California wades through budget malaise, again

Legal News Line Nov. 21, 2008, 11:33am


Arnold Schwarzenegger (R)

SACRAMENTO, Calif. (Legal Newsline) -- Yogi Berra isn't the spokesman for the state of California, but about the only way to describe the ongoing budget battles is the classic Yogism, "It's deja vu all over again."

What wasn't that much fun this first time, is looking even more like a prolonged trip to the dentist this go round. Budget battles - like Old Faithful and the swallows that return to Capistrano - are an annual event in this state where tax reform laws have made for wildly inconsistent revenue streams that give rise to times of plenty and serious times of drought.

According to most involved, 2008 has given new definition to the meaning of drought, which led to the current special budget session (better known as a stand-off) just three months after the last budget war ended an historic 85 days late in a budget compromise Gov. Arnold Schwarzenegger openly held his nose to sign.

At that time, the Republican Governator accused anti-tax conservatives in the state Assembly of simply "kicking the can down the road" to the next session by avoiding the hard decisions necessary to deal with a $17 billion deficit.

Well, the can didn't roll very far.

Six weeks later, with revenue down so dramatically that forecasts projected an additional $11.2 billion shortfall, Schwarzenegger called a special meeting of his lame duck Assembly in the hopes that those termed out of office would now be willing to approve a temporary hike to the sales tax.

A Nov. 6 press release issued by the governor's office states, "The Gov. called for a combination of cuts and revenue increases to solve California's budget shortfall, which has now reached $11.2 billion."

"In the six weeks since I signed our last budget," Schwarzenegger said, "the mortgage crisis has deepened, unemployment has increased and the stock market has lost almost 20 percent of its value. We have drastic problems that require drastic and immediate action. We must stop the bleeding right now."

Wishful thinking.

Budget talks have again stalled, a special floor session scheduled for Sunday has been cancelled and the so-called "Big Five" legislative leaders from both parties and both the state Assembly and state Senate heading up the negotiations are nowhere near a proposal.

Outgoing Senate President Pro Tem Don Perata, D-Oakland, said Tuesday is the hard deadline for an agreement prior to the newly elected Assembly taking office.

"Sunday had been the previously declared deadline," quipped a blog writer for The Sacramento Bee, "but real deadlines in the Capitol are about as rare as real budget solutions."

The Big Five met with Schwarzenegger on Thursday but Senate Republican leader Dave Cogdill of Modesto said progress is slow.

"We don't have any breakthroughs for you," Cogdill said. "There are a lot of hitches though."

Perata said a vote may not get scheduled if Republicans remain opposed to tax increases. But both sides say it hasn't broken down yet.

According to the latest published reports, talks have shifted from the governor's temporary sales tax increase to tripling the car tax, a move coupled with budget cuts of equal value plus a spending cap.

In addition to a temporary bump of the state sales tax from 5 percent to 6.5 percent, Schwarzenegger's proposal calls for broadening the sales and use tax to include more services, imposing an oil severance on those taking oil from the state and increasing the alcohol excise tax by five cents a drink, according to a press release.

Schwarzenegger combined his revenue proposal with other legislation that would address the epidemic rise of foreclosures through loan modifications and increase regulation of how mortgages are drawn up in the future.

Finally, Schwarzenegger's plan includes workplace reforms to assist California businesses that would allow for a streamlined financing and a significant decrease in costly lawsuits, the press release stated. The detailed plan is designed to generate jobs and keep businesses from leaving the state.

The state's budget crunch is so severe that in September it sold private bond notes to raise $5 billion in cash for daily expenses.

Earlier this week, Democrat Perata, his replacement Sen. Darrell Steinberg, D-Sacramento, and Assembly Speaker Karen Bass, D-Los Angeles, sent an urgent letter to Speaker of the U.S. House Nancy Pelosi and U.S. Sens. Barbara Boxer and Dianne Feinstein asking for federal "bailout" money to help the state's budget crisis.

Rumor has it that Pelosi handed the folks their collectible tin cup and told them to get in line behind Wall Street, CEOs from American automakers, mortgage lenders and numerous other cities and states from across the country, though as of press time the "rumor" could not be confirmed.

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