05.15.12 7:13 PM ET
Why Jerry Brown’s Bid to Fix California’s Budget Isn’t Working
How desperate is Gov. Jerry Brown?
Very. As he introduced his new budget proposal at a pathetic press conference this week, Brown was reduced to the role of beggar at three different points during the session. First he pleaded with reporters for the “benefit of the doubt” for him and his team of finance officials. Then he asked those same reporters to volunteer their own ideas for fighting a budget shortfall that suddenly had become nearly twice as large as he predicted in January. And finally, after questions about the big cuts he’s proposing to health and human services programs that have taken a decade’s worth of hits, Brown asked the assembled journalists—and Californians by extension—to embrace austerity with “a modicum of stoicism.”
Asking a state of emotive actors, imaginative technologists and international trade hucksters for stoicism is, to be kind about it, a nonstarter of a strategy. But Brown, nearly a year and a half into his return engagement as governor, doesn’t seem to have any other strategies.
In returning to the governorship 28 years after he left it, Brown pledged that his combination of experience, savvy and smarts would permit him to get control of California’s perpetually unbalanced finances. But the 74-year-old governor, for all his wiles, has been no match for California’s broken budget machine.
There are many states where a governor can respond to a budget deficit—say $5 billion—with $5 billion in cuts and new revenues to fill the hole. But that straightforward approach isn’t possible in California. The budget system here is a moving target—a big mess of formulas that come from the constitution, ballot initiatives, legislation, and court decisions. Together, the formulas have congealed into an algorithm so complex that the engineers at Google would have trouble understanding it.
The spending and revenues produced by this algorithm are very hard to predict. But the general tendencies of this budget monster resemble those of a ratchet. The algorithm is forever ratcheting up spending and ratcheting down revenues. It’s likely that, even as you read this, the California budget deficit is getting worse.
This budget ratchet is the No. 1 reason why California is thought to be ungovernable. Among insiders, the debate over what to do about it divides between leading technocrats who believe they are smart enough to devise ways around the sea of formulas, and critics who say that the algorithm itself must be deprogrammed up, and replaced with something simpler.
Brown has sided with the technocrats, with a vengeance. In a fit of hubris striking for a man who prides himself on modesty, he has argued that he could tame the algorithm through determination and smarts. And he has used budget numbers to argue that he is making progress in reducing the size of the gap between revenues and expenses.
That was working until this spring tax season, when the algorithm struck back with all its unpredictability. Brown’s $9 billion projected budget shortfall—which he had billed as a sign of progress—became a $16 billion shortfall, almost overnight. Last year’s budget, which Brown had touted as a triumph of balance, was shown to be billions of dollars out of whack. Forced to adjust, Brown issued a revised budget proposal this week that made cuts his fellow Democrats will oppose and used tactics, including one-time money for budget purposes, that he had previously criticized. (Most notably, Brown’s proposal swipes $410 million from a recent legal settlement with banks over foreclosure practices, money that was supposed to go to help homeowners).
When Sacramento Bee columnist Dan Walters asked Brown pointedly why anyone should believe in his new proposal given that his previous budget projections proved to be so wrong, the governor launched into a long answer that noted that JPMorgan Chase chief Jamie Dimon had just lost $2 billion unexpectedly, and included the only-Jerry-would-say-it sentence: “The capitalist system is not coincident with your expectations of exactitude.”
Brown also labeled Walters “a declinist,” a favorite straw man of Brown, who rails against media portrayals of the state as in trouble. Of course, the governor’s cuts have contributed to that decline. Hardest hit has been the state’s system of public higher education, which—for all the lure of gold, oil and sunshine—has been the secret to California’s historic success. Cheap, high-quality higher ed once lured the world’s smartest and most brilliant people here, and gave California the national lead in college-graduation rates. But in the past decade, the percentage of college graduates in its population fell by 6 points.
Fixing this requires not fighting the budget system, but changing it, and the highly centralized system of fiscal governance that is a byproduct of the passage of Prop 13 in 1978. But Brown has dismissed that approach as politically too ambitious. His one reform in this area—known as “realignment”—has returned some authority to local governments on law-enforcement issues. But to fund that change, he’s pursuing a November ballot initiative that creates a constitutional funding guarantee for local governments—but funds the guarantee with temporary taxes. This genre of “reform”—permanent obligations with temporary revenue sources—is the sort of thing that gives the budget algorithm its ratchetlike characteristics.
That same ballot initiative also devotes some of its temporary income and sales taxes to the budget. To sell it, Brown is conducting a hostage-taking. If voters don’t approve, $5 billion in cuts to public schools and $500 million in additional cuts to higher ed will be automatically triggered. The message: Uncle Jerry’s got the kids in the car and he’s not bringing them back without ransom. This is scary stuff by itself, and it seems worse when Brown talks, as he did this week, about the need for the public to accept austerity by saying: “It’s called the cliff effect. We push you off. And no one likes falling.”
At this week’s press conference, Brown, seeming to channel Germany’s Angela Merkel, spoke of the need for austerity not only in California but in Europe. Again and again, he said people need to learn with less. "What that means is that things that are good in and of themselves have got to be stopped or curtailed if we are going to have balance.”
That is not a message with much appeal to Californians, and Brown sounded less than confident that he can swing all of us. He himself noted just how complicated he finds the budget, despite all his experience. “It’s a pretzel palace of incredible complexity,” he said Monday. And so far, Brown hasn’t been able to gnaw his way out.