Tuesday, June 21, 2011

Adult Supervision

California taxpayers are enjoying a day of schadenfreude (which goes nicely with a fresh Hefeweizen, as I'll explain below).

If you have access to the Internet, you've heard that California is a fiscal basket case lurching towards Greek-style insolvency. The latest chapter in California budgetary chaos pits a Democratic Governor (Jerry Brown) and Democratic Controller (John Chiang) against Democratic legislators.

Since his election in 2010, Brown has been negotiating a budget with Democrats and Republicans. The state continues to project large fiscal deficits and an unsustainable "wall of debt" in the next decade. Compounding the impact of the Great Recession, businesses are fleeing the state's oppressive regulatory and tax regime in droves.

To his credit, Brown has rolled up his sleeves and attempted to exercise some adult supervision of the legislators in the sandbox. He has proposed a mix of temporary tax extensions and spending cuts to balance the state budget and improve the overall trajectory of state finances. Brown hoped to bring the temporary tax extensions to a statewide vote through the ballot initiative process. However, he was unable to persuade Republicans to support a ballot initiative. (Republicans claim that Brown was unwilling to consider necessary reforms to the state's unsustainable pension system. We don't know what transpired behind closed doors.)

Unable to sway Republicans to support Brown's proposal, Democratic legislators enacted "Plan B" on Wednesday, June 15. Plan B was basically a variation of "kick the can down the road." After approving the plan, Democrats broke out a case of Hefeweizen to celebrate another year of accounting gimmicks.

The next day, Brown added insult to (hangover) injury by vetoing the Democratic budget. After taking an obligatory swipe at state Republicans, Brown described the Democratic budget as containing "legally questionable maneuvers, costly borrowing and unrealistic savings."

And now for the taxpayer schadenfreude. California voters approved a law last fall that permitted legislators to pass a budget with a simple majority vote but stripped them of pay for every day the budget is late. Today, Controller Chiang announced that the Democratic budget was defective, and, consequently, legislators would be working for free until they passed a balanced budget. Despite his party affiliation, Chiang did not give the Democratic legislators a free pass: "My office's careful review of the recently passed budget found components that were miscalculated, miscounted or unfinished."

Ballot initiatives are a big part of California's political and budgetary quagmire. However, in this case, the voters deserve a celebratory case of Hefeweizen for trying to impose some accountability on their state "political leaders."

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