The State of California is nearly two months into the 2008-09 fiscal year, and it faces at least a $15 billion gap between current spending levels and tax revenues. Yet there is no sense of urgency at the state Capitol.
Earlier this month, I predicted that lawmakers would pass a budget by August 25 because that's the day the Democratic National Convention starts and every Democrat wants to be in Denver. Looks like I'm wrong again.
Legislators continue to work on non-budget bills, and this week they have spent an extraordinary amount of time on ceremonies for termed-out members. But there has been surprisingly little budget negotiation. In an interview with the Sacramento Bee, Gov. Schwarzenegger lays part of the blame on term limits. He notes that this is the first year that Assembly Speaker Karen Bass (D-Los Angeles) and Senate Minority Leader Dave Cogdill (R-Modesto) have participated in leadership-level budget talks.
"It's just one of those examples that chasing people out of the building after a certain amount of years, even though they're still capable of leading and doing a good job, like [John] Burton, is a mistake," the governor told the Bee.
What the governor didn't mention is that he has declined to participate in most of the legislative leadership's budget haggling. The "Big 5" this year has been the "Medium 4."
Redevelopment update
Earlier this week, the governor released a "proposed compromise" that includes a "temporary" $228 million diversion of tax increment from redevelopment agencies to schools. The governor's proposal is to shift the greater of 5% or $225 million from redevelopment to schools every year for three years. In a legislative update, California Redevelopment Association Executive Director John Shirey said he thinks this shift could become permanent.
The idea of using property tax increment to ease the state's budget woes has been floating around the Capitol for weeks. The idea is not going away, rather, the size of the shift seems to be increasing.
Five percent is real money for many redevelopment agencies, whose ability to repay bonds and proceed with projects could be jeopardized.
If the shift of funds from redevelopment agencies is approved, it would render meaningless a bill passed this week (AB 2594-Mullin) that permits redevelopment agencies to use non-housing revenues to acquire foreclosed housing and to assist homeowners, developers and lenders in financial straights (see CP&DR, July 2008). The state's budget solution would ensure that redevelopment agencies do not have "extra" revenue lying around to spend on housing.
– Paul Shigley
