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.
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.
It’s sad that one comment can mean more to a debate than years of attacking public employees and public works and months of attempting to destroy the California dream. That should be disqualifying enough. But Governor Hot Tubs and Stogies’ “let them eat cake” comment in the New York Times has gained some traction. Apparently this was a target big enough for everyone in Sacramento to hit. The Assembly Democrats included it in a video showing the Governor’s hypocrisy during recent budget talks.
And that’s great. Narrative-setting can be powerful and important. That’s what’s behind the Governor’s idiotic crusade to criticize legislators for legislating while he stamps his little feet. At least for today, I think the Democrats are getting the better of ol’ Hot Tubs and Stogies.
Labor groups file initiative to repeal corporate tax breaks included in recent budget deals.
These are the massive corporate tax breaks, which could cost the state up to $2.5 billion dollars a year, agreed to in secret by the Governor and the Legislature during the February budget agreement. In a time of recession, the state’s political leadership, hijacked by the 2/3 requirement, gave away billions of dollars to the largest corporations in America while crying poor about social services for the indigent and the needy. And those corporate tax breaks are the ONLY permanent tax changes made in the budget this year.
Damn right they should be repealed. They offend the conscience, cost the state needless cash, and do nothing to help the vast majority of businesses (80-90% of the proceeds of these tax breaks will go to just 200 corporations).
Bottom line: Budgets are about values, and they are about priorities. Before lawmakers take health coverage away from children whose parents are struggling to make ends meet, eliminate financial aid for students who understand that hard work and a college education provide the best promise of future success, or shutter state parks that protect California’s natural environment and provide affordable recreational opportunities, they should reverse these permanent and massive giveaways that will compromise the state’s long-term financial security.
With newfound spunk from Democrats, at least in the Assembly, and serious moves by progressive advocates to reverse the horrible decisions made in past budget years, I think the ground is being prepared for a legitimate reform of the broken structure that has brought us to this point.
Bloomberg reports that people are lining up for those souvenir Arnoldbucks.
Controller Chiang said the warrants can be transferred between individuals, setting up the possibility that a secondary market for the IOUs may develop. Already ads are appearing on Web sites such as Craigslist offering cash for the IOUs at below face value.
In such a transaction, the person who gets the IOU would get most of the cash they were due the state, while the person buying the IOU might then hold onto it until maturity and earn the face value plus the 3.75 percent interest.
At least one person offered to buy an IOU at more than face value as a keepsake.
“I am interested in purchasing a ‘State of California IOU’ as a souvenir,” the ad reads. “I figure it would be an interesting thing to have around when my grandchildren are fighting over my stuff after I’m dead and gone. I will pay two times face value (up to $100, or $50 face value) for a warrant/IOU.”
Of course, after July 10, the deadline that banks like BofA and Wells have given for exchanging these IOUs for cash, souvenirs may be the only value for these IOUs for a few months. Maybe Arnold will go to a baseball card convention and sign them himself!
Here’s another FAQ about who receives IOUs and who does not. The unemployed, SSI/SSP recipients, state employees and retirees, IHSS and Medi-Cal providers will NOT receive IOUs. Welfare recipients, contractors with the state, local governments, and income tax refund recipients WILL get them. Felix Salmon made a handy chart that suggest the haves will keep getting paid and the have-nots won’t, and that’s somewhat true, but some have-nots who have the benefit of their services being partially provided by the Feds will get paid as well. In general, where you stand does depend on where you sit, in this crisis. This again makes clear that the idea of California debtholders, who get priority of payment in the state constitution over everything but education, getting stiffed by the state is a ridiculous one that pretty much cannot happen, and lowering bond ratings should be rightly seen as Wall Street gouging.
Small businesses, students, seniors, and taxpayers will all start receiving IOUS. This shameful day didn’t have to arrive. In fact, Governor Schwarzenegger had several opportunities to prevent it.
On June 12 Governor Schwarzenegger unilaterally blocked the Controller’s authority to secure short-term loans to avoid the cash crisis. He said, “let them have a taste of what it is like when the state comes to a shutdown — grinding halt.”
On June 25 after the governor called Senate Republicans to his office for private meetings, $4 billion in immediate cash solutions that had been passed on an overwhelming bipartisan majority in the Assembly were killed in the Senate.
Most recently, the governor vetoed a comprehensive package of budget solutions supported by majorities in both houses of the legislature that would have resolved the $19.5 billion deficit, left a $4.0 billion reserve, avoided the cash crisis and prevented IOUs […]
We did offer, as a sign of good faith, to begin work immediately on reforms regarding restructuring Medi-Cal and eliminating fraud in the IHSS program. We also committed to working with the governor on other reform legislation for him to sign. But the governor wouldn’t take “yes” for an answer. So California businesses, taxpayers and students will be receiving IOUs simply because Governor Schwarzenegger thought it was more important to immediately force last minute changes such as reducing future employee pensions, fingerprinting elderly and disabled Californians who receive services, and denying kids food stamps if their families can’t access a computer to sign them up for the program.
The budget gap grows by $25 million a day and we have wasted billions of taxpayer dollars because the Governor wants to teach everyone a lesson. I hope that IOU secondary market is bigger than eBay, because those suffering with the consequences of dysfunction are going to need the help.
Speaker Karen Bass has been on the job for a little over a year now, and she probably has less than a year left in the job. She’s termed out in 2010, so whatever she wants done will have to be done in the context of the budget fight. As Bass became leader she focused on fixing our budget system. Back on day one, she had three agenda items:
Balance the state budget.
Pass a ballot initiative for foster care.
Restructure the tax code
Bing, Bang, Bam. Should be about four days for that, huh? But seriously, it looks like job #1 will end up taking up most of her time on the job. As for #2? Well, that might have to wait for the time being, and really, kind of seems like the something that could be a good task for an ex-Speaker who wants to keep up a profile in the state.
As for #3, well, that task fell to Bush acolyte and Schwarzenegger crony, Gerald Parsky. Back in December, I questioned the pick, predicting that we might end up with some unwanted Bush-esque reform. I held out hope that it be some sort of Nixon going to China kind of thing, where Parsky could help bring a few votes over to make the system functional.
However, Prop 13 was never on the table, and property taxes were taboo. Thus, the only reality based method of stabilizing our tax system, the way that nearly every other state stabilizes their tax system, was instantly dismissed. Given those constraints, it really didn’t matter all that much whether it was Parsky or Lenny Goldberg or Karl Marx who lead that commission. Nothing really workable was going to come up, and nothing workable is exactly what we got. Frankly, the proposed alternatives from the commission (PPT) should basically be summarily rejected by progressives as they increase taxes on the middle class in the name of reducing volatility.
Yet, Bass keeps on fighting. We haven’t yet seen any comment on her opinion of the Parsky commission’s proposals, but she’s been out there since May 19. She continues to fight against the 2/3 proposals as she does in this clip. And really, there should be no limit on how many times these words are spoken. Every elected official needs to use every channel, every opportunity to decry the tyranny of the minority should be used to promote the eventual repeal of the 2/3 supermajority.
This week the Budget Conference Committee of the Assembly and Senate produced a plan that solves California’s deficit responsibly and still leaves a healthy reserve in place.
The Assembly and Senate will vote on that plan next week.
Our plan is the balanced approach Californians want: Real cuts, limited new revenues and other solutions that help ward off a cash crisis later this summer.
We have accepted the Governor’s realistic proposals to solve the deficit.
But in standing up for California families, we have rejected his over-the-top proposals for eliminating the safety net in California – which would have made California the only government in the first-world without one.
We rejected the Governor’s attempt to squeeze nearly $700 million more from our schools when they have already been cut more than their fair share.
And we rejected his proposal to take Cal Grant scholarships out of the hands of students from hard working families who had already been given the scholarships for September.
Each of these programs will take real and painful cuts. But we will not let these vital services be eliminated for the people of California.
We also found ways to raise revenues responsibly.
Our plan levies a severance tax on oil companies finally placing California on par with the rest of the nation’s oil producing states. Our proposal is the same tax level the Governor pushed in January and won’t affect individual consumers.
We also raise the tobacco tax by $1.50 so consumers who voluntarily smoke can help address the impact that tobacco has on health care and other aspects of the state budget.
There is shared pain in this budget, but it is fair.
I encourage all Californians to take a close look at both our plan and the governor’s proposal.
You can do that at assembly dot CA dot GOV slash budget.
Looking at them side by side, I’m sure you’ll agree the legislature’s responsible, balanced approach is what we need to get California through these difficult times.
The plot thickens. The Governor today threatened to veto the work of the bipartisan Budget Conference Committee and reject any bill that, essentially, doesn’t hew to his desire to destroy the social safety net of the state. The Democratic leadership countered that they’ll pass the bill anyway.
Democratic legislative leaders vowed today that the Legislature will pass a “share the pain” budget-balancing plan early next week – with or without tax increases — that will close the state’s spending deficit without completely shredding California’s social services safety net.
The vows by Senate President Darrell Steinberg, D-Sacramento, and Assembly Speaker Karen Bass, D-Los Angeles, came about an hour after Gov. Arnold Schwarzenegger said he wouldn’t sign a plan that was balanced with tax increases.
The rhetorical staking out of ground by the key figures in the current version of the state’s ongoing fiscal melodrama came a day after the Legislature’s joint budget conference committee, on a party-line vote, adopted a plan that included about $2 billion in new oil production and cigarette taxes to help bridge a $24 billion budget gap.
Let’s take a brief look at what else the conference committee has done. They resisted some of the worst health care cuts, including the total elimination of Healthy Families (the SCHIP program). They reduced education spending significantly in both K-12 and higher ed. They reduced corrections spending by a fairly large amount. Despite the fact that state parks pay for themselves, Democrats agreed to cut state participation in park funding, replacing it with additional fees on park admissions. They agreed to increasing withholding by 10%, which amounts to an interest-free loans from citizens to the state. According to Karen Bass, they agreed to 45% of the Governor’s proposals in full, and 93% in part.
So the idea that Democrats are not cutting spending is simply unreasonable and wrong. At the same time, they rejected additional cuts to state worker salaries. They rejected the end of Cal Works or Cal Grants or In-Home Support Services. And some of the Governor’s proposals, like borrowing from local governments, were rejected unanimously.
I don’t even much like what the Democrats came up with. But they did not agree to completely wipe out the social safety net, calling for moderate increases in revenue on constituencies who have been getting away with murder, pretty much literally, for decades, to pay for the externalities in health care costs that they impose on the public. As Noreen Evans explains:
Californians expect their schools to be good, a safety net to be available to the needy, a college education to be affordable for working families, their air and water to be clean, and their parks to be open and kept up. In order to meet their expectations, we must to pursue new revenues. Today, for the greater good, we approved two new tax proposals that won’t impact most Californians.
Establishing a 9.9 percent tax on oil extracted from California would generate $830 million in FY 2009-2010 and $1.1 billion in future years. This precise proposal was part of the governor’s budget proposals last year. Increasing the excise tax on cigarettes by $1.50 per pack generates $1 billion in FY 2009-2010.
Tax increases require a 2/3 vote. Absent the pursuit of new revenues, wider and deeper cuts will be required. Getting new revenues requires a mere 6 Republican votes: 2 in the Senate and 4 in the Assembly. It is undemocratic that the votes of 6 Republicans can veto the votes of 75 Democrats.
But Arnold wants to destroy the state of California like a good little neo-Hooverist, so he said no.
The Dem leadership appears to want to have this fight for the moment, so they ought to realize one thing: Arnold will ultimately be responsible – and reviled – in a government shutdown situation. No question about it. Not 1 in 10 Californians can even NAME a Democrat in the legislature. If the ship sinks, Arnold will be perceived as the skipper. And so, if and when Arnold vetoes the bill, the Democrats should send it back – with MORE tax fairness solutions, daring Arnold to prolong the agony. That resets the battle and draws clear lines between those who want the richest companies in America to sacrifice along with ordinary Californians, and those who want to protect the rich completely. Unfortunately, the Dems are tipping their hand that this will not be the case.
But Bass and Steinberg seemed to be reconciled to the likelihood that the tax hike proposals would fail next week. Steinberg said that if they did, the package they sent the governor would have a reserve $2 billion smaller than he had sought.
We have a couple days to change this dynamic. The progressive movement around the budget has stiffened spines a bit so far. Time to make the calls and emails.
This is funny:
Schwarzenegger added that he wants a budget plan that will bridge the entire projected deficit of $24 billion, not a stopgap measure to “kick the can down the alley.”
The plan must consist of permanent solutions to the state’s fiscal problems, not one-time revenue that sparks ongoing spending commitments, Schwarzenegger said.
When Schwarzenegger was reminded that his own budget plan contains some one-time revenue proposals, such as acceleration of income tax payments, he smiled.
“Very good point,” he said. “We don’t want to add to the problem.”
The cyborg is not running on all cylinders. He has a single-minded purpose to kill the California dream and even these extremely moderate revenue enhancements.
Today, in addition to the California Democratic Party, Speaker Bass and Asm. Nancy Skinner (D-Berkeley) have begun pushing against the Governor’s proposals for the budget.
For her part, Speaker Bass said that her commitment was to ensure that California didn’t eliminate the social safety net and to fight back against the all-cuts budget. While it isn’t completely clear if the Speaker and Sen. Steinberg are on exactly the same page, the Democratic Leadership seems like they won’t go down without a struggle.
“Assembly Democrats will be fighting for families affected by the budget by pursuing a balanced approach that includes revenues and reforms as well as cuts,” Bass said. “Our responsible budget solutions will be aimed at minimizing hardship and maximizing opportunity for California’s economic recovery.”
Interestingly, the Speaker brought out the specter of some sort of court or federally appointed special master that would force some sort of reforms down our gut, IMF-style reforms, as California seems to be heading for a position to fit in well with that third world nation model these days. However, given the Constitutional requirements, both state and federal, it is not at all clear that such a system would be permissible. The reason why there is no provision for a state bankruptcy is that an Article III (or not, as Bankruptcy Judges do not enjoy Article III status) Judges cannot simply force states to do anything. That federalism issue is central to how our nation works, and forsaking it would be a far bigger deal than one budget crisis.
For their part, the CDP is trying to (paraphrasing here) “show our Democratic legislators that there is support for basic Democratic principles to help the neediest in our society,” Chairman John Burton said on a conference call today. “Right now our goal is to protect millions of Californians.”
The plan from the CDP is to press on traditional grassroots methods and combine them with some of the fancy new tech friendly means used so well by the Obama campaign. More details on that as they become available.
George Lakoff writes today that this could be a moment of freedom for California Democrats. Their compromised ballot measured having gone down in flames, they can now focus on the only solution to what ails the state: democracy. They can include in every public utterance until the moment the 2/3 rule is repealed the theme that California’s democracy is broken, and that we must restore it with a majority vote for budget and revenue matters. The time for half-steps and non-fixes must be over.
Up to now, Democrats have been acting like sheep being herded by the Republican minority. They need to show courage and stand up for what they believe. That’s what the voters are waiting for […]
Get rid of the 55% proposals. People understand that majority rule means democracy. 55% means nothing.
Even if you don’t address taxes and just address the budget process, the Republicans will still say you’re going to raise taxes. You may as well go for real democracy.
And finally, get a unified message that can be supported by the grassroots. Do grassroots organizing for 2010, starting now. Organize spokespeople to get that message out. Organize bookers to book your spokespeople in the media. You Democrats are a majority. Act like it. The public will respect you for it.
Unfortunately, Darrell Steinberg and Karen Bass failed the first test, stuck in a mindset that will bring the state to ruin. First, Steinberg.
“The voters have spoken and they are telling us that government should do the best it can with the money it has. We will immediately and responsibly get to work to balance the budget and head off a cash crisis in July. Delay is not an option. The necessary decisions we must make will only get harder with time.”
That is not what voters are telling you. As I said yesterday, you cannot reconcile the supposed anti-tax fervor with the passage of a transient occupancy tax in conservative Palmdale with 64% of the vote. California is a big state and no one message from a statewide election can predominate, but the mass boycott of the polls certainly suggests that we don’t want to do your job anymore. I know it’s been so long since Democrats exercised their Democratic muscles and principles in Sacramento, but this election called out the political leadership for failed governance. And everyone who has studied this for half a second understands that the failure will continue until the structural barriers are removed. And so making this absurd and vindictive statement about voter intentions both misses an opportunity to refocus the discussion and angers the grassroots further.
Here’s Bass:
“There are many difficult choices and a lot of hard work ahead of us. We now have to responsibly fill the budget hole that has been caused by the national recession and deepened by the failure of today’s ballot propositions. I hope the bipartisan cooperation between the Legislature and the Governor that went into this effort will continue as we move forward – the people of California clearly expect us to work together to get the job done. And we will.
The people of California could give a rat’s ass who works together with who. They don’t want to see this level of dysfunction anymore. Bipartisan cooperation was clearly rejected last night, because inevitably that gives leverage to the minority and provides unworkable non-solutions.
Where is the argument for DEMOCRACY in these statements? Since 1978 that democracy has crumbled and needs to be completely rebuilt. Everyone knows this but refuses to say it out loud. This is why the legislature and the Governor have historically low approval ratings. People are starved for actual leadership and see none. Only democracy will save us. This failed experiment with conservative Two Santa Claus Theories has now become deeply destructive. Because the democrats have provided no leadership and ceded the rhetorical ground, California public opinion holds the contradictory beliefs that the state should not raise taxes and also not cut spending. And if it persists without leadership and advocacy to the contrary, nothing will change.
