Standoff Delays Billions and Threatens CPF-Backed Legislation
UPDATE: Read the latest budget update story: "Legislature Approves Budget Deal: Governor Threatens Budget Veto and CPF-Backed Legislation Remains in Limbo"
For the first time ever, the second year of the regular two-year legislative session recessed August 31st with the passage of roughly 1,000 bills … the 2008-09 State Budget bill, however, was not one of those bills. As of this writing, California faces the 67th day in what has turned out to be the longest state budget impasse in our state’s history.
Significantly complicating the budget impasse is the moratorium issued publicly by the Governor last month in which he indicated that he would veto any legislation that came across his desk until the Legislature passed a budget.
Anyone interested in tracking California legislation must pay close attention to the deadlines imposed by the Legislature and the California Constitution. Normally, the Governor is given 30 days to act when he is in possession of bills passed by the Legislature at the end of session, in this year’s case prior to September 1st. There are several CPF-backed bills that were approved by the Legislature at the end of session, which are now awaiting transmittal to the Governor. However, such transmittal is being delayed in an effort to prevent bills from falling victim to the automatic veto threat.
And, now we enter unchartered territory …
Article 4, Section 10, subdivision (d) of the State Constitution says that the “Legislature may not present any bill to the Governor after November 15th of the second calendar year of the biennium of the legislative session.” However, in a separate subdivision, the Constitution requires the Governor to act on end-of-session bills by September 30th or they automatically become law.
How can the Governor act on bills he hasn’t yet received? If bills aren’t transmitted to him, what happens to them? Must they be acted on before September 30th per the above Constitutional deadline if a budget bill is not approved until mid-November, or will they survive until the state budget impasse is resolved? The Constitution does provide for the Governor’s signature of bills up to November, but the effective date of the bills is unclear since the September 30th deadline applies to bills that would otherwise take effect January 1st of the following year if signed or enacted.
What is clear is that our state Constitution does not provide an obvious road map for navigating this type of legislative bill limbo. In the meantime, the Senate Secretary and Assembly Clerk, as well as legal experts, are reviewing procedures for how best to chart the unexplored waters. Stay tuned…
As we understand it, both the Assembly and the Senate will be meeting daily until a state spending plan is approved and sent to the Governor. After having unanimously voted down both Democratic state budget proposals (first in the Assembly and then in the Senate) that were supported and would have been signed by the Governor, and after more than a two-month long impasse, legislative Republicans finally unveiled their own state budget plan last weekend.
THE PROPOSALS
The Republican Plan – Staying true to their "No Tax" pledge, the legislative Republican plan proposes to balance the state budget by, among other things:
- Collecting almost $2 billion next year via bonds based on future lottery revenues
- Raising an additional $349 million by diverting local redevelopment funds, which would not be re-paid
- Reducing or eliminating a myriad of key public programs, services, agencies and departments our state currently operates
- Reducing welfare and health spending, a cap on future state spending, and gives the Governor the authority to make mid-year program cuts in “bad economic” years.
Their proposal would also prevent the Legislature from adjourning until a budget is passed.
Because of its deep program cuts and reliance on changes to state lottery financing, Democrats have met the legislative Republican plan with hostility. In fact, Speaker Karen Bass (D-Los Angeles) has stated that many of the plan’s basic tenants are non-starters for negotiations. Nonetheless, after Senate Leader Don Perata (D-Oakland) criticized legislative Republicans last Friday for not offering a proposal of their own, the Republican plan unveiled last weekend will be permitted on the Senate Floor for a full debate.
The Democratic Plan – Democrats in the Legislature modified their budget proposal in August from the budget proposal that was approved by the Assembly-Senate conference committee in July in order to incorporate changes required by the Governor to sign a budget bill. The proposal includes:
- Cutting $270 million in the size and scope of the correctional reform package to be consistent with the Administration package
- Moving public transit funds to pay for home-to-school transportation ($100 million in General Fund savings)
- Creating two additional state income tax brackets above the current 9.3 percent ceiling. Joint filers making more than $321,000 a year would pay 10 percent on income above $321,000, while those making over $642,000 would pay 11 percent on income above $642,000.
Such tax increases are projected to generate over $8 billion in additional revenue.
The Governor’s Plan – Like the legislative Republicans, the Governor wants to use Lottery revenues to backfill the staggering $15.2 billion state budget deficit. However, unlike legislative Republicans, the Governor is proposing:
- A temporary 1-cent sales tax increase for three years (excluding taxes on diesel, gasoline and jet fuel) that would be followed by a permanent 1¼-cent reduction beginning in year four, which will transfer the structural deficit problem to the next Governor. Legislative Democrats do not like that his sales tax proposal is across the board and not on personal income, while legislative Republicans reject his tax proposal altogether.
- A spending cap, however, legislative Democrats want less restraint, while their Republican colleagues want more.
- An additional $2 billion in cuts over what was recommended by the legislative Budget Committee for a total of just under $10 billion in cuts.
We’ll continue to keep you apprised of developments as they occur. In the meantime, should you have questions, please contact Amy Howard, CPF Legislative Director, at ahoward@cpf.org.