California Governor Vetoes Budget Plan

June 17, 2011

From the Los Angeles Times:

Gov. Jerry Brown issued a historic veto of the budget approved by Democratic lawmakers hours after they passed it, opening wide a rift within his own party and throwing the state’s financial future into limbo.

The Democrats had pushed through the spending plan Wednesday, relying heavily on crafty accounting to patch over the state’s deficit, after the governor’s talks with Republicans on a tax package faltered. On Thursday morning, Brown called the budget “unbalanced.”[…]

He blamed Republicans for the Legislature’s failure to forge a plan acceptable to him. Nevertheless, he said, he would not sign the Democrats’ package because it “contains legally questionable maneuvers, costly borrowing and unrealistic savings.”

The budget veto is the first in California history. As Daniel Weintraub of the San Diego Union-Tribune explains, Brown wants a public vote to extend $10 billion in expiring temporary taxes. Some Republicans agreed to support that in return for public votes on “a tough new spending limit, rollbacks in public employee pensions, as well as a weakening of the states’ environmental protection laws.” Legislative Democrats were concerned that those votes would pass but the tax extension vote would fail, so they opposed it. Their only remaining option was thus to balance the budget on the spending side, but instead they relied on gimmickry:

They voted to defer nearly $3 billion in payments due to the schools in the next fiscal year to the year after next.[…] With tax collections in May running $400 million above earlier projections, the Democrats dedicated that money to the budget and then assumed that another $400 million would materialize next year. They are also counting on $200 million by requiring Internet retailers to collect sales tax on items they sell to Californians.

The Democrats were also hoping that the federal government would help, and the budget relies on $700 million in new payments for the Medi-Cal program that the state says the feds owe California.

Senate Republican Leader Bob Dutton called it an “irresponsible package” that did nothing to change “government as usual” in Sacramento. Brown seemed to agree. Even Democratic leaders in the Legislature conceded that their budget was less than perfect.

More on California here.

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