CDCAN Report #089-2011  – APRIL 13, 2011 – EARLY WEDNESDAY AM

State Budget Crisis

ASSEMBLY DEMOCRATS WILL HOLD BUDGET SUMMITS ACROSS STATE FOCUSING ON NEED FOR “BALANCED APPROACH” TO CLOSING BUDGET DEFICIT BY JUNE 15 DEADLINE

Assembly Speaker Perez Urges Assembly Republicans To Put Forward Proposals Or Support Governor’s Plan on Revenues To Avoid “All Cuts” Budget – Assembly Republicans Refute Claim That More Revenues Are Needed To Balance Budget – State Senate Democrats Will Continue Informational Hearings by Full Senate Budget Committee on Possible “All Cuts” Budget If Governor’s Revenue Proposals Are Not Included In Final Budget Plan

SACRAMENTO, CALIF  (CDCAN)  [Last Updated 04/13/2011  01:36 AM] -  Assembly Speaker John Perez (Democrat – Los Angeles, 46^th Assembly District) announced on Tuesday that Assembly Democrats would hold a series of summits across the State with “frontline educators, business leaders and public safety responders” to focus on a “balanced budget solution” by June 15^th that includes necessary revenues as proposed by the Governor. 

Perez  made the announcement in a press conference at the State Capitol on Tuesday (April 12), joined by Assemblymember Bob Blumenfield (Democrat – Van Nuys, 40^th Assembly District).  No actual dates or locations for the summits have been released yet. 

June 15^th Date Is State Constitutional Deadline

• The June 15^th date is the State Constitutional deadline that requires the Legislature to actually pass a State Budget and send it to the Governor .The June 15^th deadline was meant to give a governor enough time to review the budget plan passed by the Legislature before the start of the new State budget year which begins on July 1^st.
•  The June 15^th deadline has rarely been met by the Legislature except for a handful of times in the last 30 years. 
• That could change this year however with the implementation of the voter approved Proposition 25 that includes a majority vote budget (except when calling for increasing revenues) and penalties on legislators if they fail to approve a budget and present it to the Governor by June 15^th. 
• Those penalties include loss of their pay and reimbursements for living expenses and travel for each day a budget is not passed and sent to the governor.  They cannot collect that loss pay even after a budget is passed or signed into law. 
• Another crucial date is May 13^th (Friday), the date Governor Brown is expected to release his budget revisions – referred to as the “May Revise” that could contain more proposed cuts – and also more details of cuts (including those to developmental services) that were approved last month without specifics.  Budget hearings to consider and approve the Governor’s revisions and proposals will be held likely in mid to late May and early June.  [CDCAN will issue Action Alerts urging people to attend and testify at these hearings]

Perez Says “Balanced Approach Is Needed”

In moving forward with their planned budget summits, Assembly Speaker Perez said that the goal is to make “…our case that a balanced approach is needed to protect schools and keep cops and firefighters on the streets.”

Assembly Democrats, State Senate Democrats, Governor and Legislative Republicans All Pushing Separate Public Outreach Effort on Budget Crisis

• In another sign of the growing divide between Assembly Democrats and Republicans – and a growing split on strategy to solve the budget crisis between Assembly Democrats and State Senate Democrats, Assembly Speaker Perez repeated at the press conference that an all-cuts budget is not a “realistic solution because there is no support for that approach in the Assembly”.
• The Assembly Democrats’ intention to hold summits follows separate and differing efforts by Governor Brown, State Senate Democrats and Assembly Republicans with the State Republican Party to reach out and try to focus public attention on the lingering and unresolved State budget crisis. 
• The Governor has taken his budget message last week on the road visiting Republican legislative districts holding community forums, warning of the possibility of an “all cuts” budget if his revenue proposals are not placed on a special election ballot and approved by voters and the impact on education and public safety.  He visited Riverside last week with more visits planned elsewhere.  He mentioned in one of the meetings that he was thinking of the possibility of proposing as part of his May budget revisions, the idea of the Legislature approving the 5 year extension of the 2009 temporary tax increases that would go into effect July 1, 2011. That would be followed by a special election (probably in the fall) allowing voters to approve or rescind that action. 
• It is not clear how the Governor would get the necessary Republican votes to approve this plan – though the Proposition 25 penalties (loss of salary and expenses each day if budget is not passed by June 15^th and presented to the Governor) could provide an incentive.  
• Legislative Republicans and officials from the State Republican Party meanwhile announced last week their own separate effort to hold their own forums in different parts of the State through June countering the focus and message of the Governor and legislative Democrats.
• State Senate Democrats meanwhile, have planned a series of informational hearings – two at the State Capitol and possibly more in different parts of the State by the full Senate Budget and Fiscal Review Committee, focusing on the possibility of an “all cuts” budget if the Governor’s revenue proposals are not included in the final 2011-2012 State budget plan. 

Assembly Speaker Urges Legislative Republicans To Put Forward Their Own “Comprehensive Plan” or Support Governor’s Revenue Proposals

The Assembly Speaker, in a letter to Assembly Republican Leader Connie Conway (Republican – Tulare, 34^th Assembly District) and also at the press conference, urged legislative Republicans to put forward their own proposals or work with Democrats to approve new revenues.

“It’s clear that Republican legislators have acted irresponsibly throughout the process, and they need to live up to their responsibility by either producing a comprehensive plan of their own by the end of this month, or working with Democrats to approve new revenues,” Pérez said.

“This budget won’t balance itself,” Blumenfield said. “More reckless partisanship will only harm our people and economy. I’ve asked my Republican colleagues for months to bring ideas forward that balance the budget and bring them from no to yes. But no one has responded with the courage to lead.”

Assembly Republican Leader Conway however disagreed, saying in a press statement released after the press conference by the two Assembly Democratic leaders that “Throughout the budget process, Assembly Republicans have put forward numerous solutions to help California address both our short and long-term budget problems.  Despite the fact that every budget solution offered by Republicans has been summarily dismissed by Democrats to date, we will continue to offer more budget solutions in the coming months. “

She added that “If Democrats are looking for solutions from Republicans, they can start by passing the additional $1.7 billion in cuts that Governor Brown proposed, but Democrats themselves rejected in their own budget plan passed last month.”

State Senate Democrats Focusing On Possibility of “All Cuts” Budget If Governor’s Revenue Proposals Are Not Part of Final Budget Plan

• While Democrats in both houses of the California Legislature agree on the need to approve the Governor’s revenue proposals to close the remaining budget gap, they differ on strategy to get there. 
• State Senate Democrats, led by Senate President Pro Tem Darrell Steinberg (Democrat – Sacramento) held last week on April 7^th, an informational hearing by the full Senate Budget and Fiscal Review Committee that looked at the possibility of making over $15 billion in new cuts in State general fund spending on top of reductions made in March if the Governor and Legislature are unable to find a way to bridge the remaining budget gap with a five year extension of the 2009 temporary tax increases that are scheduled to expire June 30, 2011. 
• A follow-up informational hearing is scheduled for April 14^th, Thursday, 09:30 AM or upon adjournment of the State Senate floor session, at the State Capitol in Room 4203 by the full Senate Budget and Fiscal Review Committee that will focus on what type of cuts would be made to K-12 education and what new cuts would be needed for higher education if the Governor’s revenue proposals were not part of the final 2011-2012 State Budget plan. 

State Budget Crisis Continues Unresolved Due to Stalemate on Revenues And Differences On How To Close Budget Hole

• On March 16^th and 17^th the Assembly and State Senate approved and the Governor signed into law on March 24^th, 13 budget related bills (called “ budget trailer bills”) that authorized over $11 billion in budget solutions – most of that cuts in State general fund spending.  Most of the cuts (about $6 billion) came from health and human services.
• The Legislature actually approved just over $14 billion in budget solutions – the bulk of that in spending cuts to the State general fund – but about $3 billion of those solutions are not in the 13 budget trailer bills – but only in the main budget bill.
• That $3 billion in solutions are not yet enacted because they are contained only in the main budget bill (SB 69) which the Legislature approved on a strict party-line vote, has still not been sent to the Governor because budget related legislation dealing with revenues and elimination of redevelopment agencies have not yet been approved.  The Legislature can indefinitely hold a bill it passed – but once it a bill is sent to the Governor, a 12 day time deadline kicks in (except at the very end of the legislative session at the end of August or mid-September, when the Governor is given 30 days). 
• A State budget stalemate exists because the Governor and legislative Democrats cannot get support from legislative Republicans on the Governor’s $12 billion in revenue proposals, including over $11 billion in extending for five years 2009 temporary tax increases that voters would need to approve.
• The Legislature did approve the Governor’s revenue proposal regarding tax enforcement and amnesty ($360 million in revenues during the 2011-2012 State budget year) which only required a majority vote. 
• The Legislature has not yet approved two revenue proposals by the Governor (not tied to a special election ballot) dealing with making the current single-sales factor corporate tax multi-state apportionment mandatory instead of elective ($1.4 billion in revenues for the 2011-2012 State budget year) and elimination of the enterprise zone tax credits ($924 million in revenues for the 2011-2012 State budget year). 
• In addition the Legislature has not yet approved the Governor’s proposal to eliminate redevelopment agencies (for a spending reduction of $1.7 billion in State general funds), falling one vote short in the Assembly on March 16^th.  The State Senate has not yet taken up that issue. 
• The temporary tax increases were passed as part of the 2009-2010 State Budget in February 2009 with legislative Republican support and are set to expire June 30, 2011, unless extended by 2/3rds  vote of the Legislature or placed on a special election ballot by the Legislature (requiring 2/3rds vote) or placed on a special election ballot by petition gathering sufficient signatures (over 500,000 for an initiative and over 800,000 for a constitutional amendment).

Impact of Unresolved State Budget Crisis

• With the State budget crisis unresolved, the threat of more massive cuts in State general fund spending looms even larger now that could have sweeping permanent impact to health and human services, education and other budget areas impacting children and adults with disabilities, mental health needs, seniors, people with traumatic brain and other injuries, people with MS, Alzheimer’s and other disorders and their families, community organizations, facilities, and individual support workers across California. 
• Confusion regarding the on-going State budget crisis is likely to grow over the coming weeks because some of the Governor’s proposed cuts were passed by the Legislature and signed into law – though not the main budget bill.
• There are conflicting proposals and information on the impact of the lack of or the inclusion of the Governor’s revenue proposals in the budget plan – and whether that means more reductions to health and human services, higher education and reductions to K-12 education. 
• In addition, much confusion remains regarding the impact of having or not having a special election and the impact of any delay of having a special election. 

TEXT OF LETTER FROM ASSEMBLY SPEAKER TO ASSEMBLY REPUBLICAN LEADER ON STATE BUDGET CRISIS

This is the complete text of the letter sent to Assembly Republican Leader Connie Conway by Assembly Speaker Perez  regarding the state of budget negotiations.

“Dear Leader Conway,

“More than 90 days have passed since the Governor released his budget proposals to close the $26.6 billion budget shortfall. The Legislature has approved more than $14 billion in solutions, which were approved by Democrats without much support of our Republican colleagues. This is very disappointing news for the people of California, who expect all of their leaders to work together and solve this crisis.

“I appreciate that we have many disagreements on specific policy areas. However, I find it unacceptable that in place of concrete proposals, Assembly Republicans have offered partisan sound bites that do not move us forward.

“California is better off if Democrats and Republicans work together during these difficult times, and yet Assembly Republicans have balked at the massive spending cuts that Republicans have rhetorically demanded. In fact, even though Republicans make up 35% of the Assembly membership, their votes amounted to only seven percent of the votes cast for the $12.5 billion in recent spending cuts.

“In recent months, we have finally seen important signs of California’s economic recovery – over 95,000 jobs were created in February, and so far revenues are tracking higher than projections.

The best way to maintain our economic recovery is for Democrats and Republicans to work together to resolve our remaining budget problem. I am certain that by working together, we can maintain our momentum of our economic recovery, but can also avoid devastating additional cuts to education and local public safety programs.

“Therefore, I request that the Assembly Republicans end their silence on the budget and produce their comprehensive budget solution by May 1, 2011. I have directed the Assembly Budget Chair to lend any assistance you may require in drafting a comprehensive plan so that the people of our state can compare the details of both your plan, as well as the comprehensive and balanced budget supported by the Governor and Legislative Democrats.

“The people of our state need to be able to see an actual, comprehensive plan, rather than simple bullet points in a press release. While this will certainly be difficult, I believe you have sufficient time to draft your plan by the end of this month, so that we will have sufficient time for Democrats and Republicans to work out the differences through a public and transparent process and resolve our budget crisis by the June 15 Constitutional Deadline.

“I wish to be clear: in absence of an actual, comprehensive plan that objectively solves our shortfall for the Assembly to consider, your caucus has an obligation to work with Assembly Democrats on approving temporary revenue extensions necessary to protect schools and public safety from billions of dollars of cuts that will jeopardize our economic recovery and threaten the safety of Californians.

“Thank you for your attention to this matter, and I look forward to working with you resolve our budget deficit in a way that protects jobs and helps our economy recover.

“Sincerely,
[Signed]
John A. Pérez

Speaker of the Assembly”

PRESS STATEMENT FROM ASSEMBLY REPUBLICAN LEADER CONWAY IN RESPONSE TO ASSEMBLY SPEAKER’S LETTER AND PRESS CONFERENCE

The following was a statement released April 12^th by Assembly Republican Leader Conway immediately following Assembly Speaker Perez’s press conference (and also letter to Conway):

“Throughout the budget process, Assembly Republicans have put forward numerous solutions to help California address both our short and long-term budget problems.  Despite the fact that every budget solution offered by Republicans has been summarily dismissed by Democrats to date, we will continue to offer more budget solutions in the coming months.  If Democrats are looking for solutions from Republicans, they can start by passing the additional $1.7 billion in cuts that Governor Brown proposed, but Democrats themselves rejected in their own budget plan passed last month.

“I live in the real world outside of Sacramento.  The working families I talk to when I go to the grocery store, attend church or speak at community events are struggling to make ends meet.  Some are having a tough time just finding a job.  They don’t want their taxes raised, period. 

“We agree with Speaker Pérez that Democrats and Republicans alike must respect the will of the voters.  The people have spoken on the issue of taxes.  In May 2009, voters overwhelmingly rejected the very tax increases the liberal majority is pushing today.  Republicans will continue to stand up as the last line of defense for California taxpayers and will not back down in the face of Sacramento hyperbole.

“Republicans welcome Assembly Democrats into the districts that we proudly represent.  When they visit, we hope they are prepared to answer the tough questions from our hard-working constituents, who don’t want to pay a $55 billion tax increase to fund a 31 percent increase in state spending over 3 years, and don’t want to see an irresponsible realignment plan adopted that will result in thousands of dangerous criminals being set free in our communities.”