As California enters its third month without a budget, State Treasurer Bill Lockyer said Sacramento’s unbalanced books tarnish the Golden State’s reputation among investors and creditors.
“Not only is California’s credit rating the lowest in the United States, but we are ranked behind Kazakhstan, Mexico and many others,” Lockyer told a Political Science Association audience on the UC Berkeley campus last night. “We’re rated low, and that adds to our borrowing costs.”
California’s legislative session ended on August 31, with members of the Assembly and Senate unable to close a $19 billion deficit in California’s proposed $90 billion 2010-2011 budget. With outgoing Governor Arnold Schwarzenegger threatening to veto any budget that misses his goals on taxes and spending, California may be without a budget until well after the Nov. 2 election. The state has missed its June 15 budget deadline in 23 of the last 24 years, but previous budget impasses have never lasted past mid-September.
Lockyer didn’t say when he expected the budget to pass, but explained that the delay is exacting a price on the state. “It’s in the neighborhood of $50 million to $55 million more money that is spent every day than would be spent if the budget were adopted,” he said.
California’s constitution requires both the Senate and the Assembly to pass a budget by a two-thirds vote, making the state one of only three that require a “supermajority” to approve a budget. Even though Democrats have a large majority in both California houses, two Senate Republicans and five Republican Assembly members would have to vote with the Democrats in this session for a budget to pass. That hasn’t come close to happening.
The November’s ballot contains one possible long-term solution to this nearly annual legislative logjam, Lockyer said. Proposition 25 would enable the legislature to pass a budget by a majority vote and would penalize legislators for not meeting a budget deadline.
“One of the things I like about it is that if legislators don’t adopt a budget on time, they don’t get paid,” Lockyer said. “They forfeit their salaries for every day that there’s a stalemate.”
The treasurer was less optimistic about potential budget-balancing revenue from Proposition 19, the November California ballot initiative that calls for the legalization and taxation of marijuana. While Lockyer supported the legalization of medicinal marijuana during his 1990s tenure as California’s attorney general, he has joined the majority of statewide officials and candidates for state office—including Diane Feinstein, Barbara Boxer, Meg Whitman and Jerry Brown—in opposing Proposition 19.
“I don’t think legalizing marijuana would produce economic results and tax results that are substantial,” Lockyer said. “There are some economists who think there could be substantial public health costs with marijuana legalization.”
In a year when California expects competitive statewide elections for governor, lieutenant governor and attorney general, Lockyer is expected to easily win his bid for a second term as treasurer. While he supports fellow Democrat Jerry Brown in the governor’s race, he doubts Brown or Meg Whitman will change California’s byzantine budget process.
“But the thing that make me chuckle about Meg is that she controlled a small Board of Directors at EBay,” Lockyer said. “As governor, she’d have 120 legislators that hate her guts and think they can do a better job. That promises some interesting things out of Sacramento.”