State Budget Update: June 22

Budget Update: June 22

Legislative Activity

California Treasurer Bill Lockyer says that the tax plan developed by the assembly Democrats in the legislature depends on a bond sale Wall Street will not accept. That is because the Attorney General’s office (Jerry Brown) says the borrowing would violate Prop 58 of 2004. (If such a bond were declared to be illegally issued, the holders could lose everything, even if the state had the cash to honor the commitment.) Assembly Democratic leaders say they disagree with the legal opinion and seem to be pursuing their plan. But if their bonds cannot be sold, the plan would appear to be DOA. The senate plan involves taxes but in a way that avoids the 2/3 vote requirement for new taxes. However, even if the 2/3 vote for taxes is avoided, there is the companion requirement of a 2/3 vote for the budget as a whole which Republicans can block. Moreover, the Democrats’ assembly and senate budget plans have yet to be reconciled. And the governor is taking the position that he won’t sign a budget unless a 2-tier pension plan is included.

Note: It seems likely that some kind of de facto borrowing will take place in whatever budget is eventually enacted, given the magnitude of the current fiscal problem. See http://www.anderson.ucla.edu/documents/areas/fac/hrob/mitchell_lowdown.pdf

Litigation on Minimum Wage

Absent a budget on July 1, prior court decisions indicate the governor can order the state controller (John Chiang) to pay state workers only the minimum wage. (The workers would be made whole once a budget is passed.) This matter is again in litigation with the controller arguing that a) the prior decision was incorrect and b) the outmoded state payroll computers can’t be made to issue min wage paychecks. UC is not directly affected but what UC would do when other state workers are paid the minimum has not been addressed by the powers-that-be in Oakland. (CSU would be affected.) As a prior post noted, the issue of the minimum wage has nothing to do with whether the state is strapped for cash to pay. It has only to do with whether there is a budget in place authorizing payment of salaries. The governor gets leverage in bargaining with state labor unions from the minimum wage issue. Some have agreed to concessions in exchange for a promise not to impose the min wage on their workers. Most workers, however, are not covered by those deals. And the deals themselves are contingent on legislative approval which for various reasons would involve a 2/3 vote.

References: Twitter.com/CalPolicy