a year where we have to borrow more and more to get the budget balanced, meaning that we’ll need more revenue when we finally get around to structural change.

Given all the buildup that came before Arnold Schwarzenegger’s May Revise, it may seem surprising that we have heard relatively little about the budget from the state’s media and politicians over the last few weeks. The June primary is partly responsible for this, as Sacramento’s attention is on the various primary contests in legislative districts around the state.

But an even bigger factor is that there does not actually seem to be any budget solution being actively discussed, and certainly none that would realistically solve the budget deficit. Arnold’s May Revise used as its cornerstone a questionable lottery borrowing plan, but as Evan Halper explains in today’s LA Times it is becoming difficult to take the plan seriously:

Californians find the governor’s lottery strategy so distasteful, a recent state poll suggests, that they would rather have their taxes raised. Meanwhile, lawmakers are denouncing the plan as a gimmick, and analysts say it could prove far costlier to the state than Schwarzenegger is letting on.

Voters would have to approve the governor’s proposal. But Mark Baldassare, president of the Public Policy Institute of California, said they meant it when they approved the lottery by ballot measure two decades ago to raise funds solely for schools.

“They don’t see it as money to move around and use for other purposes,” he said.

Administration officials are adamant that schools, the beneficiary of the lottery, would not lose money. Still, the institute released a poll Wednesday showing that only 30% of likely voters support the lottery borrowing (with 8% undecided), while 57% back the 1-cent sales tax increase that Schwarzenegger is grudgingly proposing as a backup if the lottery plan falters.

Although it’s not clear to me whether the 1-cent sales tax increase requires a 2/3 vote, Democrats should take note of that poll result. 57% is a pretty clear majority of Californians, suggesting that concerns voters won’t support higher taxes are overblown at best.

Halper wants to argue this is a sign that voters love their lottery, but the stats suggest otherwise:

California’s lottery is one of the more outdated in the country. And last month lottery officials reported that sales were $275 million below projections for the fiscal year ending this month.

So I don’t think it’s that voters have a strong connection to the lottery. What this instead suggests to me is that voters can see right through gimmicky proposals to provide yet another short-term budget fix, and are instead demanding long-term, permanent solutions.

Combine the lottery bonds’ low poll numbers, the dim prospects that the lottery would ever attain the sales levels necessary for the bond plan to succeed (as the article notes, lotteries need video terminals to achieve high sales figured and the tribal casinos would surely never let that happen), and the lack of enthusiasm around Sacramento for the plan and it seems that Arnold’s budget is DOA.

Unfortunately nobody has yet stepped up in Sacramento to offer an alternative plan. Arnold Schwarzenegger’s administration is a clear failure, but that doesn’t absolve Democrats of their responsibility to provide a coherent alternative. Californians are seeking real solutions, permanent budget fixes that will solve the structural revenue shortfall, protect core services, and position California for success in the 21st century economy. If we don’t solve this now, this state is going to fall permanently behind the rest of the globe, and more and more Californians are beginning to grasp this.

Now would be a good time for Democrats to step up and offer a coherent, long-term budget solution. Propose it before July 1 and start mobilizing public support for it as soon as possible. We know that Republicans will maintain a ridiculous “no new taxes” stance, but that seems to be politically untenable in this climate and is setting them up for big losses in the 2008 elections. Californians deserve a clear choice, and they deserve a budget that is sound, stable, and structurally secure.

Here are a few tidbits on this GOTV weekend!

• Obviously everyone is going to be working hard for their causes and candidates, so it may be a little quiet around here.  I’ll be out walking all day tomorrow.  Oh, and don’t vote for the racist guy, Bill Johnson, as a Judge of the Superior Court (Office number 125) in LA County.

• Yesterday was the deadline for bills to get passed out of their chamber of origin, and the Assembly passed major subprime mortgage legislation, without help from Republicans (6 of them abstained despite being seated right in the chamber).  This bill has some good homeowner assistance elements that will allow people to restructure their financing before foreclosure.  A mortgage bill has also passed the State Senate, so some form of legislation will hopefully get to the governor post haste.

• One of the biggest problems with the housing crisis is that, as home sale prices lower, homeowners are reassessing their value and getting their property tax lowered, decreasing state revenue yet more.

• Sticking in the shiv before riding off into the sunset, Fabian Nuñez writes a puzzling op-ed in the Sacramento Bee approving of the Governor’s horrible idea to borrow against future lottery revenue.  Considering that the only sustainable solution to the permanent crisis mode that we have in our budget is to reorganize the tax structure instead of constantly borrowing, I have no idea why any Democrat would veer so far off message and undermine the new Speaker’s ability to move forward.  What’s more, lotteries are regressive taxes on the poor.

• One spot where there will be a lot of action on Tuesday is in Ventura County, where Democrats now outnumber Republicans and which could have contested elections in the Assembly, Senate and US Congress.  However, the LA Times shows its political acumen by writing:

One of the more closely watched contests on Tuesday will be the Democratic primary in the 24th Congressional District. Insurance agent Mary Pallant of Oak Park; Marta Jorgensen, a Solvang educator; and Oxnard businesswoman Jill Martinez are running.

Marta Jorgensen quit the race over a month ago and endorsed Martinez.  Way to go, LAT.

• Excellent news out of Los Angeles: there’s been a $1 million dollar settlement with Hollywood Presbyterian Medical Center for their dumping homeless patients on Skid Row.  They will also be monitored by a US Attorney for five years.  This unethical practice has reached a reasonable conclusion.  Hollywood Presbyterian deserved punishment.

• Trying to get rid of marijuana grow houses in Arcata is like trying to get rid of the Pacific Ocean on the California coast.

Enjoy!

By Dave Johnson, Speak Out California

The headline article in Sunday’s San Jose Mercury News: A winning bet on lottery money for Schwarzenegger?

FOR GOVERNOR’S BUDGET PLAN TO WORK, TICKET PROFITS MUST DOUBLE

The article discusses ways to increase lottery sales so the Governor can borrow from future revenue to pay today’s bills.  (And we get to pay huge investment bank fees for the privilege of borrowing our money from our future.)  

The article does not discuss the consequences of the possible failure of this wild plan to base the state’s financial future on gambling revenue.  If it fails we will still owe a huge amount of money to the big Wall Street firms, but will have even less revenue coming in to pay the additional interest and principal.  We’re talking about the possibility of bankruptcy here, folks.

The article does not discuss the consequences of using marketing methods to push gambling to California’s low income citizens.  We already know there is a gambling problem just from the amount of advertising that is being done today.  Now lottery-pushers are talking about online betting, allowing use of credit cards so people can go into debt, and increased advertising.  This can only lead to terrible victimization of people who are susceptible to gambling addiction.

Mostly, though, this Sunday headline article does not discuss realistic ideas for raising revenue to pay for the state’s schools, roads, police, firefighters, courts, health care facilities, DMV workers, environmental oversight and the rest of the absolutely necessary things that our state government does for us.  These ideas include asking the wealthy to pay the same sales taxes when they buy yachts and jets that the rest of us pay when we buy clothing and cars and necessities, or asking the big corporations to pay realistic property taxes on commercial real estate, or asking the oil companies to pay something when they pump our oil out of the ground and sell it back to us, or closing some of the loopholes that allow big corporations and wealthy to escape paying their share of taxes.

Nope, instead of looking at realistic revenue ideas we’re all being distracted by this silly lottery scheme.

Click through to Speak Out California

You guys figure that out budget thing, I’ve got yacht parties to attend:

Gov. Arnold Schwarzenegger brushed aside criticism of his latest budget plan Thursday and said lawmakers now bear responsibility for resolving the state’s $15.2 billion budget deficit.

The Republican governor, speaking with The Bee’s editorial board, lamented he had “negotiated with myself” for the last five months because legislative leaders did not meet with him to discuss the budget.

“The reality of it is that the ball is in their court,” Schwarzenegger said. “The more they scream, the deeper they bury themselves. Because in the end, they have to meet somewhere in the middle to get this budget done.”

Hey, Arnold did all he could, right?  He threw out some ideas to massively cut social service programs and raid lottery funds to borrow against the state’s future.  Isn’t that ENOUGH?  I mean, the guy hasn’t been on the cover of a magazine or at a Laker game in WEEKS!  Let him be.  These yacht parties don’t happen every day.

It is funny that Schwarzenegger is firmly in the middle of a Republican civil war.

“I said, ‘Look, if you guys are so worried about it, I’ll say it,'” Schwarzenegger said about the need to consider taxing more services. “And of course I’ll get beaten up and Republicans will say this is a signal, this is a code word that means you want to raise taxes. What do I care? Let them say that. They’re always going to complain anyway that I want to raise taxes.”

There were hundreds of students at the Capitol yesterday protesting the education cuts that remain in the May Revise.  The Yacht Party is on the wrong side of history.  Arnold’s also on the wrong side – unwilling to actually fix the budget out of fear, and willing to mortgage the future (and threaten taxes as a way to get his way on mortgaging the future).

By Randy Bayne

x-posted from The Bayne of Blog

That seems to be the message we’re getting from Governor Schwarzenegger. He is betting on the lottery to close the budget gap that is pegged at $15.2 billion. Specifically, his plan is to sell bonds (borrow) against future lottery revenues. He is counting on the citizens of California to do their part and place more bets on the lottery which he describes as an “underutilized resource.” In other words, Californians aren’t gambling enough.

This plan is beyond bad. It has no backing that I can see in the legislature and relies on voters passing an initiative to change the lottery in November. Should the voters of California be reasonable and decide not to gamble away our future, Schwarzenegger is ready to increase the state sales tax by a percentage point as punishment for not going along with his gimmick. Steve Wiegand calls the plan, “astounding for its chutzpah and really lame for its reliance on gimmickry.”

Really folks, this has got to be a bad joke. Knowing he can’t lead with taxes as a solution to close the gap, and knowing that cuts only is beyond unrealistic, Schwarzenegger is putting forth a solution that he knows is going nowhere. It is sign that Schwarzenegger has “abandoned his goal of fixing the problem that led to his historic election in 2003,” writes Daniel Weintraub in the Sacramento Bee.

If this is the best solution – and we all know it isn’t – that anyone can come up with, it is going to be one long hot summer.

The people of California deserve serious proposals with serious solutions that will be long term and not be based on the hope that people will gamble more.

There is plenty of reaction to the May Revise:

Daniel Weintraub – Sacramento Bee.

Q and A on the lottery scheme – Sacramento Bee.

Steve Wiegand – Sacramento Bee.

Shane Goldmacher has a compilation of reactions.

Health care cuts – Health Access California.

Education Coalition

Schwarzenegger – The Ultimate Girly-Man from David Dayen at Calitics.

(This is a little technique called “using your opponent’s words against them,” not an signal that I think “girly-man” is some kind of devastating or even viable slur, for the record)

Key stakeholders are weighing in on the Governor’s revised budget.  The Education Coalition notes that public education is still shortchanged, primarily through suspending COLA adjustments.  Health Access California sees major cuts to health care, through denying certain Medi-Cal benefits to adults, eliminating coverage for some low-income working parents, and forcing others through loads of paperwork in the hopes that they’ll trip up and forget to check a box so they can be purged from the rolls.  Shane Goldmacher has a pretty comprehensive list of several other reactions.  

But my favorite take – probably because it most mirrors my own – is from Dan Weintraub, whose main point is basically what a coward this Governor is.

The governor’s revised budget would give more to schools and less to health and welfare than he proposed in January, but the real story is his proposal to use lottery revenues to bridge the stubborn gap between spending and tax collections. Schwarzenegger’s press staff is furiously trying to portray the lottery deal as something other than borrowing, but borrowing it is. The state would change the game’s rules in ways designed to attract more business, then lean on private investors for $15 billion in up-front payments. That advance on lottery revenues would be repaid over 30 years from the new proceeds generated by the changes. But the up-front money runs out after three years, and guess what happens then: Yup: the budget deficit reappears, unless there’s an economic miracle between now and then. Ironically, if there were an economic surge and the governor’s revenue-averaging proposal were in place, the state couldn’t spend the new money and would still be left with a shortfall to cover. That persistent shortfall, at least according to the governor’s numbers, is in the range of about $5 billion to $6 billion a year. Fixing that would be the next governor’s problem.

Schwarzenegger started off saying he was going to “blow up the boxes” in Sacramento.  He barely tried.  He said he would be the “Collectinator” and end the state’s donor status with respect to the federal government.  Didn’t happen.  This year he said the time had come for budget reform.  He offered the same answer as he has in previous years.  He’s even trying to shake down the state into accepting his borrow-and-spend proposal with the lottery, by raising the spectre of a regressive across-the-board sales tax if the voters knock it down in November.  

He’s a coward.  He doesn’t want to be responsible for fixing the budget permanently, so he wants to pass off the problem to his successor.  He doesn’t want his legacy besmirched, so he pulled back on the proposal to close parks or suspend Prop. 98.  He just wants to tour the world and appear on magazine covers, without having to do any of that nasty business of governing.  Nobody could be worse for this state at this time of crisis.

The AP has gotten a hold of the governor’s May Revise speech and therefore the major budget proposals that are to be unveiled tomorrow. The key elements are described below and over the flip I provide some analysis of each proposal.

• Arnold will float bonds using the state lottery as security. $15 billion over 3 years will be raised but $10 billion goes into “rainy day fund”
• If that fails, 1% sales tax hike to last no more than 3 years
• Prop 98 suspension abandoned; instead COLA will not be paid
• State parks closures abandoned; instead fees to rise $1 to $2
• $6 billion still left to cut or balance out somehow.”

Overall thoughts: Here we go again. Arnold Schwarzenegger came to office in the recall of Gray Davis in 2003 promising to solve our state’s budget problems once and for all. Instead he immediately blew a $6 billion hole in the budget with the Vehicle License Fee cut and then borrowed to close the rest of the gap – costing the state around $3 billion in annual debt service.

Now that Arnold’s solution has predictably failed, he is predictably offering more of the same. Borrowing against the lottery is a problematic concept for many reasons, the main one being it avoids the core issues of our budget. It’s yet another one-time fix that does nothing to solve the structural revenue shortfall that has plagued our state for 30 years.

It is significant that Arnold seems to be backing away from his most significant cuts – especially the K-12 cuts. Obviously the details released tomorrow will be key, and we should fully expect higher ed to take another crippling blow. But this does indicate that the activism many of us have launched against the primary schools cuts has had an impact.

And of course, there’s still $6 billion left over – $6 billion that the Yacht Party will insist come in the form of destructive cuts that damage the economy, $6 billion that Democrats will – we hope – insist come in the form of wise, long-term revenue solutions.

Finally, Arnold seems to be gambling that the economy will make a quick recovery and that the current woes are just a dip and not the opening stages of a deeper recession. That, I think, is a major and probably reckless gamble to make.

Thoughts on the specific items are below.

Borrowing against the state lottery: this seems to be at the core of Arnold’s new plan. As described by the AP:

The governor will propose raising $15 billion over the next three years by selling bonds based on anticipated lottery revenue. He will use about $5.1 billion of that for the 2008-09 fiscal year to help erase the deficit, administration officials told The Associated Press on Tuesday.

The other $10 billion would be left in a reserve fund the governor wants to create as part of a budget-reform proposal. It would be intended to ease the effect of year-to-year revenue fluctuations.

The revenue proposal – which administration officials refer to as “securitizing” the lottery – would require voter approval because the lottery was established through the initiative process.

As I explained above this is a clever way to avoid the basic issues here – ride it out another year or two and dump the problem onto the 2010 gubernatorial race. Borrowing the lottery funds is designed to ease the need for the most destructive cuts without raising taxes, and the rainy day fund seems to be a clear sweetener for Republicans to along with this scheme.

Schools: The AP describes the education budgeting as follows:

The budget the governor will release Wednesday backs away from some of the less politically popular proposals in the $141 billion budget plan he released in January, including a proposal to suspend the minimum school-funding guarantee, Proposition 98.

Instead, the budget proposal will include a $1.8 billion increase in funding to schools over 2007-08 levels. Schools still will lose about $4 billion in anticipated revenue because Schwarzenegger’s plan would not include program cost-of-living increases.

This does not necessarily take the 20,000 pink-slipped teachers off the hook. Losing the $4 billion in anticipated COLA revenue will still cause problems for many school districts – and as I indicated above, higher ed is likely to face major cuts anyway even if K-12 is somehow spared the worst. In any case, teachers are being forced to balance the budget on their backs.

Here again Arnold has chosen quick fixes over long-term solutions. California’s educational system was once the envy of the nation. 30 years of tax cuts have reduced CA to nearly the level of Mississippi, and while the January proposals were bad enough, major reinvestment in all levels of public schools are needed for California to ease widening inequality, provide prosperity and jobs, and thrive in the 21st century.

The devil is in the details here, so until we see those, schools don’t seem out of the woods just yet.

Parks: The proposed park closures were always a rather idiotic idea. Although parks should be free of charge, as California’s natural patrimony, it makes far more sense to raise fees than to close parks. Outright closures would have blown an even bigger hole in the parks budget, so this is clearly the more intelligent plan.

Remaining cuts: Even with Arnold’s lottery borrowing scheme there will be $6 billion left in the deficit. Obviously a restoration of the VLF would close that for good, but expect bitter fights over that last $6 billion between Democrats who will want to provide some sensible ways to close the gap with new revenues, and Republicans – Arnold included – who will prefer destructive cuts to sensible tax solutions.

Overall the May Revise doesn’t appear to be the cataclysm that some expected, but even if Arnold’s lottery plan is embraced – which is far from certain – the basic issues remain, and we’re likely to be debating this well into the fall.

Fabian Nunez hosted his final press conference as speaker yesterday, and began his post-speaker life by offering a series of proposals focused on process issues.

The redistricting component features an independent 17-member “hybrid” commission. No legislators will serve on the panel, with the majority picked randomly from a screened pool with no legislative influence and eight others picked by legislative leaders. Unlike the Voters First initiative that may appear on the November ballot, this proposal requires diversity in every step of the process and puts the Voting Rights Act first and foremost among the criteria in selecting districts. There’s also a host of transparency and public input provisions.

The term limits provision is similar to Prop 93, but excludes the provisions that protected many incumbents that drew criticism. It reduces the maximum amount of time a person can serve in the Legislature from 14 years to 12 years, allowing  a legislator to serve all their time in one house.

There’s also a fundraising blackout period prohibiting campaign contributions to legislators and the Governor from May 15th until the budget is enacted.

These would go up on the ballot for passage by voters in November once they get through the Legislature.  There is of course already a redistricting measure that appears to be on its way to the ballot, so it’s unclear whether or not this is a “confuse and kill” strategy.  But Nuñez said that his hope would be for one redistricting proposal on the ballot.

That’s the past; here’s the future.

Karen Bass has drawn up a short agenda for her two-year reign as Assembly speaker that begins next week.

There are only three items:

* Balance a state budget that Gov. Arnold Schwarzenegger has declared is “$20 billion out of whack.”

* Create a ballot initiative that would produce $300 million to $500 million annually for foster care programs.

* Restructure California’s tax system to make it conform to the modern world. Actually, she wants to create a blue-ribbon commission of “the best and the brightest” to tackle taxes.

That’s all.

Foster care programs are Bass’ pet issue, but otherwise she’s focused on, I have to say, the ACTUAL problem facing California.

We are out of money.  Not out of money in theoretical terms, or on a balance sheet somewhere, but physically out of money by August if no budget is enacted.  The cash reserves are empty and the revenues aren’t coming in.  All that matters between now and August is that we put a budget in place that is SUSTAINABLE and, as Bass notes, in line with the modern world.  All of this process stuff about redistricting and term limits is what gets pundits and press people all a-twitter, but it’s not the problem in California.  What Bass is saying without saying it is that we need to end the 2/3 requirement so we can have a legislature that reflects the will of the people.  That’s the only way we’re going to pass a sustainable budget, that’s the only way we’ll get a 21st-century revenue system.  And I believe she knows that.

The governor wants to sell out our future, sell bonds, sell the lottery, hold a fire sale and mortgage California for generations.  We should not have to stand for that.  Selling off the state to preserve tax cuts for the wealthy is not a “creative” solution.  I have no idea how Karen Bass will fare in her 2 1/2 years as Speaker, but I’m now confident that she’s at least focused on the right issues.