Brown Vetoes California Budget, Pledges to Move Heaven and Earth for Tax Hikes; Lawmakers Face Loss of Salary

On Thursday, California Governor Jerry Brown vetoed a Democratic sponsored budget that used doubtful techniques to paper-over a $10 billion deficit. As a result, California legislators face a potential loss of salary.

Please consider Brown Vetoes California Budget Without Tax Extension

California Governor Jerry Brown vetoed a budget lacking the tax extensions he sought less than 24 hours after it was passed by the Democrat-controlled Legislature, continuing a stalemate over a $10 billion deficit.

Brown, a Democrat who pledged to solve California’s fiscal malfunctions without gimmicks and accounting tricks, said the budget sent to him yesterday used legally suspect techniques to paper over the shortfall.

“The budget I have received is not a balanced solution,” Brown said today in a statement. “It continues big deficits for years to come and adds billions of dollars of new debt. It also contains legally questionable maneuvers, costly borrowing and unrealistic savings. Finally, it is not financeable and therefore will not allow us to meet our obligations.”

The veto means California, the biggest issuer of municipal debt in the U.S., faces the start of its fiscal year July 1 without a budget that would let the state borrow from Wall Street to pay bills. Democrats, who don’t command enough votes to override Brown’s veto, said it’s now up to Brown to find a compromise with Republicans who oppose his tax plan.

Democrats were able to pass their plan with a simple majority, thanks to a November voter initiative that lowered the threshold from two-thirds. Lawmakers faced the loss of salary and per-diem pay for every day they failed to meet a June 15 deadline for passing a spending plan.

Controller John Chiang, who issues state paychecks, hasn’t said whether the budget approved yesterday is enough to meet that requirement. The law’s language requires legislators to send the governor a balanced budget; it doesn’t say it must be enacted to clear that threshold.

“We clearly met the obligation to pass an on-time budget,” Assembly Speaker John Perez, a Los Angeles Democrat, told reporters today.

Brown Pledges to Move Heaven and Earth

Please consider Brown Pledges to Seek Republican Tax Votes After Vetoing California Budget

California Governor Jerry Brown, who failed to win Republican support of tax extensions in six months of negotiations, said he’d “move heaven and earth” in another attempt after vetoing a budget lacking the provision.

Brown, a Democrat who pledged to solve California’s fiscal malfunctions without gimmicks, didn’t say how he’d get the Republican backing needed to pass his plan. His budget veto was the first in state history.

“I’m going to do everything I can, I’ll move heaven and earth, to get those votes,” Brown told reporters yesterday in Los Angeles.

Brown wants lawmakers to bridge the deficit by extending tax and fee increases that are set to expire June 30, to avert deeper spending cuts to schools and public safety. The governor needs to persuade at least two Republicans in each legislative chamber to back his plan before it can pass.

Without a budget by July 1, Controller John Chiang can’t pay lawmakers or the more than 1,000 legislative workers and gubernatorial appointees. They would get any money owed once the spending plan is signed.

Chiang also can’t pay vendors who sell goods and services to the state, or send subsidies to community colleges, health clinics, foster-care parents, nursing homes and daycare centers.

Republicans have jockeyed for concessions on spending levels, cuts to government pensions and business and environmental regulations in exchange for their support to put Brown’s tax extensions on a statewide ballot.

“Californians deserve a budget that stands the test of time, and that requires the real reforms that they are demanding -- meaningful pension reform, a spending limit and business- regulation relief for job creation,” said Senator Bob Dutton, the Republican minority leader from Rancho Cucamonga.

It will be interesting to see what Chiang rules on those paychecks. If legislators forfeit salaries, who will cave in first, Republicans or Democrats?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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