Governor Jerry Brown gave both Democratic and Republican lawmakers a whole lot to think about today with a budget veto yesterday.
Last years Proposition 25 reduced the supermajority requirement to pass a budget to a simple majority theoretically making passing budgets in Sacramento easier. The carrot? A simple majority. The stick? No paychecks, no per-diem and a permanent loss of all pay and benefits every day past June 15th that a budget isn’t passed.
Governor Brown didn’t just veto a budget. He in effect told lawmakers they weren’t getting paid until they passed a balanced budget with his veto.
While last years’ proposition 25 made passing budgets easier, last years’ proposition 26 made passing a budget that included any increase in monies labeled other than taxes a little more difficult, requiring a supermajority. Since prop 13 passed, our state has come up with renaming taxes as fees and assessments etc to get around proposition 13 and avoid raising taxes. New fees, etc now require a supermajority, just like new taxes.
Given that California’s judiciary is largely a Republican animal with most on the bench identifying as being Republicans, the thought was that this devastating court budget cut is, in part, a ploy for the Judicial Branch’s Republican majority to encourage Republican legislators back to the table for tax extensions.
Yesterday’s budget is not indicative of the cuts coming down the pipeline without those tax extensions. Because most of yesterdays budget amounted to 12 billion dollars of wishful thinking and kicking the can down the road, to balance the budget without the tax extensions would result in far more draconian cuts in the judicial branch budget than those rejected yesterday. This gives Judicial Branch leadership a lot to chew on. Will they reach out to Republican legislators and espouse the importance of temporary tax extensions or will they try to make their case with Democratic legislators in Sacramento about not making any further cuts?
About last year, this time, Arnold struck a deal with Ronald that gave the Judicial Branch an extra hundred million. The favor in return? Ronnie would hear the furlough cases on an expedited schedule.
In all of this Governor Jerry Brown sits in the proverbial catbird’s seat. He’s none too worried about getting recalled or re-elected in 3 1/2 years. With his long and distinguished service career to the People of the State of California, he really has nothing to lose by holding everyone’s feet to the fire for a no-gimmicks balanced budget that relies as much on increased fees and taxes as it does budget cuts.
Another Arnold, upset about rising vehicle registration fees that is willing to kick the budgetary can down the road to his grandchildren is not waiting in the wings to mount a recall effort. Even if they were, a smart electorate already witnessed eight years of gimmicks and one time fixes and they’re not ready for more.
The opportunity for leadership returns again to the office of the Chief Justice. Will she go to the Democrats with hat-in-hand asking them to fully fund the judicial branch? Will she tout the importance of kicking the budgetary can down the road to her grandchildren or will she reach out to Republican lawmakers and tout the importance of balancing this states budget with a combination of tax extensions and budget cuts? Does she wish to be perceived as part of the solution or part of the problem?
A whole lot of judicial branch budget both now and in the future relies on what side she approaches. Unfortunately, doing the right thing hasn’t yet crossed her radar screen.
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PROPOSITION 25
“I remain resolute in my commitment to enforcing the public’s will to permanently withhold legislative pay for every day a balanced budget is not passed after yesterday’s deadline. Article 4, Section 12(g) of the Constitution clearly states that a budget is balanced only if authorized expenditures do not exceed projected revenues, ‘as set forth in the budget bill passed by the Legislature.’
“I will move quickly to complete our analysis of whether the budget bills passed Wednesday meet the constitutional definition, or fall short, which would require my office to forfeit their pay under Proposition 25. We are awaiting the final budget bill language before we begin our examination. In addition, we have asked the Department of Finance, which tracks and tallies the Legislature’s budget activities, for data to inform our decision.”
ADDITIONAL BACKGROUND INFORMATION:
• Proposition 25 only references the Legislature’s passage of a budget; it is not affected by the Governor’s signature or veto.
• Nothing in the Constitution or state law gives the State Controller the authority to judge the honesty, legitimacy or viability of a budget. The only authority this office has over the budget is through Proposition 25 and 58, to determine whether the budget bills enacted show that expected revenues will equal or exceed planned expenditures. As evidence of that, Senator Sam Blakeslee has announced plans to introduce a constitutional amendment giving the Controller broader, independent authority to evaluate budget solutions for “smoke and mirrors.”
Produced by JCW in association with Yen Interactive Media
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New from Courthouse News: San Francisco to close 1/2 of it’s courtrooms and lay off 40% of its workforce (This assumes trial courts and not the AOC being expected to bare the brunt of cuts. )
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YenWire reports the following:
Chiang Finds Budget Did Not Balance On Paper
SACRAMENTO – State Controller John Chiang today announced that his analysis of the State budget vetoed last week shows the spending plan was incomplete and unbalanced. His analysis sought to determine whether the budget met the requirements of Proposition 25 and Proposition 58, which forfeit Legislative pay if a balanced budget is not passed by June 15.
“My office’s careful review of the recently-passed budget found components that were miscalculated, miscounted or unfinished,” said Chiang. “The numbers simply did not add up, and the Legislature will forfeit their pay until a balanced budget is sent to the Governor.”
Proposition 25, titled the “On-Time Budget Act of 2010,” was approved by voters November 2, 2010. The initiative lowered the vote requirement for passing a budget from two-thirds to a simple majority without lowering the two-thirds vote required for tax increases. It also forfeits Legislators’ pay and living expenses incurred from June 16 until “the day that the budget bill is presented to the Governor.”
Nothing in the Constitution or state law gives the State Controller the authority to judge the honesty, legitimacy or viability of a budget. The Controller can only determine whether the expected revenues will equal or exceed planned expenditures in the budget, as required by Article 4, Section 12(g) of the Constitution: “. . .the Legislature may not send to the Governor for consideration, nor may the Governor sign into law, a budget bill that would appropriate from the General Fund, for that fiscal year, a total amount that. . .exceeds General Fund revenues for that fiscal year estimated as of the date of the budget bill’s passage. That estimate of General Fund revenues shall be set forth in the budget bill passed by the Legislature.”
“While the vetoed budget contains solutions of questionable achievability and some to which I am personally opposed, current law provides no authority for my office to second-guess them in my enforcement of Proposition 25,”said Chiang. “My job is not to substitute my policy judgment for that of the Legislature and the Governor, rather it is to be the honest-broker of the numbers.”
Using this standard, the Controller’s analysis found that the recently-vetoed budget committed the State to $89.75 billion in spending, but only provided $87.9 billion in revenues, leaving an imbalance of $1.85 billion.
The largest problem involved the guaranteed level of education funding under Proposition 98. The June 15 budget underfunded education by more than $1.3 billion. Underfunding is not possible without suspending Proposition 98, which would require a supermajority (2/3) vote of the Legislature.
The budget also counted on $320 million in hospital fees, $103 million in taxes on managed-care plans, and $300 million in vehicle registration charges. However, the Legislature never passed the bills necessary to collect or spend those funds as part of the State budget.
Judicial Council Watcher 
Michael Paul
June 17, 2011
The easiest way out of this mess is to change the minds of just four republican legislators. That is all it takes to restore that 150 million dollar cut of yesterday. Without those four republican legislators crossing over to vote for temporary tax extensions, the 150 million is only the start. The judicial branch will be challenged every year in the same manner without appropriate revenues.
SF Whistle
June 17, 2011
It strikes me that given ALL the things we have learned about how the branch spends money that not only should it be “challenged” each year, there should be a top-to-bottom overhaul.
It is clear that if the branch is given whatever funding is expcted that billions are pissed away on ridiculous CCMS and court house construction debacles–
Seems like the ridiculous history of branch finances should be under a microscope—
Tax extensions are not good for business—unless you own a U-Haul franchise–
Michael Paul
June 17, 2011
The way governance is currently structured in the judicial branch, there is no incentive for those who sit on the council to look after the trial courts. There is an incentive to look at your own political aspirations with respect to those in power. Unfortunately, that includes ignoring much of what was brought up on AOC Watcher and Judicial Council Watcher. Personally, I find the end-run around employees and temps by hiring corp. to corp. consultants at a substantial extra cost to be offensive enough to disclose it to others, whom I feel confident are equally as offended. I know from experience that the AOC is feverishly moving funds between accounts to justify every department’s year-end wish list. Some of which are needed but most of which the AOC could forego in the interests of saving money.
While I somewhat agree with your premise that this budget should be challenged every year, I think the best people to do that would be a democratically elected judicial council because those people would have skin in the game and wouldn’t be out to protect the AOC at all costs.
Michael Paul
June 17, 2011
On the issue of tax extensions-
With such a debt standing behind the deficit, with anticipated contributions to Calpers going up every year to try and make up a half-trillion shortfall in current pension liabilites, a failure to tax is kicking the can down the road. I do find it interesting that 30 of the senior most people of the AOC have 100% of their own pension contribution paid by the AOC while the rest of the rank and file end up contributing to their own pensions.
There is no doubt in my mind that the AOC is a wasteful spender. Many of their master products/services contracts have management fees built into them, some provide incentives that don’t make sense. All in all these management fees are a percentage on top of products and services so there is a built-in incentive to charge as much as you can. Where they typically get the AOC is contractual loopholes you could float a carrier battle group through. Most of that is related to subcontracting and products and services required but not specified in the underlying master services agreements. Unfortunately, the general attitude was “what can we do? We’re locked into purchasing from them” when that was never the case. It isn’t as easy to put stuff out to competitive bid. The easy way ruled the day, regardless of costs.
SF Whistle
June 17, 2011
Here’s the implications of “failure to tax”—-WHO WILL BE LEFT TO TAX?
Thursday, June 16, 2011Calif. Business Departures Increasing —
Now Five Times Higher Than In 2009
Today, California is experiencing the fastest rate of disinvestment events based on public domain information, closure notices to the state, and information from affected employees in the three years since a specialized tracking system was put into place.
Out-of-state economic development officials are traveling through the state to alert frustrated business owners and corporate executives to their friendlier business climate versus California’s hostility toward commercial enterprises.
From Jan. 1 of this year through this morning, June 16, we have had 129 disinvestment events occur, an average of 5.4 per week.
For all of last year, we saw an average of 3.9 events per week.
Comparing this year thus far with 2009, when the total was 51 events, essentially averaging 1 per week, our rate today is more than 5 times what it was then.
The same tracking system has been in place throughout the three-year period.
Our losses are occurring at an accelerated rate. Also, no one knows the real level of activity because smaller companies are not required to file layoff notices with the state. A conservative estimate is that only 1 out of 5 company departures becomes public knowledge, which means California may suffer more than 1,000 disinvestment events this year. The capital directed to out-of-state or out-of-country, while difficult to calculate, is nonetheless in the billions of dollars.
The top five destinations are (1) Texas, (2) Arizona, (3) Colorado, (4) Nevada and Utah tied; and (5) Virginia and North Carolina tied.
Based on the legislature’s recent rejection of business-friendly legislation and Sacramento’s implementation of additional regulations, signs are that California’s hostility towards business will only worsen.
Michael Paul
June 17, 2011
Most of the states you mentioned, with the exception of Colorado are “right to work” states where unions (except for government unions) are powerless and the minimum wage is low. Since Colorado is surrounded by right to work states (New Mexico being the exception) the wages in both Colorado and New Mexico are on par with the super low wages in surrounding states.
California has experienced technology cycles for the last fourty years that have caused this periodic exodus of jobs. In the late 1970’s/ early 1980’s the semiconductor industry all but up and left for lower wages in third world countries. (Philippines daily average wage: $3.00 per day and it is an english speaking country.) In the 1980’s it was most other manufacturing. Today we’re seeing the mass exodus of maturing internet technologies to lower wage states and countries. This has little to do with taxation, though the regulations here are onerous. It has lots to do with being able to obtain more workers for the same price you would pay in California. This pressure is created by our quarterly profits model that drives american corporations where one bad quarter and the management team can be replaced. Those companies are forced to show increased profits or reduced costs quarter upon quarter upon quarter. Logically, it almost makes economic sense to start your business in California and grow your business elsewhere. This is mostly a total compensation issue.
Wendy Darling
June 17, 2011
Published today, Friday, June 17, on Courthouse News Service, by Dave Tartre:
S.F. Superior Says 25 Courtrooms to Close in Wake of California Budget
By DAVE TARTRE. http://www.courthousenews.com
Long live the ACJ.
Michael Paul
June 17, 2011
Let me also add a trend I observed that I understand continues to this day. Sole source agreements. Sole source agreements were typically executed by supervisors and managers. In the last year of my working at the AOC, managers were initiating sole source agreements and having underlings (typically non-managers) sign off on them as if they were the ones requesting sole source authorization. These instructions have been of a verbal nature and not in writing so that they wouldn’t come back and haunt the manager in question. Sometimes, sole source agreements make sense when they are for a relatively small amount of money. That’s not the case at the AOC though. Sole source agreements can be huge and span millions of dollars. When your boss is instructing you to sign that sole source request as if it were your own, then you do what you’re instructed unless it is clearly against the law (like sole-sourcing unlicensed contractors under your bosses instructions)
SF Whistle
June 18, 2011
Michael—
You write that “this is mostly a total compensation issue”….you write that we need more tax revenue in California as the cure for current problems…You seem to be convinced that this is just a business cycle—? It would be great if you could convince a few of the people fleeing the State to share your beliefs…
I was born / raised in California —my parents were both California natives—our family first setled in California in 1904—
I do not share your opinion that the issue is that of compensation—It happens that wages could not be raised enough / fast enough to match WHAT PEOPLE ARE ALLOWED TO KEEP in other States–
Let’s compare–
California:
State Sales Tax: 8.25% with some localiies at 10.5%
Gas Tax 46.6 cents
Diesel 48.7
Cigarettes 87 cents per 20
Personal Income Tax 9.55% plus ..25
Tax credit for dependants reduced from $309 to $98.
Property Tax–(the only bright spot in the State)–1% established by INITIATIVE NOT INSPIRED LEGISLATION–
Let”s contrast TEXAS—
Sales tax 6.25
Gas tax 20 cents
Diesel 20 cents
Cigarettes 1.43
NO PERSONAL INCOME TAX—-NONE–
Now–let’s look at results—
California may lose up to 1,000 businesses this year
As many as 10,000 people leaving the State daily—
In the past two years 40% of all new jobs created in the US are located in Texas….?
(This statistic does not support your notion that it is logical to start a business in California–
Sorry Michael—California does not have a tax revenue problem—The problem is emblematic in the Judicial Branch—We have a cocktail waitress running a multi-billion dollar branch of government. Our Executive and legislature is bought and paid for by special interests…California is out of control—
Judicial Council Watcher
June 21, 2011
It’s official. No balanced budget, no paychecks for legislators until a balanced budget is passed.
In round one, the people win. As to if the judicial branch stands to lose, it all depends on which lawmakers are approached by the judicial branch. Since we believe this places immense pressure upon republicans we feel that a balanced budget is just days away.
http://blogs.sacbee.com/capitolalertlatest/2011/06/controller-chiang-halting-pay.html