Governor Schwarzenegger possible ‘Plan B” budget compromise

John Myers, Sacramento Bureau Chief for KQED’s “The California Report,” penned the following update on a possible budget compromise by governor Schwarzenegger. The story link is at the end of this post.
June 29, 2009

Guv’s Plan B Deficit Fix
John Myers

Governor Schwarzenegger’s advisers say he’s made it clear to Democratic legislative leaders that he will accept an alternate set of proposals from his $24 billion May deficit solution, one that neither eliminates entire programs nor raises taxes.

The proposal was laid out in a background briefing for Capitol reporters this afternoon. While reporters were allowed to take notes, we were not allowed to take the actual documents with us… thus, what follows is based on notes taken.

In the aggregate, the ‘Plan B’ proposal adds up to $23.7 billion, compared to Schwarzenegger’s $23.9 billion May revise and the Democratic legislative plan of $23.4 billion.

The governor would agree to drop plans for eliminating welfare assistance, health care for poor children, and financial aid for college students. He would not, however, agree to any Democratic tax increases — including the proposed $15 car tax to pay for state parks. And his advisers say he maintains his insistence on both a 5% pay cut and a reduction in health care benefits for state workers.

The governor would go back to his planned suspension of Proposition 1A local government revenues (worth almost $2 billion), and would agree to a modified version of Democratic plans to shift state worker paychecks by one day, thus saving almost $1 billion.

Aides say he would abandon his controversial plan to close state parks, and would find the money for parks operations elsewhere (not in the above-mentioned vehicle fee).

In the Healthy Families program providing health care for kids from low-income families, Schwarzenegger would cut funding by $95 million more than the Dems, and would limit eligibility to those whose families earn 200% of the federal poverty level (about $44,000 for a family of four).

On the issue of CalGrants — the student financial aid program he’s called for eliminating — Schwarzenegger aides say the guv would make a number of changes, including a freezing of income eligibility levels and detaching current allowances of higher grants for higher tuition (thus freezing current levels).

These are just some of the changes; aides say Democratic leaders are aware of these proposals, but have not seen the same charts reporters were shown this afternoon. And they say it shouldn’t be characterized as a ‘counteroffer’ on the part of the governor; Schwarzenegger spokesman Aaron McLear said it’s simply “another way” to get to the governor’s bottom line.

The ‘Plan B’ proposal aside, the governor’s staff also discussed the tough road ahead should the $3.3 billion in current year savings be forfeited, due to lack of a deal by midnight tomorrow. They believe that the missed deadline could also create an additional obligation to public schools in 2009-10 of some $3 billion (known as a “maintenance factor” in Proposition 98 jargon). And furthermore, only about $1 billion of the $3.3 billion in 2009-09 savings could come from education (due to federal stimulus law)… the rest would have to come from somewhere else.

Gilbert comment. What a good lesson for our school children. Using a gimmick to defer paychecks by a single day to call it a billion dollar saving.

Will the payroll checks be worthless? If not how are we saving anything as we engage in an accounting shell game?

Will those who receive California’s IOU,s be able to cash them at a local bank? As of now no bank has agreed to honor them as they did 20 years ago.

About Larry Gilbert