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Desperately Seeking Balance

America‘s worst-ever state budget crisis comes with its own circus. Gray Davis had no sooner unveiled his proposed budget last week in the Capitol’s press-conference room than critics gathered in the hallways outside in what amounted to a rugby scrum with straining reporters. The Assembly Republicans‘ budget point person, Assemblyman John Campbell (R-Irvine), praised the governor’s program cuts but ripped into Davis‘ proposal for increased taxes on the wealthy, a 1-cent sales-tax hike and an additional $1.10-a-pack cigarette tax. “This will not stand, the governor is hyping the deficit to raise taxes,” he declared as a group of reporters, who had just rushed out from Davis’ presentation even as outgoing state Finance Director Tim Gage began to spell out the details, jostled around him, straining to ask questions.

After Campbell took a host of questions, growing more adamant as he repeated his simple message, the Weekly asked, “John, you‘re saying that in essence Davis has solved the budget deficit.” Campbell answered, “Yes. He has provided the road map to solving the crisis.”

“So,” asked the Weekly, “if Davis’ cuts solve most if not all of the crisis, why would he want to raise taxes?”

“Because he is catering to ideological liberals in the Legislature who want to raise taxes,” explained Campbell.

“So, John, if the Davis plan was enacted we would have a big budget surplus?”

“Yes, absolutely,” replied Campbell. It seemed an exciting thought. Then he reconsidered. “Well, many of the taxes would end up not being paid because people would figure out ways around them.”

This sort of confused thinking is one of the reasons the state Legislature is having such a hard time addressing the budget problem. Because California is one of the few states that requires a two-thirds vote of both houses of the Legislature to pass a budget, and because Democrats are just shy of two-thirds of the seats in the Legislature, Campbell‘s views matter.

Just down the hallway, Senate Republican leader Jim Brulte (R--Rancho Cucamonga) also held forth. “Raising taxes in this environment is like what led to the events of 200 years ago,” he opined, referring to the “taxation without representation” that helped spark the American Revolution. An imperfect analogy, to be sure, in that California is not a colony and just held elections in which most of Brulte’s confederates lost.

Meanwhile, back in the conference room, Davis administration officials were working their way through explanations of the budget plan, a document that could easily be used in arm-curling exercises. “Tim,” asked one reporter plaintively, “is this going to be viewed as good or bad by education advocates?”

Needless to say, folks in California‘s Capitol are still scrambling to get their hands around the scope of the state’s budget debacle, which Davis, in the widely accepted figures, puts at just under $35 billion for an 18-month period. When you put Davis‘ just-introduced budget for the next fiscal year together with his $10 billion proposal to deal with the shortfall in this fiscal year -- which the Legislature is just beginning hearings on this week -- you have a recipe for confusion. The circuslike atmosphere of last Friday will undoubtedly repeat itself.

While Republican legislative leaders shrilly proclaim their opposition to tax hikes, and community groups proclaim impending disaster with massive cuts to social programs and education, some business leaders keep their own counsel about “revenue enhancements,” as they are known in the parlance. Even if a few Republicans choose pragmatism and go along with the Democrats, there will almost certainly be major changes to Davis’ budget. Says Senate Budget Committee Chairman Wes Chesbro, a North Coast Democrat, “The governor is not getting anywhere near a pristine version of his budget.” But even on the Democratic side, powerful players are keeping things close to the vest. Senate President John Burton is still appointing members of Chesbro‘s budget committee. Assembly Speaker Herb Wesson has a study group working but no plan of his own thus far. He says he’s looking forward to the hearings starting this week, which will focus on the $10 billion shortfall in the current fiscal year, not the full budget for the next fiscal year, which Davis introduced last week.

Into this breach, as reported last week, barges the Latino Legislative Caucus, whose members now make up more than a fifth of the Legislature. In a nice sequence of political theater, the governor appeared Monday night at the annual Latino leadership reception, held across the street from the Capitol in the atrium of the old Senator Hotel, once a swankily sleazy den of influence peddling and iniquity. As he closed a mostly well-received speech to the crowd, Davis cited the need, even in the midst of “tough choices,” to hang on to “the basic elements of opportunity” that make “California a special place, where anything is possible. Anything. I got elected governor.” The crowd laughed.

But Davis probably did not intend the crowd to laugh when, in noting that many don‘t like his budget, he declared, “If you don’t like it, come up with your own.” As it turns out, the Latino Legislative Caucus will be meeting this weekend to draw up its own alternative budget.

Not long after, standing next to Davis, who was flanked on the other side by L.A. Senator Gil Cedillo, a critic since Davis‘ veto of Cedillo’s bill to allow driver‘s licenses to undocumented immigrants, L.A. Assemblyman Marco Firebaugh took up the governor’s perhaps unintended gauntlet.

After some pleasantries, which Firebaugh began by noting the Latino Legislative Caucus‘ differences with Davis, the caucus chairman picked up that gauntlet. “Governor,” he declared to great applause, “we’ll take up the challenge from you and come up with our own budget. California deserves the best, and we‘re going to do our best to come up with it this weekend in San Francisco” (where caucus members will hold a retreat at the San Francisco Hilton).

After that, Davis, Firebaugh and Cedillo huddled for a minute or two on the side of the stage. When the governor had departed, Cedillo, the new chairman of the Senate Revenue and Taxation Committee, told the Weekly, “Wasn’t that great with Marco? You never know. Gray shocked me on Friday,” when Davis, in what he described as “the only good thing in my budget,” expanded health care for children, a program Cedillo had championed.

Firebaugh was enthusiastic but realistic. “We know there‘s going to be a lot we don’t like in the final budget,” he told the Weekly. “But we have the opportunity to give the system a major tweaking, and we‘re going to take it.”

As the Latino Caucus readies itself for its push on the overall budget, L.A. Senator Sheila Kuehl -- a front-runner to succeed Burton as Senate leader when the fiery San Francisco liberal steps down at the end of his term -- discussed Senate plans to deal with the $10 billion shortfall in the current fiscal year. “Even though we’re still looking at the midyear correction, there will have to be resolution by the end of January,” she said. “We have to decide how many cuts we want to get to this midyear solution. Responsible cuts, which will include things the governor‘s not proposing. And new revenues, not just long-term but now to partly balance the cuts.”

Kuehl sees “two pennies of cuts for one penny of new revenues” as the balance point in dealing with the current shortfall. And fewer cuts in services versus more cuts elsewhere, notably in the massive corrections budget. “I’m not talking about the prison-guards contract,” she said, “which everybody always focuses on, but the underlying system. The prisons are bloated because we‘ve made everything a crime in this state. The big expense is too many nonviolent offenders and octogenarians on dialysis in prison at $35K a year.”

On the revenue side, Kuehl and other Senate Dems want to raise the vehicle-license fee and perhaps some other fees, including fees on polluters, which they say they can do with only a majority vote.

For the longer-term budget, Kuehl, like others, joins with Davis on higher taxes for the wealthy but parts company with him in supporting “careful” increases for business (Davis’ current plan would raise no new corporate tax revenue) and wants to tax many services as well as goods.

Much will be happening in the next few weeks in this circus of many rings.