California: One Vote Short of Averting Catastrophe

It's becoming a cliché: California lawmakers again fail to reach agreement on a budget. As California engages in a budget battle that has left the government of the world's eighth largest economy slipping toward insolvency, Republican Governor Arnold Schwarzenegger and the Democratic legislative majority continue to search for one last Republican vote to pass a budget. But the complex negotiations hit a snag Wednesday when Republican state senators ousted their leader, Senator Dave Cogdill, who had dared to agree to a plan involving a tax hike, and replaced him with a staunch antitaxer. To avoid a collapse of state finances, legislators are attempting to pass a $42 billion budget-balancing plan that includes $14.4 billion in new taxes, an action anathema to the rank-and-file Republican minority. "I don't want to see a tax increase passed," said Senator Dennis Hollingsworth, the new Republican leader.

The economic free fall is causing budget difficulties in other states, but California faces the deepest crisis. With the budget talks stalled, Schwarzenegger sent layoff notices to 10,000 state workers and ordered a halt to the last 275 state-funded public-works projects still under construction. Call it shovel-ready in reverse.

Why is California in this situation? The state has a history of difficult and protracted budget negotiations, in large part because the state constitution requires a two-thirds majority to pass either a budget or a tax increase. Forty-seven other states get along fine without this hurdle, which gives the minority party, in this case the Republicans, an amount of power and leverage far out of proportion to its numbers in a legislature and state dominated by Democrats.

When Schwarzenegger swept then governor Gray Davis out of office and himself into the governor's chair in the dramatic 2003 recall election, he promised to end the partisan gridlock in Sacramento and balance the state's books. Neither miracle happened. A social liberal, Schwarzenegger had been careful to wave high the no-new-tax flag. In prior budget years, he touted bonds and found other gimmicks to put off costs until later.

But now, with tax receipts drying up and the state nearly out of cash, unemployment and foreclosures above the national average, and the state cast out of the municipal-bond market (Standard & Poor's downgraded the state's bond rating to the lowest of the 50 states), Schwarzenegger recognizes that this year's shortfall is just too big to fix with cuts alone. Unlike the Federal Government, which can run endless deficits, states are required by law to balance their books yearly.

The current budget proposal would raise up to $14.4 billion by imposing a variety of temporary taxes — hiking the sales tax by a penny, adding 12 cents to the gasoline tax and raising the car-license fee (something Schwarzenegger had campaigned against in 2003). Cuts include $8.6 billion from K-12 classrooms, which probably would force schools to pink-slip teachers and increase classroom sizes; a 10% cut to the university system; a continuation of the two-days-a-month furlough of state workers that recently closed state offices, including the Department of Motor Vehicles; and several billion in cuts to social welfare and programs for the elderly, sick and poor. Republican leaders insisted on a $1 billion tax break for large corporations, believing it will encourage companies to expand their work forces in California.

The two-thirds rule to pass a budget means that fixing the yawning $42 billion gap in California's $143 billion budget requires three Republicans in both the Assembly and the state senate to join with Democrats. Because the California GOP is deeply conservative, opposes taxes on principle and holds sway in home districts gerrymandered sharply to the right, Republican moderates feel as if they are dead men walking, politically. Republican incumbents who break ranks are ferociously opposed in the primaries. And if a renegade chooses to run statewide, raising funds is as easy as a bullfrog's finding water in the Mojave.

A budget process dependent on political suicide is not a good system. The other alternative is for the Republican Party to stand firm on its no-tax pledge and solve the crisis by only cuts and shutdowns. George Skelton of the Los Angeles Times recently pointed out that the no-tax solution offers two dire options: fire all the state workers and shut down the University of California and the state colleges, or eliminate all state money for health care and social services — all the monies that help the blind and disabled, aged, homebound, poor, mentally ill, those on welfare, those in emergency rooms, etc. Either way, without a tax hike, the wheels come off the bus and California's government — and life as many people experience it in the Golden State — grinds to a halt. On Wednesday afternoon, Schwarzenegger spoke to GOP intransigence, saying, "If you think you can do this budget without any increase in revenues, then you have a big math problem."

Thus far, a series of all-nighters by legislators, plus the governor's actions shutting down the state government piece by piece, have not shaken loose the one remaining GOP vote needed to pass the spending plan.

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