The state Legislature finally approved a budget compromise that
nearly closes a $26.3 billion deficit, while saving state parks and
sparing local governments from further cuts. But the deal came close to
being derailed when state Republican leaders grew angry over a plan by
Governor Arnold Schwarzenegger to lessen California’s prison population
by about 27,000 inmates. In the end, however, it appeared that the GOP
was more concerned about looking tough on crime than actually holding
up the budget.
The state had become the laughingstock of the nation as it issued
IOUs to pay its debts. Finally, lawmakers struck a deal, but some
Republicans said they would never go along with the plan to slash $1.2
billion from the Department of Corrections. Schwarzenegger’s proposal
would have lowered the state’s prison population from about 168,000 to
141,000 over time by converting some non-violent felonies into
misdemeanors and allowing more low-risk offenders to spend their time
outside prison wearing ankle monitors.
The GOP leadership backed off its threat after Democrats and the
governor promised that the prison-reform plan would be negotiated
separately from the budget in August, the San Francisco
Chronicle reported. The about-face effectively means the
governor’s proposal likely will pass because it will only require a
simple majority vote to get through the Legislature separately —
and Republicans don’t have enough votes to block it. So by agreeing to
separate the plan from the budget, the Republicans essentially decided
to go along with it. In other words, Republicans were more concerned
about not voting for prison reform than killing it.
The deal also requires most state offices to close three times a
month. The closures not only will result in longer lines, but amount to
a 15 percent pay cut for state workers. Yet even with the cuts, the
deal fell short of closing California’s $26.3 billion budget gap. As a
result, the state’s financial problems will continue next year, the
Chronicle reported. In reaching the compromise, lawmakers used a
series of accounting gimmicks along with significant cuts to state
services. The governor plans to use his line-item-veto powers to
achieve more cuts and balance the budget overall.
The budget deal also was threatened by city and county governments
because of a plan by state lawmakers to raid local coffers. The Alameda
County Board of Supervisors even voted last week to endorse a plan to
sue the state. But then after intense lobbying from big-city mayors,
the Legislature tabled a proposal to take nearly $1 billion in local
gas tax revenues. The budget compromise also set aside the governor’s
controversial plan to close nearly all of California’s 200-plus state
parks.
More Troubling Housing News
The good news about the budget was offset by more troubling reports
on the housing crisis. Although the number of foreclosures in the Bay
Area dropped in the past few months, the total number of defaults
jumped significantly. The development raised fears that the housing
downturn, which looked to be easing, may actually worsen. There were
nearly 20,000 default notices issued in the Bay Area from April through
June, a jump of 7.3 percent over last year, the Chron reported.
Economists were especially worried because a significant portion of the
increase occurred in wealthier areas that had been previously insulated
from the foreclosure crisis. That means that more middle- and
upper-middle-income residents are having a tougher time making ends
meet. If the trend continues, it could lead to a widening of the
housing crisis, putting any hope of an economic recovery further in
doubt.
Oakland Voters Approve Pot Measure
In Oakland, city officials avoided more financial problems when
voters approved four budget measures in last week’s election. Voters
agreed to raise taxes on medical marijuana and hotel rooms, and slash
the amount of money the city spends on after-school programs. Voters
also agreed to close a loophole that allows corporate entities to avoid
property transfer tax on real estate when the ownership of the entity
changes during a merger, consolidation, or acquisition.
All four measures won with at least 71 percent of the vote. The
outcome could help the city’s general fund by $11.2 million next year.
It was welcome news following the recent revelation that the city
likely will receive less than a third of a $67 million federal grant it
requested and may have to lay off police officers.
Three-Dot Roundup
Speaking of Oakland cops, the police officer’s union appeared ready
late last week to approve a 7.5 percent cut in compensation, according
to the Oakland Tribune. Other city employee unions agreed to a
10 percent reduction, but negotiations with the police were more
difficult because the cops’ union already had a signed contract, while
the other unions were negotiating new ones. … A development team led
by politically connected businessman Phil Tagami won approval from the
Oakland Port Commission to redevelop the port’s half of the former Army
Base. Tagami also is the frontrunner to develop the city’s half,
although a group of city employees wants him to partner with a
competing development team, according to the Tribune. Tagami
plans for industrial uses and port support services at the base, while
the other team wants to build a giant retail center. … And the
Chron reported that Dianne Feinstein and other Congressional
moderates and Blue Dogs are holding up President Obama’s health-care
reform plans. The longtime senator from California says she’s worried
about the long-term costs of the plan.
