By Kevin Yamamura
kyamamura@sacbee.com
Published: Thursday, Dec. 9, 2010 – 12:00 am | Page 1A

Gov.-elect Jerry Brown and his supporting cast of fiscal players delivered their first performance Wednesday of “Budget Gloom and Doom” on the Memorial Auditorium stage.

Brown’s message: California’s budget deficit is awful.

No, really awful.

“What we’re looking at today is much worse than it’s ever been before, and our opportunities to fix it are very limited,” Brown told a crowd of about 400 state lawmakers and local government officials.

Gov. Arnold Schwarzenegger might take issue with that description of what he has bequeathed to Brown. But it is true that state leaders have fewer tools at their disposal, with federal stimulus aid evaporating and tax rates scheduled to decline.

The Democratic governor-elect seemed to have at least two goals in mind: getting everybody’s attention and getting everybody to buy into the same set of budget assumptions. More meetings are planned, including one Tuesday in Los Angeles, before Brown is sworn in Jan. 3.

Brown gave few clues about his proposed solutions and relied heavily on two people for the explanations: Mac Taylor, the nonpartisan legislative analyst who projects the state faces at least a $25.4 billion deficit over the next 18 months; and Ana Matosantos, his just-named finance director, who served in the same capacity for Schwarzenegger over the past year.

Brown defined the deficit problem as up to $28 billion – the larger deficit estimate is contingent on whether Congress passes the estate tax change on the table in Washington.

He had Matosantos and Taylor emphasize the flimsy nature of the last three budgets. In the current budget, 85 percent of solutions will either expire in the next year or never come to pass.

Because the bulk of those solutions are short-lived, they leave the following year’s budget with a massive hole that must be closed again. It is akin to patching a roof with a plastic tarp one year and having to find another solution the next.

Aimed at Sacramento

Brown indicated that he no longer wanted to rely on gimmicks and one-time solutions. He also assailed the state’s reliance on borrowing.

Taylor emphasized that lawmakers and the governor must make real spending cuts and raise permanent revenues if they want to avoid year after year of $20 billion-plus deficits.

Brown’s presentation, while novel for a governor-elect, likely had few viewers given that it aired only online and on cable on the California Channel.

“This to me was an in-Sacramento, for-Sacramento event,” said Bill Whalen, a research fellow at Stanford University’s Hoover Institution and former speechwriter for Gov. Pete Wilson.

“We’ve been throwing around the phrase ‘budget crisis’ for a decade now. At some point, you can’t keep throwing around the word ‘crisis’ any more. The governor has two challenges: one, bringing two very reluctant sides together, but secondly, selling it to a very weary public.”

The last two slides of Brown’s presentation displayed statistics that appeared to make the case for more taxes – or at least the case that state spending is not so severe. One said California’s ratio of state employees per 10,000 residents was fourth lowest in the nation. Another showed that California’s pupil-to-staff ratio is “among the highest in the nation” among K-12 schools.

But Brown would not commit, on stage or off, on whether he plans to ask lawmakers in January to raise taxes. Several sources said they believe Brown will ask voters to extend the current higher tax rates on vehicles, sales and income in a special election. But Brown did not indicate as much Wednesday.

Political viewpoints

Brown’s aides billed his presentation as an opportunity to define the budget problem – not hash out differences – and Brown tried to sidestep perilous questions by having Matosantos answer on his behalf.

But in a room that included more than 70 state lawmakers, it was impossible to avoid political dispute. Halfway through the event, an impromptu cuts-vs.-taxes debate broke out.

Democrats said the data show California needs more tax revenue and that the state had incurred enough cutting.

Assembly Speaker John A. Pérez, D-Los Angeles, said the Legislature should reconsider taxing oil production. He also said the state should revisit a plan to increase the income tax and lower the sales tax to take advantage of federal deductibility, a tradeoff that died earlier this year. Assemblyman Sandré Swanson, D-Alameda, said he “didn’t see a slide that indicated all the pain California has gone through.”

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