August 24, 2007

The State Budget — Was the Wait Worth It?

On Tuesday, August 21st, the Senate passed the state budget, the third latest budget in the state’s history. To attain the required two-thirds vote to pass the budget, two Republicans, Senate Republican Leader Dick Ackerman and Senator Able Maldonado, joined the Democrat majority, passing the $145 billion budget and scores of budget-related trailer bills on a 27 to 12 vote, ending the 52-day impasse.

The Assembly passed the budget and trailer bills on July 20th, the scheduled date for the Legislature’s month-long summer recess and recessed until August 20th. Failing to do likewise, the Senate technically remained in session during the summer recess, unable to reach an accord with the 15-member Senate Republican Caucus.

The Senate Republicans argued that the budget proposed spending approximately $700 million more that the state expected to receive in revenues for the current fiscal year and wanted to cut spending by that amount. When the Democrats rejected further cuts, the Governor committed to the Senate Republicans that he would use his blue pencil to veto $700 million.

The second issue the Senate Republicans raised, which was not a budget-related issue, centered on lawsuits Attorney General Jerry Brown had filed against a number of counties and development projects arguing those projects did not meet the provisions of the California Environmental Quality Act(CEQA), given the EIR’s did not consider greenhouse gas emission provisions contained in Assembly Bill 32 of last session.

While initially the Senate Republicans proposed language that would exempt all housing and transportation projects from CEQA, that language was flatly rejected by the Democrats and the Governor. Ultimately, the budget deal would exempt specific infrastructure bond housing and transportation projects, state and local, from CEQA lawsuits until the state Air Resource Board adopted the regulations specified in Assembly Bill 32.

With these two compromises, the budget was done. What does all this mean to fire protection special districts?

While the adopted budget does not contain any specific issues of critical importance to fire protection special districts, next year could be a different story. While the adopted budget will be balanced, with a significant reserve, it did nothing to address the structural issues that cause billion dollar-plus deficits, and the Legislative Analyst is already predicting a significant deficit for next fiscal year.

Shortly after the Senate approved the budget, Senator Steinberg(Sacramento), who is considered the front-runner to become the Senate President, assuming the term limits initiative measure that will appear on the February 5, 2008, Presidential Primary ballot fails and the current President, Senator Perata is termed-out next year, stated that the budget process needs reforms, specifically the two-thirds vote requirement to pass the budget, which only 3 other states require, requiring instead a simple majority for passage. Of more interest, Steinberg further suggested that “we need to look at how we fund state and local governments” and make whatever changes necessary thereto to resolve our structural deficits.

In an additional call for budget process reforms, on August 23rd, Senate President Perata sent a letter to the Governor(attached), requesting the Governor to convene a “ Revision Panel,” wherein Perata suggests that “nothing be exempt from consideration.”

Would this include the protections local governments current enjoy under Proposition 1A, wherein the state may no longer shift local property tax revenues without a“declaration of emergency” by the Governor and the requirement that if local property taxes are shifted, they may only be shifted once over a ten year period and must be repaid before additional shifting occurs. Clearly, Proposition 1A would fall in to Senator Perata’s suggestion that nothing be exempt from consideration.

A more troubling possibility relates to another provision contained in Proposition 1 A , which allows property taxes to be reallocated within a county, provided legislation proposing a reallocation is introduced and passes the Legislature with a two-thirds vote within each house. While any change to this provision would require a constitutional amendment, it is conceivable that a Budget Revision Panel could recommend changes allowing the Legislature to reallocate property taxes within a county by a simple majority vote.

Given the difficulty in reaching a budget accord this year, coupled with the fact that the low-hanging fruit has long-ago been picked, many believe the time is ripe for the Governor and Legislature to consider reforms to the budget’s structural problems. Senator Perata’s letter to the Governor and the recommendations therein will, no doubt, stimulate a discussion that could result in significant changes in the way the state addresses the funding of state and local programs.

While this prospect should not lead to panic, it is a good reminder of the importance of educating legislators as to the critical role fire protection special district play in California’s system of fire protection and public safety. Never assume your legislators understand what you do. It is our collective responsibility to educate them, and in the process, develop an on-going working relationship.

The future is ours if we are willing to design it.