California braces for more budget slashing with possible ‘trigger’ cuts
December 13, 2011
http://www.mercurynews.com/california-budget/ci_19525839
SACRAMENTO — As Gov. Jerry Brown gets ready to pull the trigger on more budget cuts this week, lawmakers and interest groups are bracing to see how devastating the cuts will be.
While many in the Capitol are resigned to the worst, some believe the governor will do all he can to avoid cuts to schools — no matter what the revenue figures show.
“He can spin the economic data either way as governor,” said Kevin Gordon, a leading education lobbyist. “Ultimately, it’s a political decision.”
On Thursday, Brown will announce the long-awaited results of his finance team’s forecast for the last six months of the fiscal year. The team will determine whether the revenues have improved enough to avert the worst of the potential cutbacks: $1.9 billion to K-12 schools.
When the Legislature passed a rare on-time budget last June, most Capitol observers knew it was being balanced with a rosy assumption that an improving economy would generate billions more in tax revenue. That’s nothing new in Sacramento, but this year it’s different: At Brown’s urging, the Legislature included painful, automatic cuts that would kick in if the cheery scenario didn’t pan out.
It didn’t. So the only question now is how bloody the “trigger cuts” will be.
If revenues fall from $1 billion to $2 billion short of an estimated $4 billion in new revenues, then Brown will have to pull the trigger on just the first tier of cuts — $600 million from universities,social services and public safety programs.
Data, not politics
The governor and Legislature have already made more than $15 billion in spending reductions this year to help close a $27 billion deficit. And while Brown is preparing for a November tax initiative to tackle another looming deficit, some Democrats want to raise taxes immediately to negate the trigger cuts.
Administration officials are quick to dismiss all the Capitol chatter about how the numbers will be politicized.
“It will be strictly a ministerial calculation,” said H.D. Palmer, spokesman for the finance department. “It is data driven and analytically based.”
Last month, the nonpartisan Legislative Analyst’s Office already put out its own gloomy forecast that projected the worst-case scenario: $2.5 billion in cuts that could lead to school districts shortening the school year by as many as seven days.
Sen. Joe Simitian, D-Palo Alto, said the hard reality is that the economic numbers may not be good enough to avoid setbacks to schools.
“I think you’ll see a set of numbers that go beyond that first tier,” said Simitian, a member of the Senate Education Committee. “I’m hoping we’ll get a frank, down-the-middle estimate of the revenue shortfall. We’ve got to face facts, as hard as that may be, though I hope we don’t try to overstate the case to make a point.”
Indeed, Brown may want to paint as stark a picture as he can to drive home the need for new sales and income taxes that he’ll ask voters to approve next November, said Bill Whalen, a Hoover Institution fellow who was the chief speechwriter for former Gov. Pete Wilson.
“The conventional approach would be to tap dance and come up with a creative solution that kicks the can down the road,” Whalen said. “But this is Jerry Brown, and conventional rules don’t apply. He could offer a solution in the starkest terms, talk about this as the darkest of dark scenarios.”
Brown’s announcement Thursday on the trigger cuts will be followed by January’s budget proposal for the 2012-13 fiscal year, which the governor said last week will assume $7 billion in additional taxes that he’s banking on from next November’s initiative. But Brown plans to include yet another trigger to enact cuts if voters turn down the measure.
A number of economic factors will be considered in the finance team’s revenue projections, including wages, housing permits, unemployment and even U.S. auto sales. The one piece of evidence that the finance department has that the Legislative Analyst’s Office didn’t is a preliminary figure showing how much tax revenue the state will collect in 2011, Palmer said.
‘Flying blind’
But if the finance department had waited until the end of the year to make its projections, it would have even more of a realistic — and possibly rosier — picture of the economy, said Jean Ross, director for the liberal California Budget Project.
That’s when many wealthy investors turn in their fourth-quarter tax payments, a critical barometer to understanding how strong revenues will be after tax returns are filed by April 17.
The finance department will “be flying blind without that data,” Ross said. “To me, it comes down to the question of should they buy some time to find out what happens?”
Sen. Loni Hancock, D-Berkeley, said that the Legislature next month should restore the trigger cuts by passing a tax package that raises enough revenue to offset them. She suggested closing tax loopholes for out-of-state corporations as one solution — legislation that was approved this year on a two-thirds vote in the Assembly but died when Republicans blocked it in the Senate.
“We need to pass something in January, and if we cannot, Republicans will be responsible for destroying some of the great institutions that built California,” Hancock said.
Republicans contend that Democrats added the trigger to the budget simply so they could claim they produced a balanced, on-time budget.
“Even now that they can do a majority-vote budget, the first thing they do is blame Republicans,” said Sen. Bob Huff, R-Diamond Bar.
A coalition of labor and civic leaders is holding a series of rallies around the state urging Brown to avoid the trigger cuts, which will fall heavily on the elderly and disabled who rely on In-Home Supportive Services.
“We think the governor and the Legislature have to work around the trigger cut,” said Nancy Berlin, the director of the California Partnership, an anti-poverty group. “The cuts are too serious and drastic to let it go forward, even though they’ve voted to do it.”
Berlin noted that a study released this week showing that many large California-based corporations are paying little to no taxes. And a recent Field poll showed that two-thirds of voters dislike the trigger cuts.
“Why are we doing this?” she said. “It’s not what people want and it’s not good for the people.”
POSSIBLE ‘trigger’ CUTS
Tier 1
Will be enacted if revenues fall short of budget estimates by more than $1 billion
California State University: $100 million
University of California: $100 million
Department of Developmental Services: $100 million
In-Home Supportive Services: $100 million
Juvenile justice: $72.1 million
Community college fees: $30 million
Child care: $20 million
Department of Corrections and Rehabilitation: $20 million
Grants to local libraries: $15.9 million
MediCal: $15 million
Prosecution grants: $15 million
IHSS anti-fraud efforts: $10 million
Total: $601 million
Tier 2
Will be enacted if revenues fall short of budget estimates by more than $2 billion
Reduce the school year by seven days: $1.54 billion
Eliminate home-to-school transportation: $248 million
Reduce community college allocations: $72 million
Total: $1.9 billion