Budget Update - Back to the Drawing Board

With their paychecks on the line, the California Legislature passed a rare on-time state budget last Wednesday.  This is the first budget deadline since voters approved Propositions 25 and 26, allowing non-tax budgets to pass by simple-majority votes as long as they didn’t contain higher taxes and the constitutional deadline of June 15 was met.  If that deadline was passed without a budget, lawmakers would be docked pay for each day the budget was late.

The spending plan, being called “Plan B,” covered a $9.6 billion deficit through delayed payments, borrowings, fees and other maneuvers. The package includes deeper cuts to higher education and the courts, the elimination of redevelopment agencies with plans to create an alternative funding system, a quarter-cent increase to the sales tax and a $12-per-vehicle increase to the vehicle registration fee.  It also relies on higher revenue projections and maneuvers like bringing back an abandoned proposal to sell state buildings and tapping into funds meant for health and educational programs for young children.  In addition, the package included a proposal that imposes a $150 annual levy on those who own homes in wildland areas defended by CalFire.

The Governor had stated that he wanted a clear, straightforward budget.  He had sought tax extensions to balance the budget, but it was apparent he wasn’t going to get the Republican votes to do so, and so Democrats were forced to pass a cuts only budget by majority vote.  Democratic leaders in both houses stated this was the last resort, but hope to be able to pass “Plan A” in the coming weeks.  Governor Brown had 12 days to sign or veto the budget package.

In an unexpected move, Governor Brown vetoed the two main budget bills Thursday morning.  Brown had previously warned that he would not sign a budget containing such accounting gimmicks.  In his press release, he pointed the finger at Republicans for failing to put the tax extensions before voters.  However, it appears that there may be some resistance to putting the extensions before voters within the Democratic party.  Now it is, as they say, back to the drawing board.

As of this writing, it is still unclear whether legislators will receive their paychecks in the wake of the veto.  Lawmakers said Wednesday they believe the budget they passed meets that test, but Controller John Chiang, California's chief financial officer, will decide whether to issue their paychecks.

Brown continues to negotiate with Republican lawmakers in an effort to stick to his promise to Californians.

Stay tuned….