Crazifornia: Despite revenue surge, Brown sticks to tax hikes

Laer Pearce Author, Crazifornia
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In California budget politics, the May budget revision is the second-most exciting milestone, topped only by the feverish betting on how many months, days and hours will pass beyond the constitutional budget deadline before the governor finally signs the budget. This year’s revision, released by Governor Jerry Brown yesterday, proved no exception.

Typically, the revision is a cold splash of reality, as the governor admits that the goofy, gimmicky budget he approved just a few months earlier has proved to be way off, with income over-estimated and expenses flying out of control, so instead of meeting the constitutional mandate of a balanced budget, the state is actually another three or five or seven billion dollars out of financial whack. This year, though, the revision promised to be different because the state’s treasury is going to be rolling in $6.6 billion more in tax receipts than anticipated.

The beleaguered California GOP seized on that surplus last week to offer a “no tax” budget that was balanced by using the increased revenue plus cuts, including a 10 percent pay cut for state workers, contracting out prison healthcare services (which are the costliest per prisoner in the nation), and cutting funding to preschool, mental health, adult day care and other programs.

Monday, Brown did what most expected him to do — he offered a revised budget that requires approval of several unpopular tax extensions that have been the foundation of his platform since he announced his gubernatorial campaign last March. The Republican minority was delighted.

“Today, the Governor issued a revised May budget that goes too far on taxes and not far enough on reform,” Sen. Ted Gaines of Roseville told the Sacramento Bee. “The Governor has proposed increased spending [up five percent], perpetuating the ‘tax, tax, tax’ philosophy that puts government before the people and scares off entrepreneurs who might invest here in California.”

Californians are worried about the ongoing exodus of companies from the state — about 200 of them last year alone — and Senate Republican leader Bob Dutton and Budget Vice Chair Bob Huff picked up on that in their joint statement: “Republicans are right — we don’t need, and it’s ridiculous to ask voters for, five years of new taxes. Clearly the California economy is trying to recover, which makes it critical that the state budget include reforms that Senate Republicans have been seeking from day one — a hard spending cap, pension reform and business-regulation relief.”

Democrats found themselves in the uncomfortable position of having to defend Brown’s proposed tax hikes in the face of the billions of dollars in unexpected revenues — and worse, they had to do it on the very day they approved new labor contracts that gave 60,000 state workers almost $200 million more than what Brown had said he could get from the unions in concessions. Still, Democrat after Democrat bravely endorsed the budget revision, using “no cuts” to counter the Republicans’ “no tax” mantra.

As for the unions, Service Employees International Union executive director David Kieffer managed to get “maintaining current revenues” — code for extending the tax hikes — into his comment twice, and the California Labor Federation leader spoke of preventing more revenue cuts, as if not allowing taxes to die when the legislature promised us they would die is a cut.

Other than Brown’s proposal to cut one and a half percent of the state’s workforce — less than what will happen with attrition as state employees retire young to enjoy cushy lifetime benefits — his May budget revision does nothing to address California’s state employee pension black hole, pegged at as much as half a trillion dollars. It’s not surprising Brown continued to whistle past this particular political graveyard (he’s offered up only a few window-dressing pension reform proposals), since it’s proving to be a very problematic issue for Democrats. Orange County Democratic Party Chairman Frank Barbaro learned as much last week when he told a room full of city council members, “If there’s a disparity between public and private retirement programs, I don’t ask why the public plans are so high, I ask why the private plans aren’t higher.” The comment was greeted by loud, derisive laughter.

Brown’s proposed tax extensions will probably get the same reception from the voters. Since the Democrats in the legislature can’t pull together the two-thirds vote required to pass a new tax, their only option is to put the matter on the ballot, and voters have soundly trounced every tax increase placed before them in recent years. Since those votes came when the state wasn’t getting an unexpected $6.6 billion revenue boost, most political insiders betting on when the final budget will be signed are picking dates that are in the neighborhood of last year’s record-breaking budget delay.

Laer Pearce, a veteran of three decades of California public affairs, is currently working on a book that shows how everything wrong with America comes from California.