Gov. Jerry Brown says voters face ‘day of reckoning’ to avoid budget pain
05.15.2012 | InsideBayArea.com | Josh RIchman
SACRAMENTO — Calling it “our day of reckoning,” Gov. Jerry Brown rolled out a revised budget proposal Monday that relies on increased income and sales taxes from a proposed November ballot measure to avoid deep cuts to K-12 and higher education.
Elsewhere in the budget blueprint, he said, cuts are unavoidable. To help fill a $15.7 billion budget gap, he proposed cuts to hospital and nursing-home funding to lower MediCal costs; a 7 percent cut in In-Home Supportive Services; barring colleges and universities that can’t meet minimum performance standards from taking part in the Cal Grant program; reducing state workers’ pay by 5 percent through contract renegotiations; and using assets that used to belong to local redevelopment agencies.
“It’s a difficult budget, and it reflects the fact that revenues are less than expected,” as well as that court and federal government interventions have kept the state from making some cuts — including reductions in Medi-Cal and In-Home Supportive Services — it wanted to make this year, the governor said. Also, because next year’s revenue projections are a bit rosier, Proposition 98 requires the state to dedicate more money to education, leaving less for everything else.
“We’re going to have to cut deeper, but cutting alone really doesn’t do it,” Brown said.
Brown’s budget proposes $91.4 billion in general fund spending for 2012-2013, an increase of nearly $5 billion over 2011-2012. But “costs are growing greater” than incoming revenues, said Ana Matosantos, the state’s finance director.
The governor added that his budget is a call for “real increased austerity with a plea to the voters: Please increase taxes temporarily” at the ballot box this November.
This past year’s budget kept the crisis from being far worse, Brown contended. Tough cuts have included reducing CalWORKs grants to below 1987 levels; reducing support to state universities by almost 25 percent; and cutting the courts’ budget by about 20 percent, all while realigning criminal justice to keep more convicts in county jails rather than state prisons and protecting K-12 education and public safety wherever possible.
But that is possible no more, he said. What was estimated in January to be a $9.2 billion budget shortfall is now about $15.7 billion.
The budget for K-14 education actually increases $3.8 billion — even if the taxes aren’t passed — because the state is obligated to restore to districts and community colleges what it took away in previous years. If the initiative passes, spending per student would rise from $7,170 this year to $7,969 in 2012-13.
But if voters don’t agree to higher taxes, K-12 and community colleges would be cut by about $5.5 billion, possibly reducing the school year by a combined total of 15 days in 2012-13 and 2013-14. The state would not pay off $2.8 billion owed to schools. And cuts to K-12 programs would amount to $2.4 billion, or more than $400 per student.
“It would just be devastating to education,” warned Mt. Diablo district board president Sherry Whitmarsh. “It could result in many, many furloughs or the elimination of programs, depending on the way the board and the community voices to the board cuts they would like to see. I know people think that we’re crying wolf. But I think we’ll see a lot more school districts going into bankruptcy.”
Oakland and Berkeley school officials said they have enough reserves to weather the automatic cuts in the upcoming school year should they come to pass, but their districts would undergo painful reductions for the 2013-14 school year. Oakland schools spokesman Troy Flint said such a scenario could be a “disaster” given cuts made since 2008: “There actually is a rock bottom at some point, and I think we’re getting close to that.”
Mike Napolitano, whose daughter and son attend Oakland Technical High School, said he expects parents and other public school supporters will mobilize in support of November’s tax initiatives. “It’s not going to be a state that any of us wants to live in if that doesn’t happen,” he said.
The governor proposed saving $92 million by eliminating the new requirement for “transitional kindergarten” for students who just miss the cut-off date for starting school. The Legislature is standing by the new law, but Brown has refused to concede defeat, so it’s uncertain whether that savings will materialize. “I’m surprised he didn’t lick his wounds and go away,” said Kevin Gordon, an education lobbyist.
Brown also stands by his proposal to simplify the state’s way of calculating funding for education — a formula weighted by student poverty and English ability. Bill Huyett, the Berkeley public schools’ retiring superintendent, said that should only occur only after the tax initiative passes, lest some schools simultaneously face trigger cuts and a funding-formula downshift.
“If you do it when there’s new money, maybe that’s OK,” he said. “If you don’t, then it’s a disaster.”
Brown’s budget keeps home-to-school transportation, after his January proposal to cut it sparked an outcry. “That’s good news,” said Superintendent John Porter of San Jose’s Franklin-McKinley School District, which buses children who have to cross busy and dangerous roads. “But my hope is that they didn’t take it out of something else.”
Brown has promised to reduce the debt that the state owes districts, to about $6.9 billion. But if the tax measure doesn’t pass, the state will not pay down the $2.6 billion that the governor proposed in his budget.
Cuts to California’s safety-net programs would continue under Brown’s proposal: a $225 million reduction from In-Home Supportive Services, a program allowing the elderly and disabled to avoid more costly nursing homes; $879.9 million reduced from CalWORKs, the state’s welfare-to-work program; and a $1.2 billion cut from Medi-Cal, mainly through changes in the way hospitals and nursing homes are reimbursed. Cuts to state-funded child care services would amount to $453 million.
But at least some of the proposals are less drastic than what the governor has previously called for. Home health care workers would see their hours reduced by 7 percent, down from an earlier 20 percent proposed reduction. Cuts to the state’s welfare-to-work program have gone from $940 million in January to $879.9 million proposed Monday. Savings would result from shorter time limits on aid and shrunken child care options.
Sara Gonzales, a former San Jose warehouse manager who is caring for her 6-year-old grandson, worries about the steadily decreasing funding for CalWORKs. She now receives $516 a month and has access to transportation vouchers, computers, child care and even clothes for interviews. Gonzales said she fears she is among the last Californians to benefit. “The people behind me, what are they going to do?” she asked. “It’s just going to be a rippling effect, so many people are going to become so poor.”
California Attorney General Kamala Harris issued a statement Monday afternoon noting her state Justice Department reached a foreclosure-crisis deal requiring the nation’s largest banks to pay $410 million to help homeowners get the expert help they need to keep their homes. Brown’s revised budget would divert that money to other purposes.
“While the state is undeniably facing a difficult budget gap, these funds should be used to help Californians stay in their homes,” she said, adding she intends to work with Brown and lawmakers “toward a balanced budget that honors our obligations to California’s homeowners.”
So it’s shaping up to be a contentious four-and-a-half weeks until June 15, the state constitution’s budget deadline.
“The economy is a stubborn beast, and while we would all love this chapter of California history to be part of the past, our work obviously is not done,” state Senate President Pro Tem Darrell Steinberg, D-Sacramento, said at a news conference Monday afternoon. “The governor is doing a good job and has laid out a difficult proposal.”
Steinberg said he’ll work with Brown and other legislative leaders from now through June 15 to find ways to “buy down” some of the most damaging and “egregious” cuts proposed in Brown’s revised plan. As examples, he cited deeper-than-expected cuts to CalWORKs grants and eligibility, to Cal Grants financial aid for higher education, and to the state’s trial courts.
But he said he’s confident that by taking a collaborative approach with public workers’ unions — as opposed to former Gov. Arnold Schwarzenegger’s unilateral tactics — Brown and the Legislature can achieve the salary cuts and shorter work week included in the revised plan.
Steinberg said passing the governor’s tax-hike ballot measure this November is of paramount importance, lest California have to swallow unpalatable school cuts. Senate Budget Committee Chairman Mark Leno said “every parent sees the underfunding of our school system currently” and can’t be surprised that California ranks close to the bottom among all states in per-pupil funding. This, he said, is the result of years of budget tactics that amounted to, “as our former governor used to so proudly say, ‘starving the beast of government.'”
Steinber agreed: “The public is beginning to feel the impact of what we’ve done over the past five years.”
He added adding that the state has been “denting, denting, denting, denting” the structural budget deficit “and now hopefully this will be the end of it, with the passage of the revenue and making some more difficult decisions this year.”
But state Senate Republican Leader Bob Huff, R-Diamond Bar, speaking to reporters in a state Capitol corridor just after Brown’s news conference Monday morning, said to make a real cut in California’s spending, he “would cut the Democratic majority in the Legislature because it’s policies that drive budgets.”
He said the state is so overloaded with obligations and deferred payments from past years that, even with revenues on the rise, they simply can’t rise fast enough to keep up with spending.
“You can’t tax your way to prosperity,” Huff said, but given the Democratic majority’s ability to pass a budget with a simple majority thanks to Proposition 25 of 2010, he said, “I expect I’ll be twiddling my thumbs waiting for them to engage Republicans.”
Asked why revenues came in so far below estimates, Brown said the sluggish economy makes an already difficult prediction even harder to make. “The capitalist system is not coincident with your expectations of exactitude,” he said.
In fact, general fund revenues have increased by 10.2 percent from the year before. Revenues have jumped from $86.8 billion in 2011-2012 to $95.7 billion in 2012-2013. Personal income taxes have risen by $7.3 billion, a 13.8 percent increase, and corporate tax receipts have risen by $280 million, a 3.4 percent jump. Sales and use tax revenues have jumped by $1.7 billion, or 8.9 percent from the previous fiscal year
His tax-hike measure calls for a five-year increase in income taxes for those making $250,000 or more per year and a four-year, half-cent increase in the state’s sales tax; 89 percent of the new revenue would go to K-12 education, and 11 percent would go to community colleges.
Asked whether he wishes he had asked for more money in this November’s ballot measure, Brown replied that it’s a balancing act: “This is a matter of judgment — what will the people vote for, what is fair, what will address our budget problems?”
Assembly Speaker John Perez, D-Los Angeles, issued a statement saying the governor’s revised plan “makes clear that a significant budget problem remains. … To date, the Assembly has held over 60 budget hearings, and we will immediately begin hearing the May Revision proposal. Through an open and transparent process, we will craft an on-time, balanced budget by June 15.”
California Republican Party Chairman Tom Del Beccaro issued a statement blasting the new plan.
“Amazingly, a year and a half into Brown’s governorship and we still hear nothing of the unemployed,” Del Beccaro said. “California will continue to face chronic budget deficits because so many people remain out of work; the conversation about revenues should always begin with how to restore jobs. So many people are wondering when Brown will offer plans to make California competitive, so that business will return to this state and bring jobs with them.”
The California court system, which has already lost more than $600 million in funding over the past four years, would take another $544 million hit under the governor’s plan. Brown proposes trial courts draw down existing reserves while the judiciary delays most construction projects.
But the cuts to the court system’s $3 billion budget would force judicial leaders to revisit the controversial possibility of closing courthouses several days per month to save money, a move that produced a backlash across California two years ago. The state Judicial Council, the court system’s policy arm, is set to hold an emergency meeting Thursday to consider the fallout.
Chief Justice Tani Cantil-Sakauye has tried to avoid court closures to deal with budget cuts, but the council’s options may be limited if the cuts go as deep as the governor wants. The council already has scrapped a multi-billion-dollar tech project to save money, and last year tapped into a courthouse construction fund to pay for court operations.
In a statement, Cantil-Sakauye called the latest proposed cuts “both devastating and disheartening.”
The governor in January had called for closing the state’s youth prison system, proposing to halt all new intakes to the Division of Juvenile Justice starting in January 2013. The May revise reverses that call, retaining funds for housing and treatment of the most serious and violent juvenile offenders at the state level, but charging counties $24,000 a year per commitment.
The budget did not change Brown’s plan to close up to 70 state parks by July 1. In an interview with this newspaper Monday morning, state Resources Secretary John Laird said the plan is still on track, despite recent push-back by Democrats in Sacramento. As of Monday, 16 state parks have been saved because of donations from private groups or local governments, he said, and as many as 20 more might also be saved, he said, depending on how much other funding comes in from outside sources.
“We’re doing our best to stretch and raise the money, and keep half of them open,” Laird said.
Brown’s revised budget may cost Californians more next time they go to a home-improvement store: He is proposing a new fee on lumber to help pay for state programs to oversee logging plans and improve water quality in rivers and streams. The fee, which would require two-thirds votes by state lawmakers, would raise about $30 million a year by putting a small percentage increase on the sale of lumber at stores such as Home Depot.
The exact amount wasn’t immediately clear, but the fee is part of a deal with the timber industry in which some industry fees would fall, and the state would limit legal damages from forest fires that start on private land, in an attempt to win Republican votes to pass the lumber fee.
California’s public colleges and universities would escape mostly unscathed if Brown’s tax measure passes in November, facing relatively minor adjustments. Without the taxes, the $500 million in cuts to the University of California and California State University systems would bring state budget reductions to $1 billion each since the start of 2011.
The possibility of twin cuts to the universities in January could mean higher tuition and fewer classes, said Michele Siqueiros, executive director of the nonprofit Campaign for College Opportunity, and even the tax hikes don’t help the schools recover from massive cuts in recent years.
“It makes it clear that there’s still a lot of unpredictability,” she said. “Certainly the governor is protecting education, but without additional resources.”
The governor proposed reforms to the Cal Grant scholarship program that would crack down on state money flowing to poorly performing schools, many of them for-profit colleges. Brown’s budget would cut off scholarships for colleges with graduation rates under 30 percent and where more than 15 percent of graduates default on student loans.
That may be too much at once, said Steve Boilard, higher-education chief for the nonpartisan Legislative Analyst’s Office; dozens of colleges would be disqualified from collecting the scholarships under the proposal.
“To just suddenly say ‘next year you’re not covered’ kind of leaves students and schools in the lurch,'” Boilard said. “The end result is you have fewer students who are able to enroll in college.”
But Assemblyman Bob Wieckowski, D-Fremont, who had introduced a bill to place less stringent restrictions on Cal Grants, applauded Brown’s move.
“It makes me look like a moderate,” he said.
Staff writers Karen de Sá, Sharon Noguchi, Howard Mintz, Steven Harmon, Paul Rogers, Katy Murphy, Matt Krupnick, Theresa Harrington, contributed to this report. Josh Richman covers politics. Follow him at Twitter.com/josh_richman. Read the Political Blotter at IBAbuzz.com/politics.