A Triumph of Hope Over Fear

May 20, 2009

The election is over. The voters have spoken, giving a resounding “no” to the budget-related measures sent to the ballot as part of the February budget agreement. As poll results plummeted, the Governor and, to a lesser extent, legislative backers of Propositions 1A through 1F aggressively promoted fear in an unsuccessful attempt to convince voters that the ballot measures provided the only alternative to the state plunging over a fiscal cliff. The rhetoric was extreme, even by campaign standards, with the Governor suggesting that he might be forced to lay off thousands of firefighters and release thousands of inmates if the ballot measures fail. This ploy proved counterproductive and, if anything, solidified opposition.

So why do I believe that the May 19 results can be viewed as a triumph of hope over fear? I spent the better part of the last two and a half months traversing California, talking about the budget, the special election, and California’s future. From San Diego to the North Bay, I spoke before diverse audiences ranging from Orange County PTA activists to Silicon Valley community leaders, from philanthropists to East Bay nonprofit leaders and community organizers in Los Angeles. While California faces tremendous challenges — the worst economic downturn in the post-World War II era and budget crises that show little prospect of abating — I found a new level of interest, concern, and commitment to building a better future for all Californians.

While I am not going to argue that the thousands of individuals that I met are a representative sample, they do represent the best that the state has to offer. Parents who volunteer to improve the quality of their children’s schools and public education more broadly; nonprofit service providers who struggle in the face of tight budgets and rising demand to care for the state’s most vulnerable; and interested voters who got up early or stayed out late to learn the about the state’s finances, how we ended up in the mess we’re in, and how to get out. Almost universally, I met voters deeply dismayed by, but profoundly interested in fundamentally addressing, the state’s budget challenges.

In the context of the May election, this combination of dismay and concern played out as a rejection of Proposition 1A, a mind bogglingly complex measure that would have tied California’s fiscal future to the worst decade of its fiscal past. Voters correctly understood that Proposition 1A would have done nothing to change the fundamental imbalance between revenues and expenditures that creates the state’s persistent budget shortfalls and nothing to change the supermajority vote requirements that result in gridlock and budget deals that perpetuate the state’s budget problems. Voters also rejected Proposition 1C, perceiving an uncanny resemblance between wishful borrowing against future lottery proceeds and the unsound mortgages, collateralized debt swaps, and other shaky financial transactions that have brought the global economy to its knees and pushed California’s unemployment rate an all-time high.

In the midst of all this doom and gloom, I found an underlying sense of optimism. The afterglow of the November election has brought new activists to the table and rekindled a belief that change is possible. There is also a sense of realism and an understanding that tough choices lie ahead. The ambitious federal efforts to stem the economic downturn, stabilize financial markets, and rein in the excesses of private markets are beginning to help voters see government as a solution to, rather than the cause of, economic malaise.

What happens next? The magnitude of the budget challenges and difficulty of the decisions in the weeks ahead cannot be underestimated. The take-home lesson from the recent election should be that a flawed process leads to a flawed outcome. The best interests of California can only be served through an open and deliberative process that focuses on what’s best for California five, 10, or 20 years from now. Changing the two-thirds vote requirements for passing state budgets and tax increases is a necessary first step that would go far toward restoring accountability and allowing California to respond to the needs of a growing, changing population and an ever-more-competitive economy.

– Jean Ross


Third Time Is Not the Charm for SSI/SSP Recipients

May 19, 2009

The old adage “the third time’s the charm” unfortunately does not apply to California’s beleaguered Supplemental Security Income/State Supplementary Payment (SSI/SSP) recipients. The February budget agreement included two cuts to SSI/SSP grants, which help more than 1.1 million low-income seniors and people with disabilities meet basic needs. The first grant cut took effect on May 1, dropping the maximum grant for individual recipients from $907 per month to $870 per month. The second cut will take effect on July 1, further reducing the maximum grant for individuals to $850 per month.

Now, Governor Schwarzenegger is proposing a third cut to SSI/SSP grants in 2009 as part of his May Revision. Under this proposal, the maximum grant for individuals would drop even further, to $830 per month – the minimum level required by federal law – as of September 1, 2009.

Third time’s the charm? For SSI/SSP recipients struggling to make ends meet on a dwindling income, it’s more like “three strikes and you’re out.”

– Scott Graves


Rolling Back Children’s Health Coverage?

May 18, 2009

California and the federal government appear to be headed in strikingly different directions when it comes to health coverage. President Obama and Congress are gearing up to increase access to health care. In contrast, Governor Schwarzenegger proposes substantial cuts to health programs to help close the state’s re-emerging budget gap.

Take, for example, the Healthy Families Program, which provides health coverage to more than 900,000 California children whose family incomes are too high to qualify for Medi-Cal and who do not have access to job-based health insurance. The current income limit for Healthy Families is 250 percent of the poverty line ($45,775 for a family of three). The Governor proposes to reduce the limit to 200 percent of the poverty line ($36,620 per year for a family of three). This change would save the state $54.5 million in 2009-10 by dropping 225,000 kids from the program. Notably, this cut is one of the Governor’s “contingency” proposals that he would ask the Legislature to adopt if voters reject Propositions 1C, 1D, and 1E tomorrow.

The Governor’s proposal comes as the federal government is ramping up funding to help states cover more uninsured children. The Children’s Health Insurance Program Reauthorization Act (CHIPRA), signed by President Obama in February, substantially increases federal funding for children’s health coverage, giving California policymakers an opportunity to cover more uninsured children, contingent on the state providing its own matching dollars (California pays one-third, and the federal government two-thirds, of Healthy Families Program costs). The Legislative Analyst’s Office, for example, reports that California could expand eligibility for Healthy Families to 300 percent of the poverty line ($54,930 per year for a family of three) – the exact opposite of the Governor’s proposal – for a net state cost of less than $1 million per year.

– Scott Graves


What’s the Plural of May Revise?

May 11, 2009

In a move that promises to be heavy on campaign overtones, Governor Schwarzenegger announced today that he’s releasing the May Revise earlier than anticipated, on May 14. He’s also promising to release two versions of the May Revise (Would that be May Revises? Or May Revisions?) – one scenario if the ballot measures pass on May 19, and another if they don’t. As in years past, the CBP will be releasing an analysis of the May Revise(s), so stay tuned.

It’s important to note that California will face a shortfall in 2009-10 regardless of the outcome of the May 19 election. If some combination of Propositions 1C, 1D, and 1E are rejected by the voters, the gap will widen (Proposition 1A, 1B, and 1F have little or no impact on the 2009-10 budget). That means that budget decisions promise to be tough no matter what happens on May 19.

(Update: News reports now suggest that the Governor’s office will only release budget “summaries” on Thursday, and that the May Revise will be released on May 28.)

– Lisa Gardiner


What’s the Difference Between the Cash Flow Crisis and the Budget Crisis?

May 8, 2009

Based on the calls we’ve received this morning, yesterday’s report on the state’s cash flow crisis released by the Legislative Analyst’s Office (LAO) has created some confusion. The LAO’s report does not mean that California now faces a budget shortfall on the high side of $20 billion. It does examine the state’s cash flow needs and offer some options for addressing them.

California, like many if not most other states, typically borrows money in the fall and pays it in back in the spring. This happens in both good years and bad and is called cash flow borrowing. The state’s routine need to engage in cash flow borrowing reflects the fact that many large bills – such as payments to schools made at the beginning of the school year – come due in the fall, while a significant fraction of the state’s revenues come in during the spring, when taxpayers file their personal income tax returns.

The state’s cash flow problems are newsworthy this year for two reasons. First, the state’s persistent budget shortfalls have increased the amount that the state needs to borrow. Second, the economic downturn and, in particular, problems in global credit markets mean that money is tight even for the most credit-worthy borrowers.

Yesterday’s report did not update the LAO’s estimate that the state would face an $8 billion shortfall even if the money measures on the May 19 ballot – Propositions 1C, 1D, and 1E – are approved by the voters. The failure of one or more of these measures – which appears likely if the Public Policy Institute of California’s new poll results are indication – could push that shortfall up to $13 billion to $14 billion. But that’s still significantly less than the short-term borrowing needs identified by the LAO.

–Jean Ross


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