Brown’s Budget Forum Paints a Dark Picture, Seeks Common Ground

Gov.-elect Jerry Brown, right, points to a member of the audience for a question as Treasurer Bill Lockyer looks on at Brown's budget briefing

Joining him on stage were Senate President Pro Tem Darrell Steinberg, Assembly Speaker John A. Pérez, and Assembly Republican leader Connie Conway. The seat between Pérez and Conway was marked by a name plate for Senate Republican leader Bob Dutton. Maybe Brown didn’t get the memo, or maybe he was making a point: Dutton refused to sit on the panel and instead sat in the audience.

View Brown’s PowerPoint presentation about the budget.

How bad is California’s budget crisis? Even worse than we thought, the Legislative Analyst’s Office revealed during the forum. Although the budget deficit currently stands at $6.1 billion, it will more than quadruple in the next fiscal year to an estimated $28.1 billion. The LAO predicts California will not regain its lost jobs until 2015. 

There are many reasons for profound gap between state revenues and expenditures, with the recession just the latest culprit in an ongoing mess.

“We went into the recession in very poor fiscal shape,” said legislative analyst Mac Taylor. For years, California has relied on temporary taxes and spending cuts, accounting tricks and subterfuges, and taking money from one area to fund another. But these are temporary fixes and do not solve the underlying problems.

California’s personal income tax revenues are down about 30 percent, with sales and corporate tax revenues down 20 percent each.  The legacy of borrowing has put the state under a heap of crushing debt.

“We’re borrowing just to keep going,” Brown said.

State Treasurer Bill Lockyer detailed the state’s debt and credit ratings, pointing out that that debt will have increased from $34 billion to $91 billion from 2003 through 2011 and that servicing that debt has grown from 2.5 to nearly 6 percent of general fund expenditures.

Standard & Poor’s rates California general-obligation debt A-, its fourth-lowest investment grade and lowest of any state. Moody’s Investors Service gives it an A1, one step higher and the same as it gives to Illinois.

Lockyer quoted various rating agencies, which have said of California’s finances:

• “Recurring episodes of insufficient financial liquidity have resulted in the use of extraordinary cash management measures.”
• “Institutional weaknesses, including inflexibility imposed by voter initiatives and a partisan policy-making environment, have repeatedly delayed action on addressing fiscal challenges, resulting in unsustainable budgetary solutions while exacerbating future-year budget making.”
• “State revenues are dominated by volatile personal income and sales taxes, both of which have experienced severe recession-related declines.”

When Pérez talked about taxes, it appeared to irk Republicans, including Conway, who reminded the panel that the conversation was meant by Brown to define the budget deficit, not address solutions.

The audience became impatient after about an hour of presented statistics, asking about unemployment, state spending and tax increases, questions which Brown mostly dodged. Instead, he focused on common ground.

“People will have to overcome their ideological predilections,” Brown said, in summing up the day’s discussion. “There is a zone of potential common agreement.”

The entire two-hour event is available for online viewing at: https://www.calchannel.com/channel/viewVideo/1914

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