EDITOR’S NOTE: After I wrote this piece yesterday afternoon, Governor Arnold Schwarzenegger announced he intended to veto the new budget package. If he follows up on this threat, he is as bad as the obstructionist Republicans in the state legislature.
Ideologues never let the facts, the times or the circumstances intrude on their dogma – but it’s easy to be that way when you’re not in the majority. For years, Republicans in the state legislature have pledged never to vote for a tax increase whatsoever. No matter if it’s 2008, 2005 or 2003; the state could get hit by a meteor, an avalanche or even a tsunami – but the Republican minority still won’t vote to raise taxes. Now the state is facing a real tsunami: a $40 billion budget deficit that has forced us to cease public works projects, and will deplete the state coffers by February. So the Democrats – led by Assembly Speaker Karen Bass and State Senate President Darrell Steinberg – have taken upon themselves to pass an $18 billion rescue package, with clever manipulations of the state constitution to skip the two-thirds vote requirement. Republicans are screeching bloody murder, and it’s no guarantee Governor Arnold Schwarzenegger will go along. But if you’re serious about actually governing, passing it is essential.
It gets tiresome to write the same story over and over again, but Republicans in Sacramento never change – because they’re too wedded to their ideology. All of them signed the infamous “Grover Norquist pledge” to never vote for a tax increase – the same Norquist who famously wants to shrink government until we can “drown it in a bathtub.” California is one of only three states with a two-thirds majority to pass a state budget, so Republicans have consistently held the state hostage every year.
When budget times were good, we could afford to forgo tax increases. When Governor Schwarzenegger came up with various proposals to borrow money so we can prevent cuts in state funding (never mind that it put the state further and further into debt), the state legislature could pass annual budgets that satisfied everyone. When the state’s fiscal house was on more solid ground, the Treasurer could float construction bonds to keep public works projects going – without raising revenue. Now, the chickens have come home to roost – as the state faces a mid-year deficit that will require some awful budget cuts. And cuts alone can’t balance the budget; reasonable tax increases are inevitable.
But Republicans – permanently relegated to minority status in the legislature because California’s a blue state – are still using the “two-thirds” vote requirement to refuse any tax increases at all, oblivious to the financial situation we’re in. On December 9th, their Assembly leader Mike Villines requested that Democrats capitulate to GOP demands on the eight-hour work day, meal breaks, looser environmental regulations, permanent budget cuts and a stiff spending cap. Only then, he said, would Republicans “consider” new taxes – but not necessarily support it. There’s a word for that: “extortion.”
Prior Democratic leaders might have taken the bait on such an unsavory proposal. But the new leaders in Sacramento – Assembly Speaker Karen Bass and Senate President Darrell Steinberg – are tougher than that. Failing to get a two-thirds majority to close the state’s deficit, the Democrats have a creative (and so far untested) proposal to cut $7.3 billion from schools, health care and other programs – and raise $9.3 billion in increased taxes. That would solve half the fiscal crisis, and requires an interesting adjustment in state revenue.
Here’s how it works. The State Constitution requires a two-thirds majority to raise taxes, but not if you modify taxes in a way that does not increase net tax revenue. According to a 13-page report by the Legislative Counsel, “raising taxes” requires a two-thirds vote – but modifying taxes that don’t increase tax revenue only need a simple majority. So if the Democrats (subject to their proposal) abolish the state’s $5.7 billion gasoline tax, and replace it with a mix of income tax, sales tax and oil tax increases that total $5.7 billion, they can do that. As the 13-page report explains, past efforts to require a two-thirds vote for such revenue-neutral tax changes failed – putting Democrats on solid legal ground.
Of course, a “revenue-neutral” tax adjustment alone won’t do anything to get us out of the state’s revenue problem. That’s why the more important part of the Democratic proposal replaces the $5.7 billion gasoline excise tax with a 39 cents-per-gallon “fee” to bring the state $9.3 billion. By replacing a “tax” with a “fee,” they can get around the two-thirds vote requirement – and actually plug a hole in the gaping budget deficit.
I’m still unsure if the latter part would be upheld, and would need to do more research. For one thing, San Francisco was successfully sued for imposing a 911 “fee” to fund emergency services that the courts ruled was a “tax” (which the voters later approved as Proposition O in last month’s election.) With the dire budget situation, however, I can’t blame the Democrats for trying to govern while Republicans pout. If the courts find such a move is illegal, it may give enough political momentum to abolish the two-thirds rule.
“Ask yourself this,” asked State Senate President Darrell Steinberg. “Is there any other credible, politically acceptable plan put forward by anyone to make an $18 billion-plus dent in California’s budget deficit? I think the answer is no.” The Democratic proposal passed in both houses mostly along party lines yesterday, and is headed to the Governor’s desk. Speaker Karen Bass says they’re willing to meet Schwarzenegger “more than half way,” and even threw in a relaxation of environmental legislation to appease Arnold.
It’s unclear how Schwarzenegger will respond. The Governor has repeatedly expressed his frustration at the Republican minority, and in the past has warmed to the idea of nixing the two-thirds vote requirement. But his media spokespersons were not happy initially with the Democratic proposal, which prompted legislators to make amendments.
For months, Arnold has complained the legislature is a “Kindergarten” – and the media has dutifully played along by calling him the “Kindergarten Cop.” Now, a majority of the legislature has passed a proposal to deal with the budget crisis. Will he sign the legislation and be part of the solution, or veto it and be a part of the problem like his fellow Republicans?
UPDATE: Unfortunately, Schwwarzenegger has since announced that he intends to veto the budget package. Assembly Speaker Karen Bass issued the following statement in response:
“I am frankly surprised how willing Governor Schwarzenegger is to push California over a cliff when he clearly is not fully aware of what the bills we passed today do. The governor said we didn’t do economic stimulus. We did $3 billion worth of bond acceleration to get job-creating infrastructure projects moving for transportation, drought relief, park restoration and green technologies. He said we didn’t address CEQA — we expedited CEQA for transportation projects and surplus property and we eased restrictions for hospital construction. All these actions will also help create jobs. He said we didn’t address public private partnerships. We expanded public private partnerships – despite opposition from labor.
“Yesterday the state’s Pooled Money Investment Board said they were stopping 2000 transportation projects in the state, which means a potential loss of thousands of jobs. Those projects weren’t stopped because of economic stimulus they were stopped because of California’s cash crisis — the cash crisis that the majorities in the Assembly and Senate addressed today passing an $18 billion package of solutions. California’s Treasurer warned today that there would be further dire consequences from Wall Street if Governor Schwarzenegger threw away the solutions passed by the legislature. I am surprised that warning alone didn’t give the governor pause enough to thoughtfully consider bills that haven’t even reached his desk yet.
“The governor’s haste is a waste of $18 billion in solutions that could have helped with our cash crisis and our budget deficit. The governor claims he wants to negotiate but then says things must be exactly as he wants. That is astonishing given the crisis we face. We are now waiting anxiously to see what the next step will be from a governor who has consistently been unable to produce even a single vote for a single budget solution.”Filed under: Archive