California legislature takes aim at budget reform

“Reform” is in the eye of the beholder. One policymaker’s idea of improvement is another’s disaster.  Those differences in viewpoint have become apparent as California’s Legislature begins debating a package of procedural changes that would dramatically affect how the state creates its annual budget and ease the ability of local governments to raise taxes.

“Things are badly broken here in California. The root cause is a flawed budget system,” former Secretary of State Bruce McPherson, a Santa Cruz Republican, told a joint legislative hearing on March 22.  The committee is considering a proposal from California Forward, a foundation-backed group on whose board McPherson sits.

Besides California Forward’s plan, dozens of constitutional amendments by both Democratic and Republican lawmakers have been introduced to do everything from call a constitutional convention to forbid from appearing on the ballot any measure that doesn’t include revenues to pay for its mandates.

It’s unclear what – if any – of the proposed changes will win legislative approval given the divisions between Republicans and Democrats over what constitutes “reform.”  Constitutional amendments require a two-thirds vote, which means some GOP support would be needed to pass it in the Democratic-majority Legislature.

California Forward’s original intent was to place an initiative on the ballot containing its proposed “reforms.” Insufficient money to gather the signatures needed to qualify the measure caused the group – whose co-chair is former Assembly Speaker Bob Hertzberg, a Los Angeles Democrat – to introduce its proposal in the Legislature as a constitutional amendment.

Senate President Pro Tempore Darrell Steinberg, a Sacramento Democrat, and Assembly Speaker John Perez, a Los Angeles Democrat, held a press conference touting the Legislature’s debate of California Forward’s proposal. Some see the Legislature’s willingness to enact such changes as a means to burnish its tarnished image and low approval ratings.

Even before the sweeping measure was introduced, Republicans voiced opposition to one of its key features – reducing the vote threshold for approval of a state budget from two-thirds to a simple majority.  “Democrats again are simply trying to take away the protections the people put into the constitution, so they can raise taxes and spend more. Rather than real reforms that would get California back on track, or provide more jobs, the Democrats are reverting to form: tax more, spend more,” said Senate Republican Leader Dennis Hollingsworth of Murrieta in a March 11 statement.

Many Democrats favor both a majority vote for approval of the budget 
and for increasing taxes, arguing that the Republican’s minority holds the majority party hostage.  “When the minority controls the majority, the system is broken,” said Sen. Loni Hancock, a Berkeley Democrat at the March 22 hearing of the Assembly and Senate Committees on Improving State Government. “There’s no accountability.”

California Forward’s plan still requires taxes be approved by a two-thirds vote. The group’s ideas are contained in two identical constitutional amendments, ACA 4 and SCA 19. Companion legislation would help implement the plan, if voters approve the constitutional amendments.

Besides the majority vote budget, the key components include:

Require lawmakers to identify funding sources for bills that cost $25 million or more.

Allow the governor to unilaterally cut spending if the Legislature does nothing to address a fiscal emergency within 45 days.

Switch to a two-year rather than single year budget.

Subject state agencies to performance budgeting.

Allow counties to adopt a “strategic plan” which could include an increase of up to 1 cent in local sales tax to pay for it. Half the money would go to local schools.

“California sees their government as distant, disinterested and chronically unable to solve their problems,” said Hertzberg at the March 22 committee hearing. “It is all about figuring out a way … to create a government that works, a democracy that’s real that touches their needs.”

Senate Republicans appear to favor a switch to two-year budgeting.  Sen. Mark Wyland, an Escondido Republican, has introduced a constitutional amendment, SCA 2 that would have the Legislature focus on the budget during each odd-numbered year in the two-year legislative session and pass other legislation in the even-numbered years.

The Senate, in particular, has internally increased the amount of oversight of state agencies and programs this year. Wyland argues it could be more effective if one year was devoted solely to budgetary issues.  “We’re very supportive of Sen. Wyland’s proposal. There are real opportunities here,” Jay Hansen, legislative director of the State Building and Construction Trades Council told the improving state government committees. “We know the public’s very bitter. The governor’s numbers have never been lower.”

Wyland’s constitutional amendment has yet to have a committee hearing.  Critics of the two year budget – some 21 states have them including Hawaii and Virginia – say that fiscal problems would be papered over in the first year and a solution promised for the second year.  Legislative budget writers also question whether a two-year cycle would restrict the ability to take action based on swift changes in the economy.

Democrats have said they do not favor all of California Forward’s proposals.  Of having to identify revenue to pay for measures costing $25 million or more, Sen. Alex Padilla, a Los Angeles Democrat, said, “One person’s revenue requirement is another person’s spending cap.”

Jean Ross, the executive director of the California Budget Project, questions why the California Forward plan exempts debt payments on general obligation bonds –one of the fastest growing spending areas in the budget — from its pay-as-you-go budgetary requirements.  “General obligation bond debt is the Pacman of the budget these days,” Ross said in an interview.

Gov. Arnold Schwarzenegger has endorsed the California Forward proposal, touting it in his January State of the State speech.  “I especially support its proposal for the performance-based budgeting and applying one-time spikes in revenues to one-time uses, such as debt reduction, infrastructure and creating a rainy day fund,” Schwarzenegger said.  “The leaders of this body have said and they have said it many times, that the legislature should be given a chance to enact reforms before reforms go directly to the people. Well, here is that chance. I urge you to take it.”

Ross and others question how much a package of procedural changes can do – good or ill – for a state as complicated as California.  “Other states aren’t in the constitutional mess we’re in,” Ross said in an interview. “We’re at the extreme end of the spectrum in that we’re the only state with a super-majority for the budget and taxes. Add all the ballot-box budgeting from decades of initiatives and we have arguably the most constrained political process in the country.”