Sacramento chutzpah

When it comes to budget gimmickry, the Assembly Democrats deserve some sort of prize. They have released a budget plan that would avoid most of the governor's $12.4 billion in proposed cuts, though it also involves borrowing nearly $9 billion from Wall Street. On top of all that, the scheme would only require a majority vote, eliminating any chance that Republicans could stymie the legislation. So here's how it seems to work, courtesy of Capitol Alert:

1) The state borrows $9 billion.

2) Investors are paid off with about $600 million a year from the Beverage Recycling Fund (that's what consumers pay on beverage containers).

3) Taxes are increased on oil production in California, raising $1.2 billion a year. Half of that would go to replenishing the Recycling Fund.

4) The state lowers its state sales tax by one-quarter cent but receive the equivalent amount of money in oil tax dollars.

5) Local governments raise their sales tax by one-quarter cent and the state reduces its payment to local schools by a like amount.

6) Since all the flimflam is theoretically "revenue neutral," it doesn't require a two-thirds vote in the legislature.

Clever, huh? Of course none of this begins to deal with the structural issues that have brought California to its knees - stuff like pension obligations and spending beyond the state's means. The governor's office blasted the plan, though Democratic leaders said Schwarzenegger tried a similar maneuver last year when he asked the Legislature to borrow $5 billion against the California Lottery. More from Capitol Alert:

Assembly Democrats did not have estimates for what happens after 2010-11, but their proposal presumably would put the state in a difficult bind in 2011-12. That's because their plan would sustain spending at a higher level, including the Proposition 98 guarantee for schools. Meanwhile, there would no revenue source next year to provide the same influx of money unless the economy does substantially better.

More by Mark Lacter:
American-US Air settlement with DOJ includes small tweak at LAX
Socal housing market going nowhere fast
Amazon keeps pushing for faster L.A. delivery
Another rugged quarter for Tribune Co. papers
How does Stanford compete with the big boys?
Those awful infographics that promise to explain and only distort
Best to low-ball today's employment report
Further fallout from airport shootings
Crazy opening for Twitter*
Should Twitter be valued at $18 billion?
Recent stories:
Letter from Down Under: Welcome to the Homogenocene
One last Florida photo
Signs of Saturday: No refund
'I Am Woman,' hear them roar
Bobcat crossing

New at LA Observed
On the Media Page
Go to Media

On the Politics Page
Go to Politics
Arts and culture

Sign up for daily email from LA Observed

Enter your email address:

Delivered by FeedBurner


Advertisement
Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
LA Observed on Twitter and Facebook