A Right-Wing Budget for a Blue State?

by Paul Hogarth, 2009-06-09

As California faces a $24.3 billion deficit, Governor Schwarzenegger and Republicans in the state legislature are pushing exactly what they promised before May 19th – a “cuts-only” budget. Never mind the public wants a more balanced approach to this crisis, and polling data confirms it. Republicans never let the facts get into the way of their opinion. Some targeted tax increases have broad public support, and Democrats should have come swinging in favor of them after Propositions 1A-1E went down in flames. Even if they didn’t have the votes to pass a revenue package in Sacramento, proposing it could have raised public awareness and outrage at the “two-thirds” budget rule – blaming the GOP for ensuing cuts, and helping to pass an amendment in 2010. But in the short term, what can the legislature do to bridge the gap? Republicans may never support any tax increase at all, but scrapping tax loopholes that only benefit corporations must be a prerequisite before any cuts. Releasing non-violent drug offenders would also save the state a ton, and even suspending the death penalty would save $1 billion over five years. Rather than let Arnold pressure them into passing an immediate budget with more cuts, now is time for Democrats to act like they represent a blue state.

Once again, California’s rule requiring a two-thirds majority to pass a state budget has paralyzed us – as a shrinking and increasingly bitter minority of right-wing zealots hold up the process. They didn’t support taxes before May 19th, and they won’t support them now – no matter what public opinion says. Even Schwarzenegger took years to acknowledge that we have a revenue problem, but would only support a regressive sales tax increase – the worst kind to raise during a recession.

Voters may have rejected a budget package on May 19th ballot that would have brought $6 billion in revenue – but the legislature was going back to the drawing board anyway. While Sacramento talks about plugging a mammoth deficit, political agendas are busy spinning the public “mandate.” Schwarzenegger proposes frightening budget cuts to social services, while claiming we have “no choice” but to go forward. Like the lame duck Governor that he is, Arnold almost seems to find pleasure in punishing the voters.

But the public doesn’t want it. The only person who has asked them in a systematic way is David Binder – whose polling firm found only 36% of May 19 voters supporting an “all-cuts budget,” in a comprehensive survey before and after the special election. When asking those who didn’t vote in this very low-turnout election, less than one fourth wanted only cuts. That doesn’t mean the state should just tax itself out of this, but we need a balanced solution.

The Binder poll also asked May 19 voters (and non-voters) their opinion on specific tax increases. Seventy-five percent supported raising “sin taxes” on alcohol and tobacco. 63 percent think we should raise the upper-income tax bracket by a percentage point, which Governors Pete Wilson and Ronald Reagan supported during hard times. And seventy-three percent want California to have an oil severance tax (like all other oil-producing states, including Texas and Alaska.) Ironically, Arnold says the state could raise revenue by expanding offshore oil drilling – but not a tax that would give the state real revenue.

Will Republicans care that some taxes are popular? No. Can Democrats, who control 63% of the legislature, pass them anyway? No, because they need a two-thirds majority. But rather than capitulate right after May 19th, Democrats should have proposed these reasonable (and popular) revenue solutions at the outset – and let the public blame Republicans if they don’t succeed. When the state starts making cuts (like privatizing UC campuses), outrage could be channeled into repealing the “two-thirds” rule.

In the short run, what else should they be doing? Republicans may never support a single tax increase whatsoever, but Democrats must insist on repealing corporate tax loopholes that passed last year – before even talking about painful budget cuts. The budgets that passed in September 2008 and February 2009 made three changes in corporate tax law, which will cost the state $8.7 billion over the next seven years. One, called “single-sales factor” apportionment, has not proven to be the “job booster” proponents say it is – all we know is it’s costing the state a lot of revenue.

Another one – letting corporations share their tax credits with related subsidiaries – has been a windfall for the state’s largest companies. The third one allows corporations to claim refunds against taxes paid in prior years when they have net operation losses – which is deeply irresponsible when the state has a monstrous deficit. None of these tax loopholes have been around for long, so it only makes sense to repeal them now.

Where else to cut the fat? Try our bloated criminal justice system. Schwarzenegger’s talking about changing parole to divert non-violent drug offenders away from prison – but he would slash Prop 36 funds that provide key drug rehabilitation. How about releasing the non-violent offenders who are already there? That’s over 18,000 prisoners on minor drug-related charges, who could be sent to rehab programs and save the state millions a year. On a similar note, the ACLU has launched a campaign to suspend the death penalty – saving the state $1 billion over five years.

These are just ideas to start – rather than letting Arnold and the legislature’s Republicans shred our social safety net, as if it’s the only way to balance a budget. California is one of the bluest states – whose volunteer hours and money helped elect Barack Obama last year, and drove the nation’s progressive resurgence. At this critical juncture, we cannot let the Republicans push an “all-cuts” budget – when it’s clearly not what the state wants.