Budget Update

The California State Legislature put a small dent in the budget deficit this past week.  Both houses approved a little over $14 billion in spending reductions, fund shifts and loans this past Thursday.

The Senate and Assembly both approved the budget bill on party-line majority votes -- 25-15 in the Senate and 52-26 in the Assembly -- invoking Proposition 25 for the first time since voters approved it last fall.  Prop 25 ended the previous requirement that budget bills receive a two-thirds majority to pass.

Although some progress was made, there is still a lot of heavy lifting to be done.  The Legislature did not take up any measures relating to redevelopment, enterprise zones or tax extensions.  Governor Brown has proposed that, in addition to spending reductions, the $26 billion deficit be closed by extending the 2009 tax increases for purchases, income and vehicles by another five years.  A recent Field Poll showed voters support extending taxes.

With the state’s Republican party convention this weekend, Republicans appeared determined to avoid any vote that could stoke the emotions of the party's delegates.  Republicans derided the budget votes, calling them a "drill" to pressure Republicans to put tax increases on the ballot.

Five Senate Republicans, dubbed the GOP 5, have been continuing talks with Governor Brown, despite reports that negotiations are at an impasse.  One of the so-called GOP 5, Senator Sam Blakeslee, R-San Luis Obispo suggested that if Democrats are not ready to accept significant rollbacks in pension benefits, regulations and spending limits, they should go ahead with a "one-party solution" and approve the tax extensions on a majority vote, which the Legislative Counsel has said can be done because the taxes are under an existing statute.

The Legislature will reconvene next week and take up these controversial issues.  Reportedly, Governor Brown’s number one priority is the redevelopment aspect to eliminate the state's 425 redevelopment agencies, a budget-balancing move that is needed because the agencies operate on local property tax dollars.  He believes the redevelopment vote will set the stage for the rest of the budget votes, including the approval of putting the tax extensions on the ballot.

Stay tuned…