July 25, 2008


It’s July 25th, do you know where your budget is?

June 15th is the Constitutional deadline for the State of California to have a budget in place for the fiscal year which began on July 1. This deadline of course means absolutely nothing. It wasn’t until July 8 that the Democrats proposed a budget, and until this week there hadn’t been much public discourse on the subject.

Governor Arnold Schwarzenegger, who apparently likes to deal in extremes and scare tactics to achieve his goals, is at it once again, stating on Wednesday he would reduce the pay of thousands of state employees to the federal minimum wage of $6.55 an hour until lawmakers reach a deal on California’s overdue state budget. This will affect about 200,000 employees, who will then earn about $1000 per month, which in of itself would create a bigger mess than we already have.

At the beginning of the year the Governor facing a $3 billion dollar deficit, declared a “fiscal emergency” and proposed a 10% “across the board” cut, with schools and social services taking the biggest hit. The burden of fixing the budget defict was placed squarely on the backs of the middle class and poor. In May he revised his budget outlook, restored Prop. 98 funding and proposed that the budget be balanced on future earnings from the Lottery, that or a 1% sales tax increase.

In January the budget deficit was projected at $3.3 billion dollars, which was then. Today the budget deficit is projected at a whopping $15 billion dollars due to the general market melt down and loss of expected revenue.

On July 8th the Democratic led Budget Conference Committee, led by Senator Denise Ducheny and Assemblyman John Laird, unveiled their budget proposal which relied heavily on an income tax hike for the rich. This proposal was dead on arrival. The Budget needs a 2/3rds majority vote to pass and requires Republican support in order to pass. The Republicans are dead set against any tax increase, particulary when it involves their rich friends. We haven’t forgotten the yacht tax loop hole fix which the Republicans squashed. As an alternative to a tax the Republicans are opting for spending cuts.

The proposed Budget reinstates the tax brackets on the wealthiest Californians by reinstating the 10% and 11% tax brackets. This is similar to what Republican Gov. Pete Wilson did in the 1990s: close a corporate tax loophole for large corporations, suspend a tax adjustment for upper-income Californians, roll back a tax loophole for upper-income Californians and restore the franchise tax.

The revenue generated from these changes would then be used to provide $2.3 billion more for K-12 education than the Governor recommended: Restore $1.5 billion in health and human services the Governor cut. This includes restoring nearly $200 million in health care services to some of the state’s most vulnerable residents, the reimbursement rate for Medi-Cal providers and federal pass-through funds for the aged, blind and disabled; Reduces corrections spending by $300 million with a reform package that helps lower the prison population; and Restores $57 million in financial assistance for college students.

While the Republicans have been steadfast in their opposition to any new taxes, they have not delineated any plan for the budget deficit other than to state a reduction in spending, failing to outline exactly where they would cut this spending. In order to balance last year’s budget they cut spending by making deep cuts in social services and by borrowing from special funds. This was a quick fix for last year which provided no long term answers to the State’s problem as we now see.

So on July 25th here we sit, no budget, both Parties at a stalemate waiting to see who blinks first, and the Governor making threats that he can’t possibly deliver on. In the meantime the whole State suffers; when the government stops spending money, everything slows down to a crawl. And we are left waiting for our legislative leaders to come together and compromise. In 2007 it took until late August for them to decide on a budget. This year it looks like late August once again, if we are lucky!

A California Field Poll showed that Californians don’t like new taxes, but they are willing to pay them if it is for vital services such as education and health care. The Democrats are on the right track when it comes to the budget. You can’t fix the mess and plan for the future by just cutting State spending. For too long the State’s middle class and low income wage earners have had to carry the brunt of the State’s economic woes through budget cuts, now it is time for the State’s wealth to share in the burden.

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