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Tough Budget Spot for Governor (No Plan B) Brown

May16

Jerry Brown uncorked some trademark faux Zen gibberish just about a year ago, when asked to describe the strategy he’d use if elected governor to deal with California’s massive deficit.

At the time, a few weeks into his campaign against Republican oligarch Meg Whitman, Brown was pressed in an interview on CNBC to offer specifics of his plan to tackle the state’s tangled and terrible finances. As we described it at the time:

Brown responded to the line of questioning with nothing but tired bromides about getting all the legislators in a room and going through the budget line by line blah blah blah, ending with this exchange with CNBC’s Jane Wells:

“When will we get a specific plan?
Well the plan is to go over each item of the budget.
But when will we…

That is the plan. The plan is the process.”

Ah. Yes, it all makes sense now:

The plan is the process.
The process is the plan.
I am the walrus.
Goo goo g’joob.

Today, as Brown prepares to roll out his new and improved May Revise (that’s “ree-vize”) budget proposal, he’ll do so from a weaker and more defensive position than when he set forth the original version back in January — precisely because his political strategy for pushing through a budget never really advanced beyond  “the plan is the process.”

Overestimating his charm: The governor, to his credit, sent the Legislature a serious and substantive policy proposal soon after his inauguration which split the difference between cuts and taxes in easing a $25+ billion shortfall for the upcoming fiscal year.

As a political matter, however, he made a major miscalculation in overestimating his own ability to use intelligence and sweet reason to overcome the blind ideology of the Legislature’s right-wing Republicans.

Gandalf badly misread the political terrain, perhaps because he was lulled by memories of his first turn as governor, when he was able to bargain with long ago GOP leaders who actually cared about governance, like Ken Maddy, Paul Priolo and Wild Bill Campbell, or perhaps because he simply thought too much of his ability to conduct a successful charm offensive.

Having tried and failed to win the four Republican votes needed to put his budget fix before voters – while admitting to a private caucus of Democrats that “there is no Plan B” – Brown now has been pushed into reactive mode, as he tries to scratch and claw his way through a political and fiscal landscape more treacherous than the one he encountered in those halcyon days of January.

As he renews his bid to pass a budget today, the numbers within it may be re-calibrated, but the political calculus that already confounded him once has only grown more intractable because of four key factors:

Revenue: The good news for Brown is that state tax collections in April were $2.5 billion higher than projected; the bad news is that tax receipts were $2.5 billion higher than expected. Although a pittance in an $85+ billion budget, the windfall has had outsize political impact, handing  Sacramento’s anti-government zealots a fig leaf that gives them cover as they continue to bray the same old, same old no-taxes-ever-again cant.

Republicans: The GOP made a smart, if intellectually dishonest, move  by quickly seizing on the $2.5 billion in new revenue to cobble together an alternative spending plan rushed out to beat the May Revise.

In its reliance on rosy projections, sleight of hand school funding, phony savings and illegal fund transfers, it’s exactly the kind of non-serious gossamer budget plan that the discredited Arnold Schwarzmuscle signed year after year to paper over serious problems; in a business where perception is reality, however, the Coupal/Fox/Fleischman axis has quickly moved to sell it to the public by tarting up this pig with plenty of mascara, eyeliner and lip gloss.

Business: Corporate interests are now calling for a “financial workout plan,” promising to support Brown’s call for extending some temporary tax increases, in exchange for him agreeing to compromise far more on a hard state spending cap and on pension reform; at the same time, they’re pressuring him to soften his opposition to their pet programs, like redevelopment and enterprise zones.

As the GOP caucus plays bad cop, attacking Brown from far out in cuckoo land, the business types play good cop, portraying themselves as the soul of reasonable moderation, all the while pushing the center of the budget debate steadily rightward.

Democrats: Even as pressure builds from the right, Brown’s erstwhile allies on the left are signaling they’ve gone about as far as they intend to in agreeing to billions in budget cuts.

Last week’s CTA-sponsored Capitol protest extravaganza, coupled with the ongoing refusal by liberal Democratic lawmakers to approve more than $1 billion in additional social welfare cuts that Brown proposed earlier, puts him in a tighter squeeze, shrinking the wiggle room he has available for a compromise even further.

More in Brown’s favor is Senate leader Darrell Steinberg’s sponsorship of SB 653, legislation to make it easier for local governments to put all manner of new taxes and increases before voters for approval, a measure that portends unpleasantness for business; as the bill moves through the Senate, Steinberg’s move at least gives Brown one strong bargaining chip in trying to make a deal.

Bottom line: Brown has two basic moves: 1) Push back against the left and forge a transactional solution by negotiating a deal  with the GOP in which he accepts some form of much tougher pension and spending cap proposals, while business does more heavy lifting in finding the needed Republican votes to put his tax extension plan on the ballot; 2) Push back against the right to forge an ideological solution by joining with liberal and union forces to mount a statewide campaign for higher taxes on the wealthy, oil companies and corporations to head off bigger cuts.

The plan is the process, indeed.


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There are 9 comments for this post

  1. avatar smoker1 says:

    I agree that the GOP plan was Schwarzeneggeresque but Republicans do have a point about taxes. We have the highest sales tax in the US even without the extention. Only Oregon and Hawaii have higher income tax rates and their high rates kick in at $200,000 while ours kicks in at $47,000. We have low property tax rates, but with high property values, the amount we pay is still very high. So why is it that we pay so much as compared to other states and yet the state is always broke? I can’t imagine turning this all over to the Republicans because they will spend all their time on abortion. And the Democrats don’t seem interested in the question.

    • avatar tegrat says:

      Overall, the tax code is wildly regressive, especially when considering the sales tax. While “taxing the rich” is not a silver bullet, it is a morally and logically good place to start as those riches are necessarily a product of the infrastructure built through taxation. Corporate taxes are high in principle only, the effective tax is one of the lowest in the world, which causes the corporations to hold on to vast sums of cash instead of reinvesting.

    • avatar GeoHagop says:

      Taxing the megacoroporations is the ticket, in my book. Look at Chevron…by itself, if we were to tax them as they’re taxed in AK, budget fixed.

  2. avatar artiesghost says:

    Google Bruce Cain’s paper, “Institutional Causes of California’s Budget Problem,” and you’ll see why the GOP is right in wanting to hold California’s tax rate constant. Real institutional reform starts not just with pensions and spending caps, but with scaling back our obscene dependence on income taxes and corporate taxes to fund government. This volatile revenue stream gives the legislature every excuse to spend during good times and leaves the state on the hook when revenues fall during bad times. The fact that California can’t balance a budget with the sixth highest tax burden in the nation says wonders about the spending priorities of the Democrats and the current legislature.

  3. avatar Ernie Konnyu says:

    CalBuzz read and described all the budget and tax smoke signals correctly so kudos to you.

    And despite all of your “right wing” name calling I suspect that Republican lawmakers will hold firm on not voting to allow a tax increase election. So, Brown and the Unions will have to get signatures for a November tax increase election. That “go it without Reep support” will, in turn, likely doom a tax increase approval by the people.

    Oh well! Republicans do need some kind of victory in this lefty state.

  4. avatar tegrat says:

    Thus those poor victims, the Republicans, who get such awful names hurled at them by the insensitive CalBuzzards, will effectively subvert the will of the people by imposing the will of the minority. And this is fine with Ernie, after all, who wants to live in a Democracy if it’s run by Democrats!

  5. avatar chrisfinnie says:

    Okay. Made me laugh with the line about the gov hoping to use “intelligence and sweet reason to overcome the blind ideology.” I never did think that would work. So I was always surprised an old hand like Brown would.

  6. avatar OC Progressive says:

    Anyone who whines about the over-reliance on the income tax, and particularly the volatility of capital gains revenue should also excoriate Schwarzenegger’s reduction of the car tax and his reckless borrowing to fund the deficit he created by eliminating this stable source of revenue.

    The VLF is not as regressive as some taxes, since less expensive and older cars are less valuable, and thus taxed less, than newer, more expensive vehicles.

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