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05.13.09

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Phaedra

The Hole Truth: District 27 assemblyman and Budget Committee member Bill Monning says Democrats have identified an extra $3-4 billion in revenue to help fill the gap--but the gap keeps growing.

No Plan B

This Tuesday, voters weigh in on a crucial state rescue package. If it fails, what comes next is anybody's guess.

By Jessica Lussenhop


POOR, POOR special election propositions. So unpopular even the proponents are asking Californians to vote yes in a hangdog, best-of-a-bad situation kind of way.

"I've been describing the ballot measures as crisis management. They're not budget reform," says District 27 Assemblyman Bill Monning, who is supporting all six. "We have to weather the storm as best we can."

But as May 19 draws nigh and five of the six ballot proposals continue to poll poorly, it seems only logical to be asking: What happens if they fail?

First off, says California Budget Project director Jean Ross, things have changed quite a bit since February, when this deal was put together. "They're implying if the ballot measures pass, we won't have a problem. Wrong," she says. "The gap is going to grow regardless. Even if all the budget measures are approved."

The projected deficit has been yawning slowly back open as tax revenues trickle in even more feebly than anticipated. The damage for next fiscal year has been estimated by the Legislative Analyst's Office to be more than $8 billion. On Monday, Gov. Arnold Schwarzenegger announced that it has now nearly doubled, to a staggering $15 billion. So, no matter what, it's back to the drawing board.

According to Ross, Prop. 1A (which would increase the state "rainy day" fund and extend some taxes) and 1B (which would repay schools from back losses in Prop. 98 funds) won't have immediate consequences for this year's budget, but are seen by many to be the most important propositions, especially in terms of future tax revenue, education money and as a step toward calming the state's budget volatility. Monning agrees: he says the revenues that go away in two years without Prop. 1A will gouge holes out of the 2011-12 and 2012-13 budgets.

The most clear and present danger for this year's budget is the failure of Prop. 1C, which promises $5 billion in money borrowed against future lottery profits, along with of Props. 1D and 1E, which would contribute a little less than $1 billion redirected from the First Five early childhood programs and mental health services. Those losses would be tacked onto the shortfall LAO already sees coming. "If these go down, they're going to have to borrow and cut to get to $16 billion, which is--I can't fathom it," said former assemblyman and Budget Committee chairman John Laird last week--and that was before the governor had weighed in with the fresh bad news, which puts the total up to $21 billion. "The stakes are high," said Current Budget Committee member Monning. "There's kind of no Plan B."

But with an $8 billion to $15 billion shortfall already a foregone conclusion, someone ought to be formulating a Plan B.

"I would argue they ought to tell us today how they're going to close that gap," says Ross. "There's a lot of talking behind closed doors, not a lot in public." Gov. Schwarzenegger has mentioned a plan to cut $80.8 million from CalFire--right at the start of fire season in a drought year--if the propositions fail, and though that may be an attempt to scare up some more votes for the propositions, huge cuts will certainly have to be made when the guv comes back with a revised budget sometime in late May or even June.

Last week Monning said he and his fellow Democrats had already put themselves through the paces of both an $8 billion and a $16 billion shortfall. "The Democratic caucus did a budget exercise a week and a half ago," he said. "We were able to capture some of it through mechanisms with the Department of Corrections, an early release program. We looked at some revenue-neutral adjustments with a majority vote that could capture $3 [billion] to $4 billion in increased revenue."

This includes raising certain fees, like the vehicle license fee. Though the governor promised to block a budget passed by simple majority back in December--fee increases can be passed by a simple majority vote, bypassing the Republican votes needed for the two-thirds supermajority required for raising taxes--Monning says that, at the time, "he prudently didn't criticize the majority vote as inherently illegal. I think he did that realizing he may have to accept a majority vote at some point."

Where the rest of that $16 billion or $21 billion is coming from is anybody's guess at this point. With the failure of these propositions, Republicans and Democrats will once again have to lock horns in an attempt to balance the budget, and in time for the July 1 deadline, though Laird says he can easily see the process dragging beyond that. Some fear that cuts on the backs of cuts will reach into that final frontier of services: public safety. "The governor is articulating that there's no way out of this without cutting everybody," says Monning. "We can't protect any one sector with this big a deficit."

Last week, the governor tossed out another sweat-inducing missive. If the ballot measures are not approved, the state will have to raid local governments' already-diminished coffers, a move the Sentinel reported last week could ask local leaders to make a cumulative total of $16.7 million in additional cuts, mostly on the county level.

"You're robbing Peter to pay Paul," says Laird.


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