California’s Budget Crisis: Confusing and Tragic

California’s current budget has a big hole in it — roughly the size of $18 billion. Depending on how you count the census, that works out to about $475 per person. Next year it gets worse. The budget for fiscal year 2009-2010 is already estimated to be $22 billion out-of-whack — let’s call it another $600 per person. That ‘s serious money.

Keeping track of what’s going on with the deficit, who is talking with whom and who is doing what can be challenging. There used to be negotiations between the Big Five (Governor Arnold Schwarzenegger and the leaders of the Democrats and Republicans in both the Assembly and Senate). But when the Governor began pushing for tax increases, the GOP legislative leaders balked and are no longer engaged in much of the discussions (except through press releases). Democrats engineered an end-around the constitutional requirement that two-thirds of each house pass tax increases, but the Governor vetoed their bill — not because of the creative accounting, but because the package was missing items he considers critical.

It’s enough to confuse anyone. Fortunately, two recent columns will help in keeping the players and issues straight. One is by Dan Smith, the Capitol Bureau Chief of the Sacramento Bee. He offers a Q&A that serves as a factual road map to what’s happening in Sacramento.

The second is an analysis by George Skelton of the Los Angeles Times. He works through some of the details behind the ever growing deficits. It becomes clear this is not a challenge the state can simply slash spending to overcome. The Republican’s aversion to raising taxes is principled, but there comes a time — and emergency — that justifies an exception. It’s hard to see how this is not one of those times.

There are other takes on California’s  budget debacle worth reading. For a perspective from outside the state, the Washington Post tries to explain what’s happening here to its readers. The article focuses on how California’s dysfunctional politics contributes to the problem.

For the view from an even greater distance, there’s an article from the United Kingdom’s The Independent reporting on State Controller John Chiang’s warning that California will run out of money in February. The article zeroes in on how spending mandates enacted by voters, combined with limits on property taxes, have made it more difficult for lawmakers to respond to the deficit crisis.

If the controversy was over some arcane public policy that only politicians and academics cared about, the fiasco in Sacramento wouldn’t matter. But the services the state provides in support of economic development and the safety net it provides to our least powerful residents is of vital importance. Especially now. That’s what makes this whole, confusing mess more than confusing. It makes it tragic.

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California’s Dysfunctional Government Needs Big Fix

California used to have a government of which, believe it or not, its citizens could be proud. Say what you will about  Governor Ronald Reagan, but, working with Democratic leaders like Speaker Leo McCarthy and President Pro Tem James Mills, things got done. Working with Republican legislative leaders budgets got passed. Important legislation (abortion rights and welfare to name just two) was enacted. The educational system was (relatively) strong and infrastructure was expanded, not just maintained. Yes there were problems and conflicts and pitched political battles, but the people’s business got done.

Not so now. Facing an 18 month budget deficit of over $42 billion (and counting) leaders in Sacramento are stymied by partisanship and hamstrung by procedural rules. A budget deal may be close as Governor Arnold Schwarzenegger, Assembly Speaker Karen Bass, and Senate President Pro Tem Darrell Steinberg are hard at work on a compromise. Their deal will bypass legislative Republicans who will no doubt sue the minute any compromise package is signed into law. In the meantime state services are being cut, infrastructure projects are being suspended, state workers furloughed, California’s bond ratings are falling nearly as fast as the public’s confidence in state government.

It’s not like lawmakers are trying to be inept. For example,  Governor Arnold Schwarzenegger has tried to create a “post-partisan” environment where pragmatism prevails. He just seems unable to stop insulting legislators. While all sides claim to be willing to compromise, each side of the Great Triad of Gridlock (the Governor, Democratic and Republican legislators) have positions that are non-negotiable. It’s hard to find common ground when so many issues are unmentionable. One might admire the tenacity with which Republican legislators cling to their anti-tax principles, for instance, if they would only recognize that these are unusual times that require an open mind. 

If the only result of this embarrassmentwas a diminishment in the reputation of California politicians it would be interesting, but not so bad. Unfortunately, the inability to govern is hurting citizens already on the edge. The independent California Budget Project recently issued a report, Proposed Budget Cuts Come at a Time of Growing Need, outlining the fraying safety net as it’s being pulled by a faltering economy and substantial budget cuts.  The CBP is a liberal group, but that doesn’t diminish the validity of their analysis. While the first to feel the pain from governmental dysfunction are the poor, the impact doesn’t stop there. The middle class relies on state services, too.

Clearly, California’s government needs reform. A first step was taken this year with the passage of Proposition 11. By changing the way the state’s legislative districts are drawn there’s a chance a greater number of pragmatic lawmakers may find it possible to be elected. The more competitive these districts are, the more centrist (and, consequently, less purely ideological) the winners are likely to be. This doesn’t mean they won’t have strongly held beliefs. It’s just that they (hopefully) will be more willing to find common ground with their political opponents than do current legislators who apparently value ideological purity over results.

Proposition 11, however, should be just the start. Another approach to consider would be open primaries combined with run-off elections. Voters would be able to cast their ballot for a candidate in the primary regardless of their political affiliation. If no candidate receives a majority of the vote, the top two candidates face-off in the general election, even if they are of the same party. Again, the expected result would be lawmakers who can appeal to the broadest cross-section of their communities.

Would this approach weaken political parties? Yes, and that’s not necessarily a good thing.  Parties play an important role in American and state politics. Reducing their influence is not a decision to be taken lightly. However, it’s also important to recognize that candidates are increasingly running outside of the party apparatus. Senator Barack Obama, for example, defeated the establishment’s candidate in the presidential primaries. Governor Schwarzenegger is nowhere near the mainstream of the GOP.  And in California, at least, the parties have done little to earn the support or sympathy of voters. The state’s gridlock demonstrates what happens when partisanship trumps public policy.

Proposition 11 passed narrowly, but it passed. It’s success represents California’s first step down the road toward a new way of electing lawmakers and thus, hopefully, a more pragmatic government . Nothing happening in Sacramento should disuade voters from continuing this journey.

The Value of Schwarzenegger’s McCain Endorsement

Among the remaining Republican presidential contenders, Senator John McCain is certainly the most compatible with California Governor Arnold Schwarzenegger. They both relish their role as political mavericks who are willing to speak bluntly and carry a bi-partisan stick. While Senator McCain has never referred to opponents as “girly men,” he’s probably wanted to — and has earned his reputation as being a bit on the testy side. Senator McCain is a real war hero and Governor Schwarzenegger has played the role in movies. And they’re personal friends. So it’s not surprising that, with the departure from the race by the other Friend of Arnold, former Mayor Giuliani, Governor Schwarzenegger endorsed the Senator prior to the February 5th primary in California.

Some have questioned whether the endorsement will help much. True, Governor Schwarzenegger’s approval rate among Republicans in the state hovers around 70 percent. However, it’s no doubt much lower among the GOP lawmakers in Sacramento he has effectively marginalized. For example, the compromise health care reform plan the Govenor pushed for the past 13 months (and which died in a State Senate Committee just last week) was negotiated with Assembly Speaker Fabian Nunez. No legislative Republicans were at the table. (Ironically, you could replace Senator Hillary Clinton’s health care reform proposal with Governor Schwarzenegger’s plan and it would be weeks before anyone noticed; he dismissed out-of-hand proposals similar to what Senator McCain is offering).

Of course, it’s voters who matter in the primary, not legislators. And in his current budget the Governor has sought to address the state’s $14.5 billion deficit almost entirely with spending cuts. No new taxes are on the table. This has great appeal to the GOP base in the state.

However, the Governor’s ability to transfer his personal popularity into support for his ballot initiatives has been mixed. He’s had more than his share of defeats in those battles — and there’s a good chance he’ll experience another on February 5th. He recently endorsed a change to California’s term limits law. Polls show it currently is supported by well below 50 percent of likely voters with many still undecided. If the historical tendency of undecided voters to break against ballot measures holds true in this case, the initiative is going to fail.

Interestingly, the Governor’s endorsement could have greater influence with voters outside of California whose opinions are unsullied by news coverage of his problems with other Republicans back home. 

Yet the greatest value may have nothing to do with voters casting their ballot based on Governor Schwarzenegger’s recommendation. Instead it may stem from the Oscar-worthy coverage the endorsement has generated. And when you’re running against a well funded opponent like former Governor Mitt Romney, that of kind nationwide free publicity is worth millions.

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Democrat’s Debate on Health Care Reform Echoes California’s

There were a lot of fireworks during the Monday night debate among the three major Democratic candidates. Some of the more interesting sparks involved health care reform. What struck me is how closely the debate echoed the health care reform wrangling taking place in California with Senator Hillary Clinton and former Senator John Edwards playing the role of Republican Governor Arnold Schwarzenegger and Senator Barack Obama filling in for the legislature’s Democratic leadership.

The differences among the Democratic candidate’s health care reform plans are inconsequential when compared to those put forward by the Republican candidates for president. (The New York Times offers a quick summary of the proposals). But that’s not going to stop campaigns embroiled in a close nomination fight from emphasizing what differences do exist.

On one side: accessibility. The health care reform plans of Senators Clinton and Edwards emphasize universal coverage. Every American must be insured either through government programs, their employers, or purchasing their own medical plan. Senator Clinton went so far to say advocating anything less than universal coverage was contrary to the principles of the Democratic party.

This accessibility argument mirrors that of Governor Schwarzenegger, who back in January of last year made universal coverage one of the core principles of his health care reform plan. He fought hard to keep it in the compromise plan he reached with Assembly Speaker Fabian Nunez, Assembly Bill ABX1-1. As it is, he was unsuccessful. Studies indicate ABX1-1 will help 70 percent of California’s uninsured obtain coverage, not 100 percent. Think of it as “mostly” universal coverage.

Then there’s the other side: affordability. Senator Obama’s health care plan doesn’t require people to purchase coverage. He believes most Americans want medical insurance and would buy it if it was affordable. His plan focuses to a greater degree than do his opponents’ on the need to corral the spiraling cost of health care and of health insurance premiums.  

In leaving out the mandate to buy, Senator Obama’s reform package is similar to that introduced by Speaker Nunez and Senate President Pro Temp Don Perata more than a year ago, Assembly Bill 8. The proposal expanded coverage, but without the mandate to buy. It was, as the sponsors admitted, not universal coverage. The Democratic leadership, and their allies among Labor and liberal groups, thought it unfair to force people to buy coverage that might be priced beyond their means.

In Senator Clinton’s mind, apparently defines Speaker Nunez and Senator Perata, both of whom endorse her, as bad Democrats. (Whether it makes Governor Schwarzenegger a Clinton Republican is unknown).

In tonight’s debate, Senator Obama tried to cast the debate as one between access and affordability. He failed and he remained on the defensive. Calling for universal coverage is simply good politics, even if affordability is potentially the most potent public policy.

What finally bridged the gap in California was the introduction of an “affordability standard” to the mix. As initially introduced, the idea was to exempt individuals from the obligation of obtaining coverage if the cost of premiums and out-of-pocket expenses exceeded a specified percentage of their family’s income. The specifics of the affordability standard evolved during the negotiations, and it is still a source of continued contention. The concept, however, remains the same.

Senator Obama would to introduce an affordability standard into the presidential debte — and to specifically mention how it became a part of the California health care reform compromise. Doing so allows him to remain consistent to his priorities, while showing how his approach can lead to (near) universal coverage. And, of course, aligning himself with Speaker Nunez and Senator Perata before the February 5th primaries couldn’t hurt. Besides, it would be fun to see how Senator Clinton would explain how her Democratic Party litmus test includes the Legislative Leadership, but not her rival for the nomination.