From today’s Wall Street Journal Political Diary E-mail…
California Finances Slightly Less Awful
Last week thousands of California teachers rallied to extend $12 billion in tax hikes, which they said would help prevent $4.7 billion in education cuts. Well, it turns out that schools won’t be whacked after all, even if the taxes aren’t extended.
Democratic Gov. Jerry Brown’s revised May budget projects that the state will collect $6.6 billion more in taxes over the next two years than his administration had projected in January. That’s based on tax collections this year that have exceeded earlier projections by $2 billion.
Thanks to the state’s Proposition 98, which mandates that at least 40% of general funds be appropriated for education, schools will get about $3 billion of the “windfall.” That’s $3 billion more than they got last year. Mr. Brown’s revised budget still assumes that income, sales and vehicle tax hikes that expire this year will be extended for another five years. But even if they’re not, the state will collect enough revenue to stave off cuts to education.
Last week Assembly Republicans proposed a budget plan that doesn’t extend the tax hikes or cut education. Instead, they suggested reducing state workers’ compensation and making deeper cuts to welfare and health services. Mr. Brown, however, insists that an all-cuts budget is a non-starter. “I’m not going to give Republicans a road map to ruin,” Mr. Brown said at the budget conference. But Republican lawmakers have told me that they won’t vote for the tax extensions unless they’re paired with substantive spending and pension reforms — neither of which Mr. Brown included in his revised budget.
Mr. Brown’s budget does include some notable reforms. It eliminates 43 state bureaucracies and streamlines business tax collections. It also outlines a plan to pay off $29 billion of the state’s $35 billion debt load by 2015. Still, it doesn’t touch the state’s biggest source of debt: $500 billion of unfunded pension and retiree health liability.
The budget deadline is June 15th. If Democrats want to avoid having to issue IOUs to state creditors and workers because of a late budget, they’d better get serious about pension and spending reforms.
— Allysia Finley