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Budget Impasse Enters Uncharted Territory

By Vernon Billy- September 5, 2008

With the end of the first week in September, the state’s budget stalemate surpassed all previous budget impasses, and entered uncharted waters.

Entering this new territory brought additional partisan attacks, the release of a Republican budget proposal, and more public pronouncements by the Governor calling on the legislature to pass a budget.

Responding to repeated criticisms from their Democratic colleagues and the press, Republican leaders finally introduced a budget proposal that outlines their solutions to solving the state’s budget crisis.

Briefly, the Republican proposal calls for $1.6 billion in more cuts than the Governor’s August Compromise budget (which contained $2 billion cuts above the legislature’s Budget Conference Committee).

The Republican proposal also borrows from future Lottery funds to fund education, shifts approximately $340 million in Redevelopment agencies to schools, makes numerous reductions to health and welfare related programs, and rejects the Governor’s and legislature’s one cent sale tax increase proposals.

Democratic leaders and their colleagues quickly blasted the Republican proposal, and reiterated their position that the state can not get out of its fiscal mess without raising revenue.

At a budget hearing to debate the Republican proposal, Democrats took the opportunity to emphasize that the Republican budget cuts do not fully eliminate the deficit. The Democrats also maintain that the Republican plan requires that the $4 billion of the remaining debt be addressed by using more accounting gimmicks and borrowing.

At the hearing, scores of advocates testified in opposition to the proposal and urged the legislature to approve the Budget Conference Committee budget proposal.

While Democrats were blasting the Republican proposal, the Governor focused his attention on legislators by holding press events around the state, and sending legislative leaders letters chastising them for not reaching a compromise.

So with all this verbal sparring -- which has thus far led to no action -- talk in Sacramento has been wide and varying as to where all this will end up.

While there are still some legislative options available, including using the 41-vote budget “Trailer Bills” to achieve some of the Democrats’ budget objectives, nothing is certain.

Below are some of the “possible” outcomes in this protracted battle.

  • The legislature approves the conference committee report and reaches an agreement on other non-fiscal issues of importance to Republicans
  • Democrats acquiesce to Republicans and agree to make additional cuts to education, health and welfare programs, forgo a tax increase and paper over the fiscal mess until next year.
  • Democrats acquiesce to Republicans on the budget this year, and move to change the two-thirds vote requirement for passage of a budget next year, which would eliminate the need to have Republican support moving forward.
  • Both parties acknowledge that they can not reach agreement and seek to mimic Congress, and pass legislation that authorizes a so-called “continuous appropriation” of funding at the 2007-08 levels.  This would be the first time such a proposal is enacted.

         While no one knows exactly how (or when) the budget is going to be resolved, one thing is for certain – the state’s capacity to continue to pay its bills and avoid an unprecedented level of borrowing is quickly coming to a close.  If the legislature misses this window, some political observers believe the next statewide election may see major efforts by some to expand Democratic seats or seek constitutional changes to the legislative institution and its processes.

Editor's Note: Vernon Billy  is a managing partner of Education Media Group, LLC and is president of Governmental Solutions Group, LLC, a policy consulting and legislative advocacy firm. .