Uncertainty reigns as Jerry Brown vetoes 'questionable' California budget

Gov. Jerry Brown vetoed the California budget handed to him Wednesday, potentially isolating himself in continuing efforts to fix California's fiscal crisis.

Democratic lawmakers, who hold wide majorities in the Assembly and Senate, passed California's first on-time state budget in a quarter century Wednesday. In so doing, they avoided the penalties of Proposition 25 – an initiative passed by voters in November that decrees that lawmakers forfeit their pay for every day after the June 15 deadline that a budget is not passed.

But Thursday morning, Governor Brown, also a Democrat, lambasted the budget as financial gimmickry.

“Unfortunately, the budget I have received is not a balanced solution," he said in a statement released on YouTube. "It continues big deficits for years to come and adds billions of dollars in 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 as they occur. We can – and must – do better. A balanced budget is critical to our economic recovery.”

Still unresolved is whether lawmakers can continue to receive their paychecks, because they passed a budget – even though it was vetoed. The answer to that question could determine the ultimate fallout from Brown's veto, since Democratic lawmakers might ramp up pressure on Brown to sign a less-than-ideal budget if they aren't getting paid.

In any case, the next two weeks will be crucial.

"Brown is sticking by his pledge to accept only a realistic, gimmick-free budget,” says Jessica Levinson, political reform director for the Center for Governmental Studies. “While some may say Brown is a glutton for punishment, only the next few weeks will show whether his veto will ultimately force the legislature to pass a budget more in line with his proposals.”

Should legislators be paid?

The matter of legislators' pay will be determined by state Controller John Chiang. In a memo released to the press Thursday, he said he is analyzing "whether the budget bills passed Wednesday meet the constitutional" requirements of Prop. 25.

But the memo perhaps offered clues about how his office is leaning. The memo said: "Proposition 25 only references the Legislature’s passage of a budget; it is not affected by the Governor’s signature or veto."

The vetoed budget was balanced with a mixture of taxes, cuts, and various other accounting and policy maneuvers including the delay of billions in bills, forgoing debt repayments, and counting on revenues that may or may not come in.

Brown had no choice but to reject it, experts say. “It’s absolutely what he had to do. It was a terrible budget. His governorship would have been over because he said he wouldn’t" resort to such tactics, says Tony Quinn, co-editor of California Target Book.

In vetoing the budget, Brown sought to soften the blow to Democrats.

“Democrats in the legislature made valiant efforts to address California’s budget crisis by enacting $11 billion in painful cuts and other solutions,” Brown said in his statement. “I commend them for their tremendous efforts to balance the budget in the absence of Republican cooperation. If [Republicans] continue to obstruct a vote, we will be forced to pursue deeper and more destructive cuts to schools and public safety – a tragedy for which Republicans will bear full responsibility.”

An all-cuts budget to address the remaining $9.6 billion deficit is one option. Brown has said he will also continue to push for his preferred option: putting before voters a proposal to extend certain taxes that would cover the $9.6 billion shortfall. But Brown has been jockeying for several months without success to find the four Republican votes he needs to move forward.

What Brown must do to gain those votes, say Mr. Quinn and others, is to demand that Democrats accept the reforms that the Republicans have asked for in exchange for their votes on the tax deal – spending caps and pension reform.

'Bridge tax' needed?

Even if a deal can be reached, however, the taxes expire June 30 and an election would not happen until after that date – leaving a period when California would be operating without the tax revenue it needs to balance the budget. In coming days, the Legislature could take up a proposal for a so-called “bridge tax,” which would hold the state over until a vote can be approved and taken.

Republicans have been opposed to such an idea, as proposed, because it would extend the taxes – at least temporarily – even if voters ultimately rejected them. But without them, Democrats say, revenue fluctuations would hurt the programs reliant on the funds.

“Having to increase [the taxes] in the interim adds a complicating dimension to what the GOP would have to do,” says Roger Niello, a former Republican Assemblyman.

State Controller Chiang said he "will move quickly" to resolve the pay issue.

“Technically they’ve met the letter of the law, and they can argue that in court,” says Barbara O’Connor, director emeritus of the Institute for Study of Politics and Media at California State University, Sacramento. “But if Chiang holds true to the intent of the people, he won’t sign the checks.”