What’s Next?

The answer to this all-important question regarding the state budget is unclear. Yesterday, June 15 –the constitutional target for passing a budget –the Legislature approved a Budget Bill and accompanying legislation by majority vote. The package of actions closed the $9.6 billion gap remaining after the March budget actions using a combination of higher revenues, additional spending reductions, increased fees, proceeds from the sale of state office buildings, and other measures. A list of bills making up the budget package is available here. On June 16, the Governor vetoed the Budget Bill, SB 69, and the “baby budget bill,” AB 98 with a statement broadcast on YouTube. In light of the fluid nature of budget negotiations, the CBP will not prepare a summary of yesterday’s budget agreement. The Budget Committees of the Senate and Assembly have both published summaries.

The Governor has not acted on other measures included as part of the package, such as ABx1 28, which would require a number of out-of-state retailers to collect use taxes owed by California consumers, or ABx1 26 and ABx1 27, which would abolish redevelopment agencies that do not participate in an “Alternative Voluntary Redevelopment Program” designed to provide $1.7 billion in 2011-12 property tax proceeds to help close the budget gap and $400 million per year thereafter, most of which would go to public schools.

The June 15 package, similar to a number of budget agreements in recent years, largely relied on “one-time” measures and borrowing to bridge the gap remaining after the enactment of deep spending reductions in March. We have argued repeatedly that a responsible solution to California’s persistent budget problems requires a balanced approach that combines the previously enacted spending cuts with additional tax revenues. While Proposition 25 of 2010 gave lawmakers the ability to address the spending side of the budget by a majority vote, it left the two-thirds vote requirement for any measure that increases state tax revenues in place. Absent fundamental change to budget rules that let a small minority block the will of a large majority, California may well be doomed to perennially unbalanced budgets that leave the state ill-prepared for the future.

— Jean Ross