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California Still Without Budget a Week into New Fiscal Year

State lawmakers and Gov. Gavin Newsom still have not agreed on a budget deal. A lot of time was used to determine how to allocate the state’s unexpected windfall. Placeholder legislation has kept the government running.

(TNS) — California's fiscal year started more than a week ago, but lawmakers and Gov. Gavin Newsom still don't have a budget deal.

They've enacted placeholder legislation to keep the government running while they hash out the final details, but the delay leaves Californians waiting for details on how money for critical areas including wildfires and infrastructure will be spent.

It's a different situation than the budget stalemates of past decades, when state government had to cut deals with banks to ensure state workers were paid even as budget negotiations dragged into the fall. But it's still causing frustration for many closely watching or involved with the process, including Assemblyman Vince Fong of Bakersfield.

The top Republican on the Assembly Budget Committee, Fong said this year's budget process is more chaotic than any he's seen in his five years in the Legislature.

That's in part, Fong says, because the Legislature spent a lot of time early in the year allocating an unexpected windfall of tax revenue for the 2020-21 budget year, which ran from July 2020 through June 2021. Lawmakers worked with Newsom for months to negotiate how to spend the unexpected money on schools, economic stimulus and wildfire prevention.

That work early in the year compressed the traditional process for hashing out the 2021-22 budget, Fong said.

"We have so many outstanding, unresolved issues," Fong said. "We're debating wildfire prevention in the middle of wildfire season, we're debating drought mitigation and water storage in the middle of the drought. Ideally we would be dealing with this months ago."

Meanwhile, the state faces a string complex problems, including reopening schools, rebooting the economy and upgrading broadband infrastructure, even as the ongoing pandemic perpetuates uncertainty.

Fong faulted Democrats who control the governor's office and both houses of the Legislature for not handling the circumstances better.
"What is frustrating is that they didn't have these conversations earlier," Fong said. "What is troubling is the fact that they do have all the control, and so why did they not come up with some type of agreement in the first place?"

Newsom and legislative leaders have repeatedly said they agree on the fundamental principles and framework of the budget. They say they want to use the state's massive surplus, which Newsom says is estimated at $80 billion, to help people and businesses that have been hit hard by the economic downturn. They describe the budget framework they've enacted as something to be proud of.

"This truly is a historic budget," Assembly Budget Chair Phil Ting, D- San Francisco, said during a debate on a budget bill. "This is a budget that really demonstrates that our values are protecting the most vulnerable families, the families who need our help the most."

Ting's Senate counterpart, Berkeley Democrat Sen. Nancy Skinner, defended this year's budget process last month when Sen. Jim Nielsen, R- Red Bluff, called the budget bill they were debating "fake" because it did not represent a final deal.

"I feel good about this budget," Skinner retorted. "This is not a fake budget."

Before 2011, California lawmakers and governors consistently failed to have budgets in place by the start of the state's fiscal year. Then, the late budgets sometimes meant that state workers and state contractors couldn't be paid on time.

"It really got bad," said Mike Genest, who served as Gov. Arnold Schwarzenegger's Finance Director and now works as a consultant. "We just never passed a budget on time. It wasn't even thought about."

Then in 2010, voters passed Proposition 25 that allowed lawmakers to pass budgets with a simple majority instead of two-thirds. The measure also tied lawmakers' pay to on-time passage of the budget. Chris Hoene, executive director of the independent California Budget & Policy Center, described it as a "turning point" for the Legislature to start passing budgets on time.

But the initiative still allows lawmakers to set their own rules about what constitutes a budget, which effectively gives lawmakers a way around the deadlines, Genest said. They can pass placeholder budget bills that technically satisfy the legal requirements even when they don't have a full deal, as they have this year.

"They were telling the fox to watch the hen house," Genest said of the voters who passed the initiative. "I don't think people understood that at the time but most of us on the inside at the time realized there would be a way around it."

Although every year some details about the budget still aren't decided by the start of the fiscal year, this year a lot more is still pending, Hoene said.

Although lawmakers and the governor don't have a full agreement on the budget, the state isn't facing the same consequences that plagued it during the years when budgets were rarely on time. This year, lawmakers have enough of the budget in place to ensure state workers will continue to be paid and that state government can function, said H.D. Palmer, spokesman for Newsom's Department of Finance.

By this time last year, when lawmakers and Newsom also faced massive pandemic disruptions, they already had a budget agreement in place that made cuts to offset an estimated $54 billion shortfall. Hoene said this year they have a very different, and in some ways harder, challenge of spending new money rather than cutting.

"It's often more complicated to figure out how to spend money than how to cut," he said. "It's politically harder to cut services, but it's procedurally easier."

The Legislature and Newsom have agreed overall about how much to spend on most areas of the budget, but still need to settle details of exactly where the money will be spent and when.

Hoene said he thinks the delays this year are likely an anomaly because of the drastic change in the state's economic fortunes.

"If you think back to one year ago, the Legislature and governor thought they were facing a budget with significant declines," Hoene said. "That is such a stark difference from where we thought we would be that it has made the process of executing the budget more of a challenge."

Fong said he expects the Legislature will continue hashing out the budget for the rest of the year.

"It's going to be an ongoing and seemingly never-ending budget process," he said.

He said he hopes state government returns to a more normal budgeting process next year, including by reinstating a conference committee that traditionally allows Republicans to have more input on the budget.

"The budget is the most important document we produce, and what we decide and where resources go determines so much of what happens in state government," Fong said. "I do hope that we move back to a regular budgeting process... This process right now is not sustainable."


(c)2021 The Sacramento Bee (Sacramento, Calif.) Distributed by Tribune Content Agency, LLC.
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