July 17, 2009

Budget Deal Closer But Sticking Points Remain

By David Walrath

There are two major sticking points remaining for a 2009-10 State Budget deal: 1) borrowing from local government and possible litigation on that borrowing; and 2) the Proposition 98 maintenance factor. The maintenance factor is under litigation now by the California Federation of Teachers. The Governor believes the voters rejected establishing by statute the maintenance factor (Proposition 1B on the May 19th ballot) and if it is to be recreated at the $9.5 billion level then it should be done by the voters (what I believe to be a less than accurate position on voter motivation but the Governor’s for now). The education community believes it is not a change to Proposition 98 and a voter issue, but an issue on how the Department of Finance interprets Proposition 98. The interpretation can be changed by Finance and clarifying legislation can be passed to avoid future confusion.  So much for the public statements.

The real issues are:

• If the only need is a clarification, then why put off implementing that clarification until 2011-12?
• Some legislators want any unexpected new revenue in 2009-10 and 2010-11 to go to restoring health care and social service cuts, not to schools. Others want any unexpected new revenue to be used to rebuild reserves and state cash flow. If clarification is made and there are new unexpected revenues in 2009-10 could somebody go to court and litigate for the increased 2009-10 revenue (if any) even if the clarifying legislation has a 2011-12 operative date?

The Governor’s position is that schools should be repaid (if there are sufficient revenues and some future Governor and Legislature agree) but not be GUARANTEED the repayment.

The local government transfers give me a headache. Two of the three proposals probably are illegal, but at some point the Legislature and Governor agree to adopt the “If you don’t like it, sue us” attitude. They are approaching that point.

As the fool I am, I expect something by the 22nd of July 2009.