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Tuesday, January 11, 2011

Tuesday, January 11, 2011

It Could Have Been Worse

By Michael Meranze

Perhaps the best thing to be said about Jerry Brown's proposed budget is that it could have been worse.  Unfortunately, it may still be.  The proposals that Brown has put forth--with their severe cuts to higher education, childcare, in-home services for the elderly and disabled, cal-works, and other social services--depend on the Governor getting a series of tax extensions on the ballot and on the people of California approving them once they are on the ballot.  There is no certainty that these things will happen.  Instead, come June we may be facing an even more brutal budget proposal--with even deeper cuts and a continuation of California's now conventional budget difficulties.

The Governor appears to have made a series of intertwined calculations.  The first calculation is that California will not recover from the Great Recession until 2016. (Budget, 35)  In the meantime he expects somewhere from what he terms "tepid" to moderate growth with a relatively slow replacement of jobs.  The second assumption he appears to have made is that it is impossible to obtain new taxes in the present context--instead the revenues that he is advocating are for the most part taxes that are scheduled to expire that he wants extended (although there is modification to certain corporate tax breaks).  So, for example, there is no proposal for an oil extraction tax.  The third assumption he appears to make is that there can be no firm fiscal footing for the state unless there is fundamental reorganization of the state itself.

But we should be clear what re-organization means in this budget.  Brown is not challenging Proposition 13 for instance, nor is he seeking to change the rules for the approval of revenues.  Instead, he is attempting to overturn the way that funding streams and governmental services have been set up since the aftermath of Prop 13.

Central to the budget proposal, consequently, is the effort that he calls "Realignment." (Budget, 15-28)  Brown is proposing to disentangle the threads (of funding and services) that have thrown county, local, and state government together in providing government services.  He wants to devolve responsibility and control over a series of governmental functions (particularly in juvenile justice, low-scale offenders, parole, mental health, welfare) down onto the counties.  In exchange for this increased responsibility and authority, Brown wants to create dedicated funding streams to pay for these services--and it is to these areas that most of the proposed revenues will be sent (especially the continued sales taxes and the vehicle registration fee).  Some, particularly the surcharge on income taxes will remain in the general fund but they are not enough to compensate for the loss of revenue due to the recession nor to pay down the state debt without severe cuts.

The budget argues, not unreasonably, that when the state took over many local functions (and their funding) in the attempt to mitigate the effects of Prop 13 (and Brown was a prime mover in that), the resulting complexity served to undermine the effectiveness of government, cause unnecessary duplication, and decrease the citizenry's belief in the government itself.  Brown seems to believe that clarifying the roles of the different levels will make the government cheaper and more effective and thereby strengthen people's faith that their taxes are being used wisely.

If I understand the logic of all of this, the Governor's budget presumes that until he can demonstrate that state funds can be used more effectively, and brought closer to their point of origin, it will be impossible to convince people to contribute more revenues.  As a result realignment and devolution are the areas that will benefit the most from the proposed extension of the sales tax and vehicle registration fees.  While there are cuts proposed in these areas the emphasis on realignment means that the greater brunt of the cuts will be born by those programs and services that remain on the level of the state government--including, but not limited to higher education.

Needless to say this strategy is both risky and troubling.  In the short term there is no guarantee that the voters will approve these taxes in the spring, and by taking off the table any genuinely new sources of revenue the Governor has committed himself to a budget that must make significant cuts.  If these taxes fail and Brown continues his efforts at realignment further cuts will have to be made at the state services level--likely including higher education.  Secondly, although he is proposing a dedicated funding stream for realignment it is only for the next 5 years.  Brown may be hoping that by that point the economy will have recovered enough that revenues will increase substantially or that devolution will have restored enough faith to allow a further extension of the taxes.  But this outcome is hardly certain.

More to the point, as the California Budget Project makes clear in their own analysis, the budget presumes serious cuts to the most vulnerable members of the community.  Some of these cuts have been previously rejected by courts or the legislature but they may stick this time.  If they do go into effect they will have very serious effects on the lives of those with the fewest resources.

The cuts to higher education are also quite severe.  As I discussed earlier both UC and CSU are facing buts of half a billion each while the Community College System is facing a cut of $400M.  Indeed, the budget's hardest words are reserved for the community colleges which Brown implies are under-priced and over-funded because they get too much credit for students who allegedly don't complete their courses. (Budget, 154-155)  But be that as it may, the cuts for UC and CSU will reduce general fund support below the level of the 2009-2010 budget year.

These overall budget approaches offer a context to begin to discuss how best to proceed.  Bob Samuels has suggested that while Brown offers nothing to suggest that there is a way to roll back his cuts to higher ed he has signaled an openness to structure the cuts in dialogue with a wider variety of groups than normal.  This openness may indicate an opportunity to push back against the Regents and UCOPs normal approach of raising fees and class sizes while forcing concessions from the staff and faculty.  But Dan Mitchell has offered some caution to any optimism about this process--suggesting that the language in Brown's budget allows wiggle room for more tuition increases and enrollment cuts.  But is there realistically anyway to absorb cuts like the ones proposed without serious damage to the institutions--that seems to be the first question.  If there are, how would we get there?

Making any such discussion even more difficult is the overall reductions in services.  If Brown refuses--as he seems to want to--to discuss the fact that both boom and bubble have effected different people in very different ways, increasing inequality to unprecedented levels; if the budget proceeds as if the recent tax relief offered to the very wealthy on the federal level cannot be recaptured on the state level (even though the federal level is doing little to assist states to meet their burdens); if there is no way to convince people that those functions performed on the state level deserve to be funded then we are looking at a situation where the university is being set against the poor, the young, the sick, and the elderly in the struggle for funding.  Ethically it would be hard to make that argument.  Politically in the shadow of the 36 it would be impossible.

If nothing else, Brown's budget lays bare the terrain that we operate on.  At the very least we will need to support Brown's tax proposals.  I personally think that realignment makes good sense (and the existence of state and federal laws and regulations should prevent realignment from being an excuse by some counties to not fulfill their responsibilities).  Within the University we need to demand that teaching, research, departments and the workers who make them possible be the last things considered for cutbacks.  But in the larger public we need to do more than simply defend higher education--we must defend it in conjunction with the rest of the important tasks of human survival and flourishing that are threatened.

I just wish I had a good strategy to make that happen.


Aldo Antonelli said...

I don't know how you figure it could have been worse. Cuts for state workers, welfare recipients and the universities, at the same time as $1.4 billion is restored to Corrections & Rehab? Shifting services to counties hoping that this way it will be easier for them to get more tax revenue? Rich counties will not need more tax revenues and poor one won't be able to afford it.

Just because he's a democrat and dated Linda Ronstadt doesn't mean he gets a free pass.

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Anonymous said...

"I don't know how you figure it could have been worse."

It still can be worse, and we should expect that it probably will be worse.

First, competing interest groups will battle over their shares of the budget, while Republicans battle for more cuts and reduced taxes.

Second, not all of Brown's proposed ballot measures to maintain current taxes will pass, so that will through him and the legislature back to making more cuts or otherwise coping with a persistent deficit.

Third, achieving something close to a balanced budget this year will not eliminate problems next year, when there will be another short fall.

Fourth, sooner or later the compounding cuts in State and local services will lead not only to long term problems, but will contribute to a terrible short term disaster, like lack of emergency response in a crisis (earthquake, fire, flood, epidemic, riot, etc).

It can get a whole lot worse. Almost certainly it will get moderately worse.

The extent of the financial crisis continues to be underestimated. Add to that the dire consequences of political gridlock and virtual stasis in policy discussion, and it seems clear, at least as I look at it, that we have a way to go before we reach bottom.

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