The Legislature has passed a placeholder state budget that protects lawmakers from losing ther salaries, but the end game may be a battle over taxes.
Drafting a state budget for California is always a difficult process, given the state’s diverse and often conflicting interests, but it became infinitely more so during the century’s first decade.
Although Democrats controlled the Legislature, Republican Arnold Schwarzenegger was governor, the state was slammed by what was then the worst recession since the Great Depression, and the budget required a two-thirds legislative vote, which gave minority Republicans leverage.
Those impediments often meant weeks- or even months-long stalemates, frustrating groups that depended on the budget’s flow of money, particularly public employee unions. Their solution was Proposition 25, a 2010 voter-approved ballot measure that reduced the required budget vote from two-thirds to a simple majority, effectively excluding Republicans from participation.
To blunt criticism that it was a power grab, Proposition 25’s supporters included a proviso that the budget had to be passed by June 15 each year or legislators would have their salaries docked.
Proposition 25 had its first test just a year later. Although Democrat Jerry Brown had become governor, the recession still raged and he and the Legislature squabbled over the 2011-12 budget.
Democratic legislators, using their newly minted power from the simple majority vote, passed a budget by June 15 but Brown vetoed it, saying “It continues big deficits for years to come and adds billions of dollars of new debt.”
Controller John Chiang, also a Democrat, declared that the Legislature’s unbalanced budget violated Proposition 25 and began withholding legislators’ pay.
Lawmakers fumed at Chiang, contending that passing a budget, even an unbalanced one, by June 15 satisfied the law. The stalemate continued for a few more days until Brown and legislative leaders hammered out a deal.
Nine years later, Proposition 25 is once again in play. An even more severe recession is once again punching holes in state finances and Brown’s Democratic successor, Gavin Newsom, is once again sparring with his co-partisans in the Legislature on what to do about it.
On Monday — June 15 — both legislative houses passed a version of the 2020-21 budget that is admittedly out of balance by many billions of dollars, thereby, legislators say, complying with Proposition 25. It would put off big spending cuts for a few months on the assumption that Congress and President Donald Trump will provide about $14 billion in federal aid by then.
Newsom says he holds the same hope but wants to make spending cuts up front and then rescind them later if the feds come through.
Were Controller Betty Yee to adopt Chiang’s 2011 interpretation of Proposition 25, she would hold up legislators’ paychecks, but shows no signs of doing so and risking their wrath.
The larger question is how this week’s pretend budget sets the stage for an end game.
Clearly, Newsom’s approach is aimed at putting maximum pressure on Congress by making recipients of state support — schools particularly — immediately feel the recession’s impact on revenues.
Legislative leaders say they want to spare vital services from such instant pain, but their real game is buying time. Its leaders appear to hope that if Uncle Sam doesn’t ride to the rescue there will be enough backlash to enact a multi-billion-dollar state tax increase, despite polling that indicates voters are very leery about new taxes.
Public employee unions and other pro-spending groups are demanding, via a newly formed coalition, Commit to Equity, to “end the systemic inequity of our tax code, which gives billionaires and corporations a pass from paying their fair share (and) tax the privileged to preserve and improve schools, healthcare, and vital community services…”