The one thing we can pretty much count on next week, in the wake of Gov. Jerry Brown's weekend bombshell announcement of a deficit that has ballooned to $16 billion, is that the state Capitol is headed to the budget equivalent of Defcon 2.
It's that bad.
"Tax receipts are coming in lower than expected," says Brown in the YouTube video shot in his Capitol office, a copy of Albert Einstein's Ideas and Opinions at his side. "And the federal government and the courts have blocked us from making billions in necessary budget reductions."
It's certainly no surprise that the state's projected budget gap has widened. April tax receipts, combined, with previous months of below expected revenues, had most people assuming that Brown's revised budget (due Monday) would project a hole of close to $12 billion.
But clearly there are more problems -- and big ones -- that the governor and his budget team have now identified. The projected deficit is 77 percent larger than the one assumed just four months ago. A spokesman for Brown says there won't be any more budget details until Monday morning's news conference at the Capitol. The governor then flies to Los Angeles to deliver the bad news in front of TV cameras in the southland.
And so it's worth pausing to consider some of the broader political issues on the road towards inking a budget agreement in the next few weeks.
For starters, we know that Brown (as he did in January) will assume passage of his November tax increase initiative in closing the budget gap. The governor's budget staff believes the initiative's temporary income and sales tax increase will bring in $9 billion in its first year, while the nonpartisan Legislative Analyst's Office (LAO) assumes it's worth a little less than $7 billion.
Given that the lower estimate would require the deepest cuts, it's hard to see majority Democrats in the Legislature demanding the LAO'smore projection. And so we can likely assume the solutions needed will be closer to $10 billion (closing the remaining $9 billion gap and providing some kind of expected cash reserve).
So, where do lawmakers cut up to $10 billion? That's where it will undoubtedly get ugly.
K-14 education, which makes up roughly 40% of the state's general fund, will likely decrease automatically under the governor's new budget because funding levels fall and rise with revenues. But don't expect additional cuts to K-12 schools and community colleges... because the governor effectively took any such idea off the table in his weekend video.
He said his plan -- specifically, the tax initiative --"avoids cuts to schools." That sounds like that, at least until voters weigh in on November 6, he's not cracking open school funding guarantees. And there's not likely to be any stomach for public school cuts in the Legislature, either.
What about higher education, and funding for UC and CSU campuses? Unlike K-14, there are no legal protections for funding here. Deeper cuts, which would almost undoubtedly trigger tuition and fee increases that have been mused about lately, would no doubt be wildly unpopular on campuses statewide. They'd also be a tough sell in the Legislature, where campus protests over $2.6 billion in higher education cuts since 2008 have left some key legislators resolved to stop the bleeding.
Then there are health and human services programs, making up more than 28 percent of the general fund and also often targeted in recent years. Democrats balked at Brown's January proposal for cuts that included $1 billion out of the welfare-to-work program CalWorks. And the governor himself noted in the YouTube video that federal officials have essentially said no to some of his plans for savings in health care for the poor.
As you can see, at every turn there's a political or legal blockade in the way of finding $9-$10 billion in additional savings. The Sacramento Bee and others reported last week that Brown has asked labor leaders to help reduce state workforce expenses by $750 million. Even that heavy political lift only solves a fraction of the problem.
From there, the biggest spending items are things like prisons and the courts, and those are also fraught with danger. Prisons are already tied up in the still unfolding public safety realignment process, and everyone from California's chief justice on down has warned that cuts in court funding are now threatening the rights of Californians to justice under the law.
Legislative Republicans, though, don't think the cutting has gone far enough.
"The imaginary money the majority party counted on in last year's sham of a budget never materialized," said Assembly GOP leader Connie Conway in an emailed statement. "Today's news underscores how we must rein in spending and let our economy grow by leaving overburdened taxpayers alone."
Conway is referring, in part, to last year's deal between Democrats and Brown that was reached by assuming $4 billion of unspecific revenues. The lack of those revenues helped trigger additional automatic cuts at the end of 2011.
The GOP reaction certainly seems to reinforce the idea that there's no policy concession that Democrats could give Republicans in the Legislature (probably not even a deal on public employee pensions) in exchange for any additional revenues, especially with Brown's own tax measure looming for the fall ballot.
The conventional wisdom under the Capitol dome has been that even though the governor submits a revised plan on Monday, substantive budget action won't come until after June 5 -- the statewide primary election where 100 of the 120 seats in the Legislature are on the ballot. But that would also mean only 10 days until legislators begin forfeiting their salaries without sending a budget to Brown, the wildly popular provision contained in 2010's Proposition 25.
And keep in mind that last year -- the first time Prop 25 was in effect for a budget debate -- the deficit lawmakers were asked to erase between mid-May and mid-June was less than $10 billion. This a far larger task to pull off... and in an election year, to boot.
It's been suggested that the outcome of the November tax debate will prove to be the make-or-break moment of Jerry Brown's return to the governor's office... a defining moment for his political legacy. But with hispronouncementof more fiscal trauma, a 2012 legislative compromise may also go a long way to shaping how Brown is viewed -- good or bad -- once the history books are written.