Skip to comments.California Budget Crisis Could Reach Meltdown (The Titanic is Going Under Folks!)
Posted on 06/30/2003 9:20:33 AM PDT by Pubbie
SACRAMENTO, CALIF.--California's Legislature engages in budget brinksmanship nearly every year, but this time the stakes are higher, the problems more intractable, and Gov. Gray Davis is more politically debilitated than ever.
In short, this time it's serious.
"People are nervous," said Jack Kyser, a public policy economist based in Los Angeles more than 30 years. "There's a real chance for a meltdown that could have rippling effects throughout the nation. This is something of a different magnitude than we've seen before."
With a deadline of midnight Monday looming for the passage of a new budget, the Democratic governor and the Republican minority in the Legislature are deadlocked over Davis' demand for further tax increases.
Only three years ago California was riding a wave of prosperity that was the envy of the nation. But runaway spending and a slumping economy have brought the Golden State to the brink of insolvency, with a deficit that could swell to nearly $40 billion by next July, or more than one-third of all state spending last year.
For the first time in history, the state is operating almost completely on borrowed money. California already has the worst credit rating in the country, and officials say the state cannot borrow any more until a new budget is passed.
At the same time Davis is trying to forge a budget compromise, he is fighting off an attempt to oust him that is almost certain to go before the voters in the fall. He could become the first governor in California history to face a recall election.
The politically crippled governor is at a further disadvantage in the budget crisis because there is no surplus from which he can dole out money to get his way with the Legislature.
Budget stalemates are nothing new across the country and in California they are so routine they barely register with voters.
Gridlock is so familiar that businesses that supply the state with everything from gasoline to fresh vegetables build the uncertainty into their financial plans, knowing they will eventually be paid. Even state workers who will go without pay when the current budget expires Monday can get no-interest loans from their credit union.
But clearly, there are signs that the problems this year are bigger and more complicated.
The state's controller has warned that California has enough cash to last only through the middle of August.
State managers issued nearly 10,000 layoff warnings last week, some to police, teachers and prison guards. Billions of dollars owed to nursing homes, community clinics and hospitals will go unpaid.
Tom Seivert, a physician's assistant at a Sacramento clinic, said services for the poor will be delayed or not performed at all.
California is one of the few states to require two-thirds approval of a budget, and although Democrats hold big majorities in both houses, they cannot pass a budget without GOP votes.
This super majority rule is cited as the reason the Legislature has approved only four budgets on time the last 22 years. Last year, partisan wrangling caused the budget to be delayed a record 76 days.
Some progress has been made. Lawmakers trimmed $12 billion from the shortfall this spring and the governor recently raised $4 billion by tripling the car tax. Davis still wants an additional $4.2 billion in tax increases to balance the budget this year.
Republicans will not budge on taxes.
Sen. Gil Cedillo, a stalwart Latino Democrat from Los Angeles, knows an opportunity when he sees it.
The troubles besetting Calif. Gov. Gray Davis -- a major budget crisis, rock-bottom approval ratings and a powerful recall movement -- give Latinos the chance to push forward an issue foremost on their agenda: driver's licenses for undocumented immigrants.
Last year, Davis vetoed a bill by Cedillo that would have provided licenses for the undocumented, a hot-button issue for many Latinos, who see it as an immigrant rights issue. In the process, Davis lost Cedillo's endorsement and helped depress Latino voter turnout in the state.
Now, as the governor fights for his political life, Cedillo speaks out against the recall with all the passion of a diehard Davis supporter.
"This is a movement put together by extremists in the state who want to set back government," Cedillo says. "It's disruptive and it's a bad precedent. We have to commit ourselves to fight it."
Cedillo knows the governor cannot now afford to alienate Latinos, who, according to polls, are less likely to want to get rid of him, and helped him win re-election last November by a mere five percentage points over Republican Bill Simon.
The most recent survey of the Public Policy Institute of California shows that 46 percent of Latinos reject the recall and 37 percent support it -- better for Davis than the 51 percent of the general voting population that want him out and the 43 percent who would keep him.
At first, Cedillo is evasive when asked about the chances for his driver's license bill this year. "The bill is going forward, we'll continue to negotiate," he says. But later: "My expectation is we'll get a bill this year."
"When the driver's license bill comes up he's going to sign it, and you can thank the recall for that," says political analyst Sherry Bebitch Jeffe. "(The recall) is going to influence his behavior, what he signs and what he doesn't. It's driving the whole budget process on both sides."
The governor knows that he cannot afford to have a Latino appear on the recall ballot, which is why it was so important for the Democratic leadership to convince lieutenant governor Cruz Bustamante to bow out of an hypothetical recall election.
"If Bustamante runs, will Latinos come out in droves to vote Davis out, to get the first Latino governor in modern history?" Jeffe asks. "Maybe."
If Latinos and other major democratic constituencies were not excited about Davis in November -- his support among Latino voters dropped from 80 percent in his first election to 65 percent in his second -- there's not much to excite them now that budget realities have meant cuts in social programs, the arts and Medical funding.
But for unions, many of whom represent mostly Latino workers, keeping Davis maybe better than risking a Republican governor or one of the two possible democratic candidates who fare better in the polls: Sen. Dianne Feinstein and Bustamante.
In the event of a recall election, "the risk is too great that we'll get somebody that will be less supportive of workers," says Eliseo Medina, executive vice president of the Service Employees International Union's (SEIU). "We can't afford a Republican governor or someone who isn't sympathetic to immigrant rights."
Most union leadership and legislators like Cedillo would much rather have Davis in a difficult situation and extract concessions from him in exchange for their support than risk the election of others who may not need the Latino vote as much.
"The senator (Feinstein) ... what can I say?" Medina says. "I don't think she's very pro immigrant." Davis, on the other hand, "may now be in a position to listen better" to the union's concerns.
Many Latinos remember that when Bustamante was an assemblyman, he voted in favor of requiring legal status in order to have a driver's license.
Sen. Feinstein, considered the best chance for Democrats to keep the governorship should well-financed Republican candidates appear on a recall ballot, has so far said she is not running.
But if the recall does qualify, and especially if it qualifies for the more Democratic-leaning electorate of the March primary, Davis's people know they have a better chance to win if he is the only Democrat on the ballot. Although risky, their strategy is to label the recall effort a Republican right-wing conspiracy, resurrecting the ghost of infamous former Gov. Pete Wilson and his anti-immigrant Proposition 187.
Nobody knows how that will work if moderate, moneyed and famous Republicans like Arnold Schwarzenegger or Richard Riordan enter the race.
But one thing is certain: When undocumented immigrants finally get their driver's licenses in the next few months, they'll have the Republicans and the recall leaders to thank.
And when the state finally goes belly up in The Middle of August I will be Laughing-My-Ass-Off when the illegal Mexicans are severed from the State Gooooooooooobermint's teat!
Hope you Mexicans have saved some money away to make sure you can take care of all those tons of Anchor Babies you had, cause state assistance should be allllll dried up by Fall... Hahahahahahaha!!!
I'm having a bad grammer morning.