Members of the CA Legislature are moving rapidly toward an important deadline -- believed to fall due around March 10....a vote on whether or not to allow a proposed June referendum which would ask the state's voters to approve the proposed multi-year extension of a series of temporary tax hikes. Even if the referendum were to happen, the State Constitution states that a two-thirds majority of the voters must approve it because it supposedly involves proposed tax hikes. (We'll leave it to lawyers to determine whether extending temporary increases is a "tax hike" or merely a continuation of taxes at their current level.)
So far, the state's Republicans in both the Assembly and the House have rounded up over two-thirds of their members who say they will bar the voters from weighing in an an issue which will play a huge role in California's future. Why? Because they insist it doesn't meet their demands that it also offer a set of tax cuts equal to the revenue that would be generated by continuing the temporary hikes.
In reality, the referendum, if held, would give voters the right to choose from those options as I will explain below the jump. And to put things in terms of impacts on people and programs, I will spell out what would happen to just one campus of the state's higher education system if the referendum passes......or if it is blocked or fails to win the needed votes.
First, some background:
Lots of states are in financial trouble, but California (not surprisingly given its size) has been a leader in this field. Newly elected Governor Jerry Brown (now beginning a second stint as California's chief executive) wasted little time in telling the Legislature and the voters that resolving a projected $24 billion-plus deficit over the next 18 months was going to take some Draconian budget measures under the best of circumstances. His proposal:
About $12 billion in budget cuts for state programs as spelled out in the Sacramento Bee Among them:
• Higher education: Make deep cuts to both University of California and California State University systems, in ways targeted to minimize fee hikes and enrollment reductions. (NOTE: See below for my explanation of what this would mean at just one of the 23 campuses in the CSU system....Both with the Governor's plan or a plan without the proposed revenues from extending expiring taxes.)
• Higher education: Make deep cuts to both UC and CSU systems, in ways targeted to minimize fee hikes and enrollment reductions.
• State employees: Reduce spending in the six bargaining units that have not reached contract agreements, with savings similar to the 8 percent to 10 percent to which other units agreed.
• State organization: Consolidate some state departments and agencies.
• Libraries: Cut state funding for local libraries.
• Medi-Cal: Require patients to provide co-payments for services, limit doctor visits and reduce rates paid to health providers.
• Healthy Families: Increase participant premiums and co-pays, eliminate vision care.
• Welfare: Cut grants, impose stricter time limits on recipients getting grants, eliminate child care for 11- and 12-year-olds.
• SSI-SSP: Cut grants to the federal minimum for low-income elderly, blind and disabled individuals in the program.
• In-home care: Reduce the number of hours In-Home Supportive Services workers could care for elderly and disabled residents, cut domestic services like cleaning and laundry in cases in which caregivers live in the same home as recipients, typically family members.
• Developmental services: Make deep cuts to the system of 21 regional centers that oversee care for the developmentally disabled.
• Foster care: Eliminate transitional housing aid for 18- and 19-year-olds.
• Cal Fire: Reduce staffing on wildfires.
• Courts: Deep unallocated reduction to trial courts.
• Fairs: Cut all state funding for county fairs.
• AIDS: Require higher co-payments for AIDS drugs.
Brown plans to close the remaining half of the gap with taxes by seeking continuation of a wide range of soon-to expire temporary tax hikes. However, adhering to a campaign pledge to voters, he is proposing a June referendum, asking them to decide whether they agree on the tax continuations as part of his plan to close the huge gap. To get a referendum on the ballot by June and ahead of the next fiscal year's budget deadline, the Legislature needs to approve the referendum. That needs to happen by around March 10th to get the logistics in place for the June vote.
But voters may not even get the chance to vote. Why?
Because like the referendum question itself, another two-thirds vote of approval is needed by the Legislature itself to authorize the referendum. And that will require at least two GOP members of the Assembly and another two GOP members of the Senate to break with their colleagues and vote yes to approve the vote.
Right now, 21 of the 27 GOP Assembly members and eight of the 15 GOP state Senators have announced they are pledged not only to NEVER raising taxes, but also to blocking any efforts to place a tax-hike measure before voters. They say they oppose putting any tax increases on the ballot unless voters are presented with an equal-sized tax cut.
The Governor has labeled that idea a flim-flam and has gone on the offensive, chiding the GOP for refusing allow the voters to voice their opinion on this critical issue.
Brown also brushed aside an idea, floated by some conservatives, to place a second measure on the ballot that would allow voters to cut taxes as much as Brown’s measure would raise them.
Brown called the proposal “flim-flam.” Such a tax cut would only widen the state’s already enormous $25.4-billion deficit, he argued.
"Don't say, 'I'm going to solve this problem by creating a bunch of new problems that we will have even more trouble handling,' " Brown said.
Brown said that should voters reject the tax extensions, he would have to cut deeply into nearly every area of government -- “which is schools, which is police, which is the elderly, which is wherever we can get it.”
And the cutbacks to schools would shrink the academic year, he suggested: "We’re not talking days, we’re talking weeks."
And a little simple math quickly demonstrates that the GOP stance is flawed and potentially disastrous for the state:
In simple terms, Governor Brown proposes to close the state budget gap roughly equally through a combination of budget cuts ($11-12 billion) and increasing revenues by continuing a series of taxes which would otherwise expire, giving the state an additional $11-12 billion annually for a few more years until the state can get its house in order.
Let's suppose GOP votes can be found which allow the referendum. Then, there are two possible outcomes.....(A)the measure passes and the Brown plan moves forward or, (B) tax extensions can't get the required two-thirds majority.
If that happens of course, Brown will still have a roughly $11-12 billion dollar gap to close and is signaling that he will have to do so heavily, if not exclusively with cuts.
But let's suppose the GOP gets what it wants and the referendum gives voters a choice that includes (A) continuing the temporary tax hikes to give the Governor the money he needs, along with cuts to close the gap and (B) another $12 billion or so of still more tax cuts.
Now you have several possible outcomes:
1- The voters approve Brown's plan. They allow continuation of the temporary hikes, but don't go for the tax cuts. Brown's proposal moves forward.
2- They approve the temporary hikes AND they approve the tax cuts. The result is a wash, and Brown is still $12 billion short and has to close the gap almost totally with additional budget cuts.
3- They do NOT approve the continuation of the temporary taxes and they DO approve the additional $12 billion in cuts. Now Brown finds himself $24 billion short because he doesn't have the additional income from continuation and the tax cuts reduce the revenue he has to close the gap by another $12 billion.
These of course are broad concepts, but let's bring it down to eye level with a look at what would happen at one campus of the 23-member California State University system. I offer this perspective as the recently retired head of Public Relations for the California Maritime Academy....the smallest of the CSU's members.
In my five years I have watched student tuition system-wide go up 45% over a three year period. Faculty and staff there and throughout the CSU endured a year of two-day-a-month unpaid furloughs amounting to a salary cut of about 10% during the 2009-10 fiscal year. Vacancies have increasingly gone unfilled and the resulting job responsibilities parceled out to remaining faculty and staff already handling workloads well beyond their core job descriptions.
Governor Brown's plan, (only valid if the referendum is allowed by the GOP and passed by the voters) would result in an 18% one-year cut in Cal Maritime's budget. Education is labor intensive. As with most of the CSU members, 85% of Cal Maritime's expenditures are salary and benefit related, so you can imagine the impact of an 18% whack in one year.
(Cuts in previous years had already left the CSU behind where its funding was several years ago. In fact, if the Governor's proposed cuts as spelled out in HIS budget are approved by the voters, the CSU's budget for the next fiscal year will be the same as it was over a decade ago when it was educating 70,000 fewer students.)
So that's the good news, and possible only IF the Brown plan manages to survive GOP opposition and gain a two-thirds referendum vote.
So what is the bad news? (A) The GOP acts as a bloc and refuses to allow the referendum or (B) the vote is held, but doesn't win a two-thirds majority. In that case, Brown is suddenly another $12 billion or so short and has to close the gap by doubling his proposed spending cuts across the board.
For Cal Maritime, that 18% cut under the "good news" scenario would likely double....we're talking about potential cuts of over one-third of the school's entire budget in one year and that would also be happening across the system. Worse yet, if the worst case scenario of a referendum that denied continuation and approved further tax cuts, that figure could approach a cut of nearly half of higher education's budget in a single year.
The CSU's Board of Trustees does have some degree of autonomy and with it the ability to try and close the gap with its own actions - primarily cuts in programs and/or increases in tuition. But closing a one-third cut in the system budget in one year could easily mean tuition increases of 50% or more and even that might not close the gap. The solution then becomes one of cutting programs, reducing the number of students admitted into the system and limiting opportunity.
The CSU system has been a national leader in opening doors for students, particularly under-served inner city and minority communities. CSU administrators regularly visit community churches and organizations to promote the fact that qualified students can realistically consider higher education as an option for their futures. But with possible cuts of 18-35% in one year, those opportunities will clearly be slashed if not eliminated. (Note too that at the Federal level, the GOP's demand for over $60 billion in budget cuts includes some $6 billion in Federal Pell scholarship grants for higher education.)
Worse yet, California is already "eating its own seed corn." Studies show that each dollar invested in educating a student generates well over $4 in return in terms of individuals who begin contributing to their communities and the economic viability of the state - especially as taxpayers. And their skills in new technologies help business grow and contribute as well.
Conversely, slashing educational opportunities, and continuing major cuts in faculty and staff will further add to the state's economic woes. Those who continue to work within the system will very likely find themselves asked to consider further salary reductions, and requirements that they contribute more to health and pension programs.
How deep are we willing to cut our state's educational programs, our services to the frail, the disadvantaged and the elderly, our police, fire and health systems? Those are crucial questions for the citizens of California.
Right now it appears clear that the state Republican party doesn't feel the voters have any need to have a voice in those decisions.
Their insistence that any referendum also include a set of tax cuts equal to the proposed revenue that would be generated by extending temporary tax hikes doesn't make any sense. If the referendum is allowed but the voters don't approve the extension, the GOP will, in effect, get the additional tax cuts they want, and as Governor Brown has noted, he will then have to double the level of spending cuts he is currently proposing. So the referendum, in effect, includes what the GOP wants.
But they are frightened of the voters....frightened that the electorate might just be willing to pay more to help get the state on a more stable fiscal platform and sustain critical core programs and resources. And that is the last thing they want to happen.