Joe Nelson, Staff Writer
Posted: 05/22/2012 04:00:23 PM PDT

SAN BERNARDINO – High unemployment and a staggering number of people underwater on their mortgages continues to vex San Bernardino County, with no relief expected until late 2015, according to a budget report approved by the Board of Supervisors on Tuesday.

The county added 15,600 jobs in the first three months of 2012, but its unemployment rate, as of March, was still hovering at 12.7 percent, higher than the national unemployment rate of 8.4 percent and California’s unemployment rate of 11.5 percent.

Roughly 264,122 of the 488,422 single family homes in the county have been underwater on their mortgages – in which owners owe more than the home is worth – at some point in the last four years.

Of the underwater homes, 63.7 percent of the homeowners had received notices of default. As a result, a housing recovery is not likely until late 2015, according to the budget report.

“It is clearly my opinion and the opinion of the Board of Supervisors that our economy is still struggling,” said Greg Devereaux, the county’s chief executive officer.

He said the local economy will not rebound until developers start building homes again and more businesses set up shop.

But before that can happen, the county must first get its arms around the foreclosure problem and the high number of people underwater on their mortgages.

“Hence the desire for the board to form a JPA (joint powers authority) with some of our cities and explore what’s out there,” said Devereaux.

The county is pushing to form a JPA that would create a program to assist these troubled homeowners. The cities of Fontana and Ontario have agreed to join the county in the plan.

Hesperia Mayor Russell Blewett has also expressed a strong interest in the program, but his city has yet to embrace the proposal.

County spokesman David Wert said a number of private companies and/or organizations are developing or have developed programs targeting underwater homeowners. The federal Home Affordable Refinance Program (HARP) is another option, he said.

Despite the projected delay in the recovery of the housing market, it’s not all bad news. The median home price in the county has leveled out at $150,000, and for March that median price was 9.5 percent above the April 2009 low, an affordable price for 77 percent of local families.

David Mlynarski, chief financial officer for the Inland Empire Economic Recovery Corp., a public-private partnership that purchases foreclosed homes, refurbishes them and sells them to first-time homebuyers, said the county must become more business friendly if it wants to attract business to the region and spur job growth.

“We are at the bottom of the list when it comes to being business-friendly and job-friendly,” Mlynarski said.

To read entire story, click here.

BY ALICIA ROBINSON
STAFF WRITER
arobinson@pe.com

Published: 22 May 2012 05:09 PM

Riverside officials say they expect to recover only a portion of the $49.44 million that the former redevelopment agency spent to buy 80 pieces of land that are now up for sale.

Some residents are frustrated by the predicted loss and critical of the former redevelopment agency for buying parcels and letting them sit idle, in some cases for six or seven years.

But redevelopment supporters argue that buying the properties allowed the agency to eliminate crime-ridden or rundown houses and businesses, benefits it’s hard to put a price on.

Under the state law that ended redevelopment, the city is required to put the bulk of its former redevelopment agency’s assets up for sale. Now officials are trying to sell 80 properties, broken into 26 groups of one or more parcels.

The city made a deal earlier this month to sell a parcel on Magnolia Avenue for $550,000. The redevelopment agency had paid $1.82 million to buy the land in 2007.

The sale price of other properties likely won’t be known until the city has them appraised.

“There will be an economic loss, there is no question, to the taxpayers of Riverside,” Councilman Mike Gardner said at a May 8 council meeting.

Of the remaining groups of properties, among the most costly were three groups on different corners of the Five Points intersection in La Sierra that cost a total of $10.2 million, and six parcels on Merrill Avenue across from Riverside Plaza that the agency paid $6.2 million to acquire.

The properties aren’t likely to fetch as much as they cost when the agency bought them partly because most had something on them — a business or a house, for example — that increased their value, Gardner said by phone Tuesday. There may also have been costs to relocate businesses or residents and demolish whatever was on the site.

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Nestande

By PE Politics
May 22, 2012 12:15 PM

Calling for an “honest conversation” about spending cuts, Assemblyman Brian Nestande and others Tuesday proposed a constitutional amendment to prohibit lawmakers from deferring scheduled payments to schools from one fiscal year to another.

The state has built up more than $10 billion in school-funding deferrals as lawmakers try to avoid permanent general-fund cuts.

But critics say the deferred money has scrambled district finances and costs them hundreds of millions of dollars in interest on borrowed money to pay their bills until the state money arrives.

“It’s really the largest shell in the shell game” of a state budget, Nestande, R-Palm Desert, said at a Capitol news conference. “Deferrals are just avoiding the tough decisions.”

Joining Nestande was Assemblywoman Kristin Olsen, R-Modesto, and other deferral critics, including Sharon Scott Dow, a representative of the Advancement Project. The group is led by wealthy civil rights attorney Molly Munger, who has spent more than $8.2 million to qualify an initiative that would raise income taxes to increase funding for schools..

Nestande and Olson did not say what should be cut to pay down the school deferrals. They ruled out raising taxes to generate more money for schools, notwithstanding their co-press conferee.

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Sacramento — California’s public schools could see as much as a month of classroom time slashed from the calendar if voters reject a plan to raise taxes in November.

Gov. Jerry Brown has proposed giving school districts the option of cutting up to 15 days from the school year if voters reject his proposed income and sales tax initiative. The significantly shortened year would help offset a multibillion-dollar automatic midyear cut that would be implemented upon rejection of the taxes.

Districts statewide already have the option of cutting five days from the 180-day school calendar in order to reduce costs, and the proposal for three more weeks would be in addition to that. Public schools would take the biggest hit if the taxes fail, as nearly $5.5 billion out of the $6 billion in automatic cuts would come from their budgets under the governor’s plan.

Brown on Tuesday noted that the Legislature would ultimately decide what the so-called “trigger cuts” would entail, but he said that giving schools such an option is the only way to deal with the uncertainty.

“I’m doing the only thing that can be done, and that is assume the taxes and put in the trigger cuts,” Brown said after making a pitch for his tax plan to a gathering of the California Chamber of Commerce. “Is it the best way? It’s the only way that I can see going forward.”
Opposition to cuts

Polls of state voters in recent months have shown overwhelming opposition to the governor’s proposal for automatic spending cuts.

Education leaders said there are myriad problems with the proposal, including that Brown would want school districts to bargain with teachers unions to make such a reduction. That would result in districts having to make vast concessions for the unions to agree to what essentially would be a one-month reduction in pay, said Jill Wynns, president of the California School Boards Association.

“I don’t know what we would have to give, but … I guarantee in the future people would say, ‘How could that have gotten into the contract?’ ” Wynns said.

Shortening the school year any more would put the state and its students at a significant disadvantage for learning, and Californians would be fooling themselves to think otherwise, she said.

“From my point of view this is a huge game of pretend. We’re pretending you can have a world-class public school system without paying for it, and that’s just wrong. It’s a lie,” she said.

The Legislature first allowed school districts to shorten the 180-day year by five days as part of the February 2009 budget agreement, when the state was on the brink of financial collapse. Districts have the option of doing that until the 2014-15 school year.

In the current school year, 35 percent of school districts statewide have reduced their calendars between one and five days, according to a report by the Legislative Analyst’s Office. As part of the budget deal last year, the Legislature gave districts the option of reducing this school year by an additional seven days, but no districts took that option, according to the analyst.

To read entire story, click here.

Dan Walters

By Dan Walters
dwalters@sacbee.com
Published: Wednesday, May. 23, 2012 – 12:00 am | Page 3A

As the state budget’s deficit widens, Gov. Jerry Brown is being thrust into a three-front political battle.

He must not only persuade voters to pass his sales and income tax package, but, implicitly, persuade them to reject a rival tax measure just for schools.

Meanwhile, Brown is pressing liberal Democratic legislators to ignore their political DNA by making deeper cuts in health and welfare programs, not only to close the deficit but to bolster appeals to voters for new taxes.

“It’s not easy,” Brown told hundreds of business and civic figures gathered Tuesday in Sacramento for the annual Host Breakfast.

“We’re getting there,” Brown continued. “We’re making the cuts. But we also need the revenues.”

Brown had been cultivating business groups to support his original tax plan, but they cooled when he shifted gears to satisfy rivals on the left, reducing the sales tax element and sharply boosting income taxes on high-income taxpayers, including many attendees at Tuesday’s event.

Despite Brown’s assertion, cuts in welfare benefits, medical care for the poor, child care, developmental disability services, and in-home care for the aged and disabled are a tough sell among liberal legislators who support those services.

Brown’s new budget counts on those reductions to narrow the deficit by more than $1.5 billion but legislative leaders have said that softening their impact is their highest priority, characterizing them as “life-and-death” issues.

Past efforts to make cuts in those areas have been difficult. Most involve federal funds as well as the state’s money, and some have run afoul of Washington’s unwillingness to grant waivers, while others have been blocked in court.

To read entire column, click here.

BY MICHELLE L. KLAMPE
STAFF WRITER
mklampe@pe.com

Published: 21 May 2012 10:14 PM

A record number of California schools, including 31 in the Inland Empire, may not be able to pay their bills in the next couple of years, the California Department of Education announced Monday, May 20.

Nearly 20 percent of California school districts and other local education agencies such as county education offices are in financial jeopardy, according to a list compiled by state officials using financial reports from March. The list includes 18 of 23 school districts in Riverside County and 13 of 33 school districts in San Bernardino County.

Twelve districts — none in the Inland Empire — have indicated they cannot meet their financial obligations this fiscal year or next, a budget status known as negative certification. Another 176 districts indicated they may not be able to pay their bills this year or in 2012-13 or 2013-14, a qualified certification.

Districts with a qualified budget could become insolvent within two years unless they make additional cuts or bring in more revenue. Districts with a negative budget cannot pay their bills this year or in 2012-13. Under both conditions, districts face increased supervision and sometimes intervention from the county office of education to ensure they don’t become insolvent.

The number of agencies on the financial edge has increased by 61 since the list was last released in February and up 45 over the previous year’s list, state officials said. In 2006-07, just 24 school districts had a negative or qualified certification, and none were in the Inland region.

“Having 13 is crazy,” said Dan Evans, a spokesman for the San Bernardino County office of education. “That is a stunning number that should give everybody pause to say, ‘What’s going on here?’”

State and local education officials said the dramatic increase is a by-product of the prolonged state budget crisis and the unknowns surrounding tax measures being proposed to help fund schools. Paul Jessup, deputy superintendent of the Riverside County office of education, said moving school districts back onto solid financial footing will be difficult as long as the state’s financial woes continue.

“We’re in desperate need of an honest state spending plan,” he said. “We keep on getting budgets built on hope. Hope is not a plan.”

Districts have been required since the 1990s to file two financial reports, known as interim reports, one each by Dec. 15 and March 15. Districts review their fiscal health for the current year and two subsequent years. The reports look at cash flow, reserves, deficit spending, enrollment and attendance, status of labor agreements and more.

The county office of education reviews the reports and submits them to the state Department of Education. When districts have qualified or negative certification, they face additional oversight from the county office, which can step in to veto decisions on spending. In the worst case scenarios, a school district that has run out of money can seek an emergency loan from the state Department of Education.

To read entire story, click here.

By Jim Sanders
jsanders@sacbee.com
Published: Tuesday, May. 22, 2012 – 12:00 am | Page 1A

One week after Gov. Jerry Brown proposed slicing state workers’ pay by 5 percent, the Democratic governor and legislators find themselves targeted for a “share the pain” salary cut.

Members of California’s Citizens Compensation Commission said Monday that a pay-cut proposal for statewide officeholders will be on the table when the panel meets May 31.

Commissioner John Stites II said he supports a 5 percent cut for elected officeholders, from the governor to lawmakers.

“I definitely think they should take the same hit – at least,” Stites said. “Whatever happens to the people who work for you, whatever conditions they live under, it’s incumbent upon you to live under those same conditions.”

Brown projects a $15.7 billion budget shortfall for the fiscal year that begins July 1, and has proposed to bridge the gap with tax increases and program cuts, including a shift to a 38-hour, four-day workweek for state workers.

When he unveiled his revised proposal last week, Brown said his administration “would do more than what we ask state employees to do,” suggesting he and others would voluntarily take pay cuts.

Stites and other commissioners said they have no idea whether a pay cut would pass the seven-member panel of gubernatorial appointees.

Commission Chairman Tom Dalzell said he supports the notion of shared sacrifice, but that it would be premature to cut elected officials’ pay this year when the fate of Brown’s 5 percent wage cut for state workers has not been decided.

“It’s putting the cart before the horse,” Dalzell said.

The pay commission, created by voter passage of Proposition 112 in 1990, is responsible for determining compensation for all statewide elected officials. Salaries for California’s elected officials range from $173,987 for Brown to $95,291 for legislators.

The panel chopped officeholders’ pay and state contributions to their medical, dental and other benefits by 18 percent in 2009.

Legislators have taken additional hits to their compensation the past three years, with elimination of a Capitol car-lease program and a cut in lawmakers’ living expenses from $173 to $142 per day.

Commissioner Charles Murray stopped short Monday of committing himself to a new pay cut for officeholders. But they, too, should feel pain from this year’s belt-tightening, he said.

“Even though the legislators don’t consider themselves state workers, we do,” Murray said.

Commissioner Scott Somers was noncommittal about whether he would vote yes at the panel’s meeting next week at Sacramento City Hall. Somers said he supports the concept of shared pain but does not think elected officials should automatically be slapped with an equal cut any time state worker pay is reduced.

To read entire story, click here.

Sacramento– Gov. Jerry Brown’s latest budget proposal attempts to close a formidable $15.7 billion deficit, but the real debate at the Capitol in the next few weeks probably will be over how to cut just a fraction of the big amount.

That’s because about $2 billion in the governor’s budget represents permanent reductions in spending on state welfare, child care and other programs that Democratic leaders in the Senate and Assembly have pledged to protect.

Brown’s other budget proposals might be more controversial with the Legislature if the state weren’t facing such a large shortfall. Those include one-time solutions such as his proposal to seize almost $300 million from the national mortgage settlement that Attorney General Kamala Harris hoped to use to help distressed mortgage payers stay in their homes.

Some of Brown’s other reductions, like delaying the repayment of some loans, won’t cause a stir at all. The Legislature, which can pass a budget by a majority vote, has just under four weeks to approve a spending plan to cover the deficit by the June 15 deadline.

The scope of the dilemma faced by Democratic lawmakers and the governor was reflected in comments made by Senate President Pro Tem Darrell Steinberg, D-Sacramento, last week as he sought to reframe the situation by comparing it with the huge deficits of the past several years.

“I’m going to stop referring to this as a crisis,” Steinberg said. “It’s a problem.”

Not that the haggling on the relatively small permanent cuts will be easy. Both Brown and Steinberg predicted difficult negotiations, though Steinberg said, “I’m not looking for a big public fight here.”
4 touchy proposals

There are four main proposals over which Democrats and the governor are most likely to butt heads.

Those include proposed cuts to CalWORKS, the state’s welfare-to-work program; cuts to Cal Grants, which provides financial aid for low-income college students; reductions in state support for child care; and reductions to the In-Home Supportive Services program for the blind, elderly and disabled.

Brown has proposed $1.85 billion in reductions to those programs, including:

– An $880 million cut to CalWORKS by reducing from four years to two years the amount of time adults can receive welfare payments if they do not meet specific requirements for work activities.

– A $292 million cut to Cal Grants by increasing the minimum grade point average for students to qualify and reducing grants for students attending private or for-profit colleges and universities.

– A $425.5 million cut in the funding the state gives families to subsidize child care expenses, resulting in the loss of 29,600 child care slots.

– A $224.5 million cut to In-Home Supportive Services through a 7 percent reduction in hours for providers and by eliminating some services for people who are in a shared living arrangement.

To read entire story, click here.

Legislative Democrats aren’t organizing a bake sale just yet, but they say they will desperately search for cash in the coming weeks to avoid the most severe cuts proposed by Gov. Jerry Brown.

Saying the state’s budget deficit has risen from $9.2 billion to $15.7 billion, the Democratic governor has proposed more cuts to programs that serve the state’s poorest residents.

Brown has described it as a “day of reckoning” and wants his fellow Democrats to slash as much as possible before he asks voters to hike taxes on sales and high-income earners in November.

But Democrats signaled immediately that they plan to block some of the deepest cuts to welfare, child care and college scholarships for low-income students.

“We will scour the cupboards, look behind the pots and underneath the cushions, doing everything we can do to see if there’s some opportunity to reduce the extent to which we have to make these cuts,” said Assemblyman Roger Dickinson, D-Sacramento.

Democratic lawmakers say they have cut enough in the wake of the recession and that Brown’s proposals would result in homelessness, even death.

“To me, a cut that you know may result in the difference between life and death, and a cut that will increase homelessness, it’s our obligation to avoid those cuts,” said Senate President Pro Tem Darrell Steinberg, referring to proposed cuts in welfare grants.

Several Democrats said they want to “buy out” Brown’s cuts with creative ideas but offered few specifics. In the past, that has meant one-time accounting maneuvers, fund shifts and inventive changes that often fall short.

The governor insists the cuts are necessary to solve California’s budget problem not just this year, but in future years. Told that Democrats want to “buy out” his cuts, Brown responded, “With other cuts?”

“The key to true budget balance (is) ongoing cuts, and they are the most difficult, but also absolutely indispensable,” Brown said.

Besides his need to balance the budget, the governor has ample political motivation to persuade Democrats to approve as many cuts as possible, said Dan Schnur, a former GOP consultant who serves as director of the University of Southern California’s Jesse M. Unruh Institute of Politics.

“Brown seems to understand the voters don’t trust state government with their money, so he’s been trying to find a way, whether through pension reform or cuts in these areas, to regain some fiscal credibility with them,” he said.

Since 2007-08, lawmakers have cut monthly grants and reduced the time limit in the state’s welfare-to-work program, CalWORKs. The maximum grant for a family of three fell from $723 to $638 a month. Adults cannot receive benefits after four years, rather than five.

The state has slashed child care for low-income parents by imposing stricter income-eligibility requirements and cutting funding to child care providers.

California still has a disproportionate share of the nation’s welfare cases, because of the state’s demographics – a large share of younger, poorer residents – and the state provides aid for children after their parents exhaust eligibility.

But Democrats say cuts have been too fast and too severe. Brown now proposes to revamp the CalWORKs program by cutting off aid after two years rather than four for parents who do not seek work, training or education. The plan would save $880 million.

“We recognize that we’re going to have to make some cuts,” said Sen. Curren Price, D-Inglewood. “But we think these areas have already been cut to the bone. And so we’re going to be looking for ways to increase revenues. Taxes are certainly one way. Taking a look at some other loopholes, seeing how we can shift funds around.”

To read entire story, click here.

By Chris Megerian, Los Angeles Times
May 19, 2012

SACRAMENTO — California’s budget deficit may be more than $1 billion larger than even Gov. Jerry Brown’s latest estimate, the Legislature’s financial advisor said Friday.

Brown announced last weekend that the deficit had swelled from $9.2 billion to almost $16 billion. But the nonpartisan legislative analyst’s office said there may be less money available than the governor assumed, possibly increasing the budget gap to at least $17 billion.

The bulk of the difference lies in questions over money from defunct local redevelopment agencies. Brown wants to use $1.4 billion in leftover assets to help plug the budget gap, and the state expects to collect property tax money that used to fund the agencies.

However, Legislative Analyst Mac Taylor’s review said there’s “considerable uncertainty” about that sum and expects it to be much lower, raising the deficit by $900 million.

Taylor said money may be siphoned off before it reaches the state because of the defunct redevelopment agencies’ previous obligations, such as construction projects or bond payments. Lawsuits over the dissolution of the agencies could further complicate the problem.

Before the state knows exactly how much money is available, Taylor said, “we have to do audits and checks.”

H.D. Palmer, a spokesman for Brown’s Department of Finance, said the administration is crafting legislation that would allow the state to collect the redevelopment money it wants to balance the budget. The legislation will be considered by lawmakers along with the rest of the budget.

The budget gap could widen further if Taylor’s estimates about tax revenue are correct. He expects the state to collect $392 million less in taxes in the upcoming fiscal year than Brown predicts.

Taylor called that a “rounding error” — just 4% less than Brown’s $95.7-billion estimate — and said the governor’s proposal appears reasonable otherwise.

Still, the usual vagaries of California’s economy make it difficult to map out a spending plan. The state relies heavily on income tax revenue to fill its coffers, and tax receipts have been unpredictable.

To read entire story, click here.

The pile-on was in full effect within hours of Gov. Jerry Brown’s announcement this week that California’s budget deficit had grown to $15.7 billion, with The Week giving its national audience a summary of the Golden State’s financial affairs.

“California’s financial apocalypse,” the magazine offered. “A concise guide.”

Fox News played the Red Hot Chili Peppers’ “Californication,” and host Greg Gutfeld proclaimed Brown captain of “the Titanic that is California, a state so broke it may ask Greece for a loan.”

On Friday, the Democratic governor slapped back on national TV.

“This is not Europe,” Brown told Charlie Rose on “CBS This Morning.” “This is still the Wild West, and we’re going to prove to the rest of this country and the world that we know how to do it.”

For Brown – and California – it may be a tough sell.

Though no part of the country was immune from the effects of the recession, California’s latest deficit projection comes as many other states begin to climb out of their own budget sloughs.

Fewer state budget deficits are being projected than in recent years, the National Conference of State Legislatures said in a report this month, with revenue in most states meeting or exceeding expectations.

“This is good news for state lawmakers who have closed more than $500 billion in budget gaps over the previous four fiscal years,” the report said.

As budget officials elsewhere were describing their financial situations as “cautiously optimistic” or “stable,” the Conference of State Legislatures said, California lawmakers “continue to cope with the state’s multibillion (dollar) gap between projected revenues and anticipated expenditures.”

On Friday, the nonpartisan Legislative Analyst’s Office said California’s deficit may be even larger than Brown’s latest projection, perhaps higher than $17 billion. Though state revenue is growing, the amount is less than officials hoped.

Brown’s revised deficit estimate, released Monday, already was 70 percent greater than he projected in January. In an interview taped Thursday, Rose asked him, “What happened?”

“Very simple,” Brown said. “We’re not fortunetellers. We don’t have clairvoyance.”

On the East Coast, pundits noticed.

The Wall Street Journal chided with the headline “California Ugly.” Even with state tax collections ticking up nationally last year, the newspaper scolded, “California can’t seem to keep up despite one of the highest tax rates in the land.”

In a fall survey of states, the National Governors Association and National Association of State Budget Officers found the overall condition of states improving since the height of the recession. Even so, spending nationwide remains hampered by rising health care and education expenses, among other costs, the report said.

To read entire story, click here.

Sandra Emerson, Staff Writer
Created: 05/17/2012 07:23:12 PM PDT

UPLAND – The City Council has been updated on the condition of the city’s budget and will meet next week to decide where to make cuts.

City Manager Stephen Dunn presented the council with an update on the city’s fiscal condition during a special meeting on Wednesday, asking it to set its priorities so staff could find a way to absorb $3.4 million in obligated expenses.

“I have $400,000 in new revenues I can apply to services in the general fund. I have $3.8 million in what we call obligated expenditures, so I am saying that I am already short $3.4 million from where we are right now,” Dunn said.

The council asked Dunn for more information on the impact of the cuts and scheduled another special meeting at 7 p.m. Wednesday.

Dunn asked the council to consider reallocating resources, which would take money from selected departments to give to others. Or, make each department absorb its own obligated expenditures, which would result in a higher service level reduction in public safety.

Councilman Ken Willis asked Dunn to have staff prepare two budget scenarios for the next meeting.

“My recommendation is that we share across the board. It’s not fair for one individual group to take the brunt of it,” said Councilwoman Debbie Stone. “This is something we need to look at and figure out a way to make it work.”

The city expects to see about $2.2 million increase in its general fund revenues – $400,000 in new revenues and $1.8 million in budgetary accounting changes.

The city has identified about $3.8 million in obligated expenditures that will need to be absorbed moving into the 2012-13 fiscal year. The $400,000 in new revenue makes the shortfall from the current fiscal year $3.4 million.

Of the $3.8 million, $2.3 million is in labor costs, $400,000 is in operational costs and $1.1 million is in legal costs.

The police contract is estimated to cost the city about $700,000. However, police unions Wednesday presented Dunn with a list of concessions they are willing to make that will reduce their impact on the budget.

“I will be in the process of analyzing those concessions,” Dunn said. “They realized what’s happening with us, and they stepped up to the plate, so I really appreciate that.”

Contractual merit increases add up to $400,000, but Dunn said he will be asking employee groups to forego the increases.

The city is obligated by the Public Employees Retirement System to pay $1.2 million in the next fiscal year.

The rest of the shortfall is in operational expenses as well as legal expenses.

About $1 million of the $1.1 million in increased legal costs is for the San Bernardino County Flood Control’s lawsuit against the city.

To read entire story, click here.

By Ed Mendel
Thursday, May 17, 2012

The CalPERS board yesterday raised the annual state payment for state worker pensions $213 million to a total of $3.7 billion, rejecting Gov. Brown’s request for a bigger increase to avoid a “loan” costing “$145.9 million over the next 20 years.”

Unions asked the board to spread out higher pension costs mainly caused by a lower investment earnings forecast. Paying part of the new rate over two decades, instead of the full amount now, makes an extra $149 million available for worker pay and other programs next fiscal year.

Although the amount of money may be relatively small, compared to the $16 billion state budget deficit revealed this week, the issue is the big one facing public pensions.

Like former Gov. Arnold Schwarzenegger, who also unsuccessfully urged CalPERS to adopt higher state rates, Brown is asking the Legislature to enact cost-cutting pension reforms.

Painful increases in annual employer pension costs might increase public pressure for pension reform. But paying more now to avoid higher costs later also reflects the view that pensions are seriously underfunded.

Most pension funds expect to get about two-thirds of their revenue from investment earnings, not annual employer or employee contributions, and critics say the earnings forecasts are too optimistic.

Alarm grew when a deep economic recession, and a stock market crash in 2008, punched a big hole in pension investment funds. The CalPERS investment portfolio, still well below its peak of $260 million in 2007, was valued at $229.4 billion Tuesday.

CalPERS state worker plans were on average 70 percent funded last June 30 with an “unfunded liability” of $38.5 billion. That’s the shortfall in projected assets needed to pay for pensions over the next 30 years.

The state has a much larger debt for retiree health care promised current state workers over the next 30 years — $62 billion according to an actuarial report done for state Controller John Chiang.

There is no dispute about whether strong investment returns will help close the retiree health care funding gap. Legislation by former Assemblyman Dave Elder, D-Long Beach, created a retiree health care fund two decades ago.

But lawmakers chose not to put money in the fund. Now state worker retiree health care is a pay-as-you-go plan, up more than 60 percent in the last five years and costing the state general fund about $1.5 billion in the current fiscal year ending June 30.

Pension and other retirement costs are still a relatively small part of the current state budget, which is expected to spend $87 billion from the general fund and $34 billion from special funds for health, transportation and other programs.

The state is paying CalPERS $3.5 billion ($1.9 billion general fund), retiree health care $1.5 billion, California State Teachers Retirement System $1.3 billion, Social Security $500 million and Medicare $240 million.

In contrast, cities spend most of their budget on personnel, not on a range of programs like the state, and some cities are already overwhelmed. San Jose spends 20 percent of its general fund on retirement, an argument for a pension reform on its June ballot.

The state could have a much bigger pension problem if CalSTRS was properly funded, not to mention retiree health. Officials estimate that CalSTRS needs an additional $3.25 billion a year to be fully funded in 30 years.

Unlike the California Public Employees Retirement System and most public pensions, CalSTRS lacks the power to set annual contribution rates that must be paid by employers, needing legislation instead.

CalSTRS, about 69 percent funded, has been seeking a rate increase for five years. It’s offered legislators a half dozen scenarios that begin to phase in a rate increase in 2016, only one of which is projected to get CalSTRS to 100 percent funding.

The power of CalPERS to give the governor and the Legislature an annual bill that must be paid can be a friction point. In the dispute over paying off part of the new rate increase over 20 years, board members said they were giving lawmakers an option.

To read entire column, click here.

Capitol Alert
The latest on California politics and government
May 15, 2012

As Standard & Poors urged lawmakers Tuesday to pursue “credible” budget solutions to bridge the state’s $16 billion deficit, the ratings agency did not approve of Senate leader Darrell Steinberg’s idea to forego a reserve this year.

In the report, S&P suggested it could lower the state’s ratings outlook or even impose a downgrade if lawmakers and Gov. Jerry Brown don’t pursue real solutions that bolster the state’s cash situation this summer. The state still has a “positive” outlook but an A- credit rating, which rates lowest in the nation.

Brown built a $1.05 billion reserve into his $91.4 billion general fund budget for 2012-13. Steinberg said yesterday that one idea was to use that money instead on public programs.

To read entire story, click here.

By Jon Ortiz
jortiz@sacbee.com
Published: Wednesday, May. 16, 2012 – 12:00 am | Page 1A
Last Modified: Wednesday, May. 16, 2012 – 6:26 am

One day after Gov. Jerry Brown proposed sweeping changes to state government work schedules, many employees were still deciphering what it means for them.

Brown wants to move most of California’s 214,000 workers to four-day workweeks and 9.5-hour shifts starting July 1. The change would reduce state workers’ hours and pay by 5 percent each month and cut state payroll by about $839 million, $401 million of it from the deficit-ridden general fund. Many departments would be closed on Fridays, some on Mondays.

Here are some of the most frequently asked questions from reader emails and comments on sacbee.com:

>So now what?

Marty Morgenstern, the Brown administration’s Labor and Economic Development Agency secretary, said the state will meet with departments and labor union officials to hammer out the particulars.

Look for those talks to heat up immediately, because Brown wants the new arrangements in place in time for the July 1 start of the 2012-13 fiscal year.

>Are the unions going for it?

It’s difficult to make a blanket characterization: A dozen unions represent 181,000 state workers divided into 21 bargaining units who perform thousands of different jobs.

But it’s clear that labor had a hand in shaping the proposal. For example, Brown’s budget also calls for cutting back on outside contracts for services such as janitorial and security work and computer technology consultants.

SEIU Local 1000, the largest state worker union, has argued for years that California pays too much for those kinds of vendor service contracts. Of course, ending that outsourcing would mean more jobs for state employees who are covered by the union.

By giving SEIU what it wants, it raises the likelihood that the 95,000-member union will go along with Brown’s furlough plan and make it harder for the other smaller unions to resist.

>State workers are all under contract right now. Doesn’t this violate those agreements?

Brown says he wants to honor the bargaining process, but that doesn’t mean that the contracts would need to be reopened. The changes could be enacted through short side-letter agreements that focus on the scheduling changes and nothing else.

>How long would the state run on the four-day schedule and cut employees’ pay?

Finance Department spokesman H.D. Palmer said the arrangement “could extend beyond the 2012-13 year.” That’s a detail that the administration needs to hammer out with the unions.

>What leverage does Brown have?

The governor could lay off employees, but that seems a stretch, given that the state already has shed 15,000 positions in 2012-13 and Brown anticipates cutting another 11,000 in the coming fiscal year. The layoff process is cumbersome, too, and Brown needs savings quickly to plug a $15.7 billion deficit.

Brown’s hand could be strengthened if Democratic legislators signal they’re willing to use their authority to circumvent labor contracts and impose pay cuts or furloughs if the unions don’t cooperate.

>Would Democrats really do that to their friends in organized labor?

Under severe budget pressure in 2009, the Legislature erased two paid state holidays and changed overtime rules without the unions’ consent. Nearly two years ago, the threat of legislative action on pension reform prodded labor leaders to compromise with then-Gov. Arnold Schwarzenegger.

>Would union members vote on the schedule changes? What’s the Legislature’s role?

To read entire story, click here.

Dan Walters

By Dan Walters
Published: Wednesday, May. 16, 2012 – 12:00 am | Page 3A

Poker players often use the phrase “betting on the come” to describe a willingness, if instincts and odds indicate, to wager big on the hope that they will draw winning cards.

That’s a perfectly valid tactic when one is playing with one’s own money and therefore bearing the risk.

But is it appropriate for California politicians to bet on the come by approving many billions of dollars in spending on very shaky assumptions that the money will be there when it’s needed to pay the bills?

Risk was the underlying theme of two hearings in the Capitol on Tuesday.

One dealt with Gov. Jerry Brown’s newly revised budget, which assumes that voters will approve new taxes, and the other with the Brown-sponsored bullet train project, which assumes that the federal government will finance completion once it’s started.

Brown and his minions respond to doubts about those assumptions with assurances that if the taxes are not approved or the feds don’t provide bullet train money, they’ll have coping mechanisms that mitigate the risk.

He proposes “triggers” that would automatically cut spending if taxes are rejected, and to simply halt construction if the bullet train lacks financing. But those are fail-safe mechanisms only on paper, not in realpolitik terms.

Under Brown’s budget, the schools would suffer nearly all of the spending cuts were taxes to be rejected. He’s clearly doing that to push voters toward his tax plan, since schools are the single most popular category of state spending, but it’s very unclear that the very powerful education lobby and Democratic legislators would be willing to make that gamble.

To read entire story, click here.

By Judy Lin, Associated Press Writer
Posted: 05/15/2012 09:21:09 PM PDT
Updated: 05/15/2012 09:22:38 PM PDT

SACRAMENTO – Gov. Jerry Brown is pleading with Californians to raise their taxes as part of his solution for solving the state’s budget deficit, but it’s uncertain whether voters will be in an accepting mood come November.

Polls show voters want more money for schools but don’t want to tax themselves to pay for it. They continue to be pessimistic about the economy in a state with one of the highest jobless rates in the nation. And they distrust the Legislature, which oversees the budget.

Brown is facing a tough environment after announcing over the weekend that the state’s deficit had risen to $15.7 billion, much larger than he said a few months ago, said Jack Pitney, a political science professor at Claremont McKenna College in Pomona.

“When the governor says devastating things are going to happen, people will say, `Look, you said the shortfall was going to be a lot smaller than it was. You were wrong then; why should we believe you now?”‘ Pitney said. “The governor is facing a trust deficit as well as a fiscal deficit.”

On Tuesday, the Democratic governor defended his plan to raise the statewide sales tax and seek higher income taxes on the wealthy, warning of deep cuts that include a school year shortened by as much as three weeks if voters reject his taxes.

He said it was not a scare tactic but rather the stark reality of a state that is not taking in enough tax revenue to cover its expenses. His administration projected that California’s economy will continue to recover at a modest pace but housing and unemployment continue to be a drag.

To read entire story, click here.

Molly Munger talks about her tax proposal earlier this year. (Rich Pedroncelli / Associated Press)

By Steve Lopez
May 16, 2012

In March, when I wrote that the tax increase proposals by Gov. Jerry Brown and civil rights attorney Molly Munger were unimaginative if not doomed, I got an email from Munger.

She did not agree, at least with regard to her initiative.

“Unimaginative?” she wrote, inviting me to meet with her.

This week, I decided to take her up on her offer after watching Brown admit that the financial mess he told us about in January was nothing compared to the mess we’re in now. Frankly, I don’t know how the January estimates were so far off the mark, with a $9-billion hole turning into a $16-billion hole in less time than it takes to grow tomatoes. Why should we trust the next set of numbers Brown throws at us?

The governor’s latest proposal is for $11 billion in cuts, and they would come with a warning that if we don’t pass his temporary sales and income tax hike in November — which would raise as much as $6 billion — the suffering will intensify and public schools will be hit even harder.

Look, I know this mess isn’t Brown’s fault, but I’m getting tired of his threats and his shortsighted “fixes.” It’s like having the foundation of your house flooded by a broken water main, and the plumber suggests you spend $75 to fix the leaky bathtub faucet.

And as Munger points out, even if the public backs Brown’s plan, schools are still going to be in big, big trouble.

“We’re bleeding, and it’s a tiny Band-Aid,” she said when we met Monday afternoon at Buster’s in South Pasadena, not far from where she lives.

Her plan would raise $10 billion a year by increasing income taxes on a sliding scale, all of it to retire school bonds and support education.

Brown on the other hand would temporarily raise income taxes on the wealthy and sales taxes on everyone, but only some of it would go to schools and the rest to various other services.

Does either have a chance?

I’m not terribly optimistic, but for all the parrots out there who do nothing but chirp about how California has a spending rather than a revenue problem, the fact is that Brown’s proposed $91-billion general fund budget would be roughly 10% smaller than the budget just five years ago. And as my colleague George Skelton has pointed out, general fund spending per $100 of income is lower today than it was in Ronald Reagan’s last year as governor.

So it’s at least possible that Californians would be willing to bite the bullet and raise taxes on themselves if they thought schools would benefit. But which bullet? It’s hard to believe that having two proposals on the ballot won’t lower the odds of either one passing.

Munger told me she and Brown have chatted, and the governor “talked about how campaigns can get very tough.”

Whoa! Was the governor threatening her to back off and clear the way for him or he’d wage a nasty campaign against her?

Munger keeps her cards close. She wouldn’t answer me directly, but said rather than one of them backing off, or waging a kickboxing competition, she’d rather see a scenario in which she supports the governor’s proposal and he supports hers. Even though if his got more votes, hers would be null and void.

And?

To read entire story, click here.

By Marc Lifsher
May 15, 2012, 9:05 p.m.

SACRAMENTO — The state government’s contribution to employee pensions is expected to jump to $3.7 billion from $3.5 billion in the fiscal year that starts July 1.

On Tuesday, a committee of the board of the California Public Employees’ Retirement System recommended the increase as well as a $29-million drop to $1.2 billion for non-teaching school and community college district workers.

Even with the increase, the state’s contribution is lower than the $3.9 billion paid in fiscal 2010-2011, CalPERS said.

The biggest factor in next spending year’s rise was a board decision in March to lower the fund’s expected average annual rate of return on investments to 7.5% from 7.75%, CalPERS said.

To read entire brief, click here.

Watching the sad spectacle of Governor Gandalf yet again expounding on California’s budget horrors Monday was like going to see one of those dreadful, anemic sequels to a long-ago tapped-out blockbuster franchise.

“Jaws 5: Devouring the Poor,” maybe, or “Die Hard Drowning in Red Ink” or even, “Groundhog Day 2: Punxsutawney Phil’s May Revise.”

The only thing worse was reading the inane Back East commentary, written by the usual assortment of Romney-sniffing blowhards, ill-informed thumbsuckers and right-wing mantra-chanters whose knowledge and understanding of California politics seems proscribed by the collected rantings of Flashreport freelancers and the world’s shortest book, viz. The Wit and Wisdom of Jon Coupal.

By far the day’s dumbest offering was submitted by the Wall Street Journal’s William McGurn, who must have spent at least 10 or 15 minutes after lunch coughing up his hairball analysis comparing Jerry Brown to Chris “Two Man” Christie without mentioning what you might call some of your Key Differences between California and New Jersey like, oh say Prop. 13, Prop. 98 or the two-thirds vote. But we digress.

The funniest comment came from the governor his own self, who put a new entry into Krusty’s Collected Coinages by characterizing the maze of interlocking and convoluted political and financial entanglements that define the chronic budget mess as “a pretzel palace of incredible complexity.”

Spurred by that fine phrase, utterly exhausted by watching the wheezy old Lakers vainly try to run with the OKC Thunder and certain that, as past is prologue, everything worth saying about the budget plague has long ago been said, we burrowed deeply into our incomparable Dustbin of History Archive, returning to the surface with three Calbuzz Classics that frame the issue for all time:

Why California is still broke(n). Once upon a time, before anyone had heard of Tanning Mom, Instagram or Dubstep, we proved with geometric logic that the state’s fiscal woes, far more than a simple matter of budgetary arithmetic, in fact result from a confluence of mind-numbing political calculus.

Since then, some incremental progress has been made in addressing the utterly dysfunctional structure of state government, most notably the terrific job done by the Citizen’s Redistricting Commission and the electorate’s willingness to throw down a bet on the new top-two primary system as a way to send at least a few more pragmatic pols and a few less ideological hacks to the swampland of Sacramento. Sadly, the bottom line remains the same:

As state and local officials struggle to weather a fiscal crisis that threatens to drive California into insolvency, they wield power with the damaged machinery of a patchwork government system that lacks accountability, encourages stalemate and drifts but cannot be steered.

Friends make the worst enemies. Of all the budgetary idiocy that’s unfolded since Gandalf took office, not least of it the Department of Finance’s blue-sky, rosy scenario revenue projections last summer, the single lamest move may be the legislative leadership’s delay of previously agreed-to cuts that made the current awful problem worse, a shining example of a political dynamic we described with a major assist from Calbuzz Poet Laureate William Butler Yeats.

But for a governor of California in recent years – at least since the days of Pete Wilson and Willie Brown, when leaders had power and deals could be made and enforced — finding that one’s most difficult challenge is the opposition party is actually an anomaly. For Gray Davis, Arnold Schwarzenegger — and this year Jerry Brown — the most debilitating opposition force in Sacramento is the extreme wing of his own party…

Jerry Brown is a centrist. Like Wilson, Davis, Schwarzenegger, he is trying to hold the center while those filled with passionate intensity flap and swirl around him. It is no service to the civic good for those on his left to set loose mere anarchy…

To read entire story, click here.

Tuesday, May 15, 2012 – 04:50 p.m.

Here is some news reverberating across the transom this week.

Brown wants portion of Harris foreclosure settlement

You gotta love it.

California Governor Jerry Brown, in an effort to cobble together more money to blow, wants to steal hundreds of millions of dollars meant to help distressed homeowners. The dough, a part of a national foreclosure settlement obtained by Attorney General Kamala Harris, is meant for distressed homeowners.

Harris has objected to Brown’s position.

And Brown appears as if he could care less.

One can only image what Harris is saying behind closed doors.

Issa endorses Cook

Stop the presses!

Congressman Darrel Issa (R-Vista) has endorsed Assemblyman Paul Cook in his quest to represent the 8th Congressional District.

Now this nod is definitely a scale tipper.

Laugh out loud.

CD 8 -  The Marine factor?

The battle of the Marines.

Yes, in the full out war in the 8th Congressional District, Assemblyman Paul Cook, a retired Marine colonel, and San Bernardino County Supervisor Brad Mitzelfelt, a former Marine Non-Commissioned Officer, are pressing those credentials hard.

The latest mailers has Cook displaying his medals, while Mitzelfelt is in full dress uniform.

It was Cook’s ballot title of Retired Marine Colonel that swept him into the 65th Assembly District six years ago.

A title now unavailable to him this go around.

U.S. Postal Service slow with campaign mail deluge

The U.S. Postal Service is struggling to deliver campaign mail this go around.

The combination of heavily contested races along with San Bernardino County’s new rocket scientist registrar of voters has buried mail carriers.

Registrar Michael Scarpello decided to hold off on the early mailing of sample ballots this year.

Scarpello decided voters were irresponsible in keeping the pamphlet available.

This year the sample ballots were mailed at virtually the same time as actual absentee ballots.

The only addressee’s receiving political mail in a timely manner?

Voters using P.O. Boxes!

Tuesday, May 15, 2012 – 08:30 a.m.

Was it the plan all along or just plain incompetence?

Governor Jerry Brown’s screwing over of the California budget that is.

Did Brown feel he needed a forest fire to brainwash voters into passing his November tax increase?

We may never know. But it sure looks like he’s capitalizing on the state’s budget buffoonery, when it comes to budgeting.

For the past five months, all we have been hearing from Brown is how we need more taxes so he and state democrat lawmakers can keep spending at current outrageous levels.

But, Brown has never really addressed shrinking the size of the bloated state government in any meaningful way.

The number of state workers on active payroll really hasn’t fallen.

After all, that would upset his labor union support.

Now Brown wants to play the furlough game.

Yes, Brown wants to have state workers switch to four, nine and one-half hour, days per week.

And that temporary sales tax an income tax increase? Try seven years.

Can you say permanent?

At this point, with three measures on the ballot, it’s questionable whether voters will approve any tax hike.

Brown should worry.

California Governor Jerry Brown

By Kevin Yamamura
kyamamura@sacbee.com
Published: Tuesday, May. 15, 2012 – 12:00 am | Page 1A
Last Modified: Tuesday, May. 15, 2012 – 6:17 am

Gov. Jerry Brown announced Monday that the state budget deficit had grown by a remarkable 70 percent since January, but fiscal experts said the economy had little to do with it.

They instead blamed a bad marriage of volatile capital gains and political intransigence that led state leaders last year to count on a huge upswing in revenues that never materialized. At the same time, corporate tax changes from 2009 appear to have cost California more than state officials ever realized.

The Democratic governor says the general fund deficit has mushroomed from $9.2 billion to $15.7 billion. Most of the widening gap comes from acknowledging that his previous forecast was too optimistic, a concern that economists voiced last summer.

“I think the sense we were all getting last year was that we were getting to the end of our rope in solutions,” observed Brad Williams, a fiscal forecaster who previously worked for the Legislative Analyst’s Office. “This was what was left – an aggressive forecast.”

The recession has had a lasting impact on a general fund budget that dropped from $103 billion in 2007-08 to $86 billion this year.

But nothing significant has changed in the California economy this spring to warrant such a dramatic growth in the deficit.

While housing and government jobs have yet to experience much recovery, taxes from paycheck withholding and sales are slowly growing. Export and high-tech sectors are robust.

“There’s nothing wrong with the economy,” said Chris Thornberg of Beacon Economics. “The problem here is the process. Simple as that.”

The deficit also grew because federal judges and administrators rejected cuts to Medi-Cal and in-home care programs. The state owes more to schools in 2012-13 because of how funding formulas work, another symptom of the faulty revenue projection.

A year ago, Brown issued a different May budget on an upbeat note after state coffers overflowed in April 2011.

That tax boost put the state on a higher glide path, but Democratic lawmakers and Brown doubled down when May and June also saw more revenues and they could not persuade Republicans to support a tax measure.

They turned to more optimistic projections after the governor vetoed Democrats’ first budget, which contained a sale of state buildings, use of First 5 early childhood money that has since been blocked by a judge and a questionable maneuver to pass a quarter-cent sales tax by majority vote.

Their eventual budget deal had the state counting on another $4 billion more in 2011-12. Brown’s Department of Finance now predicts the state won’t collect the $4 billion and will fall an additional $1.2 billion short.

Capital gains have become an increasingly significant part of California revenues over the past two decades, and with it comes instability in state revenues and forecasting.

The upcoming sale of Facebook stock is expected to net $1.5 billion for the state through June 2013, and possibly an additional $400 million if voters pass the governor’s tax hike on wealthy earners.

Brown said Monday he thought last year’s actions were “reasonable when we did it.” He blamed the missed projection on the volatile nature of the state’s tax system and called the state budget “a pretzel palace of incredible complexity.”

Twice, he referenced JPMorgan Chase CEO Jamie Dimon, whose firm recently revealed a $2 billion trading loss, calling that “a big miss.”

“The capitalist system is not coincident with your expectations of exactitude,” Brown said. “It doesn’t play out like we may want it to.”

To balance this year’s budget, Brown has proposed a mix of spending cuts, fund shifts and his $8.5 billion tax hike on sales and wealthy earners. Some of the deepest reductions hit poor Californians, such as stricter requirements in welfare-to-work, lower payments to Medi-Cal providers and a reduction in Cal Grants. He also has proposed trimming the 40-hour workweek by two hours for state workers.

To read entire story, click here.

UPDATED: 2:45 p.m.

Gov. Jerry Brown on Monday implored voters to approve his tax proposal as he presented a revised budget plan to address a deficit that has ballooned to $16 billion.

“We have a more difficult problem. We’re going to have to cut deeper,” Brown said. “But cutting alone really doesn’t do it. That’s why I’m linking these serious budget reductions — real increase to austerity — with a plea to the voters: Please increase taxes temporarily on the most affluent and everyone else.”

The governor’s revised plan calls for an additional $4.1 billion in cuts on top $4.2 billion in reductions already proposed in January, but Brown’s message was squarely focused on the state’s need for more revenue. Brown recently submitted signatures to qualify his seven-year tax hike for the November ballot. It calls for increasing the sales tax by a quarter percent while also raising personal income taxes for individuals making $250,000 or more per year.

If the taxes aren’t approved in November, Brown’s budget plan calls for an automatic $6.1 billion “trigger cut” in addition to the $8.3 billion in other cuts. The majority of the trigger cut would be to schools, which has Republicans grousing that the governor is intentionally targeting education to gain voter support.

“If the taxes don’t pass, (schools) get 97 percent of the cuts,” said Senate Republican Leader Bob Huff of Diamond Bar, whose district includes part of Orange County. “…That’s a little bit disingenuous, because you know people want to fund education. But if that’s the lever that they can pull to get people to support the so-called temporary taxes that are now seven years, then that’s the lever they’re going to pull.”

In January, when Brown initially presented his 2012-13 budget proposal, his office pegged the deficit at $9.2 billion. Brown said it has since grown to $16 billion because of the economy and because the federal government and courts have blocked some reductions. But on Monday Brown had to acknowledge he played a role in the increase as well when he and the Legislature approved last year a budget based on the rosy assumption of a $4 billion increase in tax receipts. That money never materialized.

“Here’s the deal: We have an uncertain economy. We had very good revenues in June (of last year). It looked like we had the money. And therefore we put the budget together the way we did,” Brown said. “…It’s very easy to play gotcha.”

To address the bigger gap, Brown proposes additional cuts to Medi-Cal, the court system, child care services and in-home supportive services, among others. Brown is also proposing a 5 percent reduction in employee pay, to be achieved through negotiations with public employee labor unions. Brown’s plan to cut pay involves moving some state employees to a four-day work schedule and reducing their weekly hours from 40 to 38.

Under that proposal, some state offices would change their hours from 8 to 5 Monday through Friday to a 7 to 7 Monday through Thursday. For all practical purposes, the idea is very similar to the “Furlough Fridays” enacted under Gov. Arnold Schwarzenegger, but the Brown administration and Democrats in the Legislature both said this plan won’t face the same opposition from public employees.

To read entire story, click here.

L.A. NOW
Southern California — this just in
May 14, 2012 | 1:29 pm

State judicial leaders warned Monday that the proposed cuts for the California courts may jeopardize public access to the justice system.

During the last three years, the state’s huge court system has been cut by $650 million. The new proposed budget would shrink the system by another $544 million, freezing construction to replace dilapidated courthouses.

The new cuts come after Gov. Jerry Brown released a revised $91-billion budget in response to the state deficit that has ballooned to $16 billion, nearly twice what the governor projected when he released his initial budget proposal in January. In addition to the court cuts, Brown is proposing sharp cuts to health and welfare spending, and a 5% reduction in state payrolls.

California Chief Justice Tani G. Cantil-Sakauye called for an emergency meeting Monday of judicial leaders to determine how the courts should respond.

“The proposed cuts to the judicial branch are both devastating and disheartening,” Cantil-Sakauye said. “They will seriously compromise the public’s access to their courts and our ability to provide equal access to justice throughout the state.”

To read entire story, click here.

Dan Walters

By Dan Walters
Published: Tuesday, May. 15, 2012 – 12:00 am | Page 3A

Just a few months ago, Gov. Jerry Brown chastised “declinists” and “dystopian journalists” for their pessimism about California, particularly about emerging from a deep recession.

“Contrary to those critics who fantasize that California is a failed state, I see unspent potential and incredible opportunity,” Brown told the Legislature in January, citing supposed signs of economic recovery.

On Monday, however, Brown blamed a sluggish economy for revenues falling billions of dollars short of the rosy estimates in the budget he signed last June.

“You can never get it quite right,” Brown told reporters as he released a revised budget aimed at closing a deficit he pegged at $15.7 billion, $6.5 billion more than his previous estimate.

“We have an uncertain economy,” he added, describing revenue and deficit numbers as a “guesstimate.”

Whatever the deficit may truly be, Brown’s revised 2012-13 budget is as much a political document as a fiscal one, clearly aimed at persuading voters to approve new sales and income taxes next November.

One of the charts he displayed uses $16.7 billion as a goal ($15.7 billion deficit plus a $1 billion reserve) and claims that his budget relies on $8.3 billion in cuts for half, while counting on just $5.9 billion in new revenues, plus $2.5 billion in other moves, mostly one-time shifts.

His goal, quite obviously, is to prove to voters that he isn’t just asking them to pay more taxes, but is also slashing health and welfare services, courts, state employees’ pay and other spending categories.

“California has been living beyond its means,” he said. “There has to be a balance and a day of reckoning. This is a … day of reckoning.”

To read entire story, click here.

Gov. Jerry Brown’s announcement that the state’s deficit has swelled to $16 billion (from a $9.2-billion estimate in January) means that a new array of budget cuts are likely.

But where to cut?

Talk back LAAs The Times’ Anthony York and Christopher Megerian reported Sunday, Brown’s announcement doubled as a sales pitch for tax hikes that he hopes voters approve at the ballot box in November. He said budget cuts, primarily to public education, would be even worse without increasing the sales tax a quarter-cent for four years and raising levies on incomes of $250,000 or more by 1 to 3 percentage points for seven years.

“We can’t fill a hole of this magnitude with cuts alone without doing severe damage to our schools,” Brown says. “That’s why I’m bypassing the gridlock and asking you, the people of California, to approve a plan that avoids cuts to schools and public safety.”

Assembly Speaker John A. Pérez (D-Los Angeles) said severe spending reductions in previous years have left few places for lawmakers to make more cuts, meaning higher taxes are needed to close the larger-than-expected deficit.

To read entire story, click here.

By Ed Mendel
Monday, May 14, 2012

A superior court judge this month upheld a voter-approved initiative giving lower pensions to all city of Menlo Park new hires except police, the first court ruling as unions challenge similar measures in Pacific Grove and Bakersfield.

Voters in the three cities approved cost-cutting pension reforms in November 2010 that bypassed bargaining with unions. California is one of only several states where public employee retirement benefits are set by labor negotiations.

The measures in the small cities of Menlo Park and Pacific Grove, with relatively wealthy and well-educated residents, were overwhelmingly approved by more than 70 percent of voters.

In the much larger and more diverse Bakersfield, a measure that sharply cuts the pensions of new police and firefighters, not other non-sworn city employees, was approved by 56 percent of voters.

(A twist on ballot-box pension reform: Riverside County deputy sheriffs put a measure on the November 2010 ballot requiring voter approval to cut the pensions of new officers and firefighters, receiving 53 percent of the vote.

(But a counter measure backed by county supervisors allowing pension cuts for new hires and requiring voter approval of pension increases received 61 percent of the vote, becoming the new law because it received more votes.)

The measures in the three cities, which are in the giant California Public Employees Retirement System, set the stage for widely watched votes next month on pension reforms in the state’s second and third largest cities.

Voters in San Diego and San Jose, charter cities with “home rule” power under the state constitution and their own pensions systems, are being asked by their mayors and others to cut pensions earned by current workers in the future.

Unions oppose the measures that have become an issue in the San Diego mayor’s race and an open seat on the San Jose city council. The San Jose measure was placed on the ballot by a narrowly divided city council.

Pension reformers, unable to get a majority of city council votes, gathered voter signatures for initiatives in San Diego and Menlo Park. After signatures were gathered in Pacific Grove, the council enacted the measure confirmed later by voters.

Being able to bypass a city council, where members may rely on union support, is one argument for ballot-box pension reform. Critics say setting pensions through local bargaining, rather than statewide legislation, tends to drive up employer pension costs.

If one local employer raises pensions, unions ask other employers to match the benefit to remain competitive. A CalPERS-sponsored bill, SB 400 in 1999, gave state workers a major retroactive pension increase.

A report last year by a nonpartisan watchdog, the Little Hoover Commission, said SB 400 started “a chain reaction of retroactive pension increases granted to public employees up and down the state” and is regarded as “pivotal” in the pension crisis.

Some union leaders contend there is little hard evidence for the alleged “ratcheting up” effect of bargaining. Unions also say that pensions are a form of compensation, and therefore an important part of collective bargaining.

The Pacific Grove measure was an early attempt to cut current-worker pension costs. Reformers say employer savings from cutting new-hire pensions can take decades, and bargaining higher worker pension contributions often requires offsetting pay raises.

Pacific Grove’s Measure R caps the city contribution to pensions at 10 percent of pay, requiring employees to pay the rest or choose a low-cost option like a 401(k)-style individual investment plan.

In addition to filing a lawsuit, a police union also persuaded the state Public Employment Relations Board to issue a complaint charging the city with violating labor laws.

The labor-friendly board attempted earlier this year to get a court to block the San Diego pension measure from the ballot, unsuccessfully arguing that union negotiations were required first and then a vote of the city council.

A report to the Pacific Grove city council this month said agreements reflecting Measure R have been made with general employees and management. The city is using part-time employees when possible to reduce pension enrollment.

To read entire story, click here.

Dan Walters

By Dan Walters
dwalters@sacbee.com
Published: Monday, May. 14, 2012 – 12:00 am | Page 3A

When Vallejo declared bankruptcy in 2008, one collateral consequence was a years-long political duel in the Capitol between lobbyists for local governments and those for unions representing their workers.

Unions pushed legislation that would have required local governments to get permission from an obscure state agency before filing for bankruptcy – an agency that is and probably always will be dominated by union-friendly Democratic politicians.

Although it did not come to pass in Vallejo, unions representing police officers, firefighters and other local workers were worried that a federal bankruptcy judge might be willing to abrogate their contracts and perhaps even reduce retirement benefits.

By routing bankruptcies through the state agency, union leaders clearly hoped, officials of insolvent local governments could be barred from seeking payroll relief.

Ultimately, the unions and the local governments, primarily the League of California Cities, agreed to a compromise last year, one that in general required insolvent entities to use mediation to seek relief from creditors and file bankruptcy only as a last resort. It was enacted by the Legislature and signed into law.

Almost immediately, two cities, Mammoth Lakes and Stockton, invoked those procedures, the former because it lost a massive lawsuit and the latter because it had overspent on community facilities, including a new sports arena and a new baseball park, and could not repay its loans.

Whether mediation succeeds in staving off bankruptcy in both cities is uncertain. Nevertheless, the unions are already seeking to change the process back to something closer to their original proposal, and thus make it more difficult for local governments to seek bankruptcy relief.

To read entire story, click here.

California Governor Jerry Brown (AP Photo/Reed Saxon)

By Kevin Yamamura
kyamamura@sacbee.com
Published: Sunday, May. 13, 2012 – 12:00 am | Page 1A
Last Modified: Sunday, May. 13, 2012 – 10:48 am

In a gloomy preview of his May budget release, Gov. Jerry Brown said Saturday that California’s deficit has mushroomed to $16 billion, nearly $7 billion higher than he last estimated.

The Democratic governor blamed a slow economic recovery, as well as federal judges and administrators who blocked cuts to health care for the poor. Brown had previously pegged the deficit at $9.2 billion.

“This means that we will have to go much further, and make cuts far greater, than I asked for at the beginning of the year,” Brown said in a video released on YouTube. “But we can’t fill a hole of this magnitude with cuts alone without doing severe damage to our schools.”

The governor then made a campaign pitch, asking voters to approve his November ballot initiative to raise taxes on sales and wealthy earners.

Fiscal experts for months warned that Brown had been too optimistic in his January plan, particularly in his assumption that capital gains from California’s wealthiest residents would propel the state’s funding higher.

The nonpartisan Legislative Analyst’s Office warned in February that Brown had overstated tax growth, a concern borne out when California ended last month $3 billion in the red for the fiscal year.

The governor is slated to release his revised budget Monday, and no sector that relies on state funding is likely to escape deeper cuts. Brown has already told state worker unions to expect at least a 5 percent compensation reduction.

Advocates for low-income residents expect another proposed round of deep cuts to health and welfare programs beyond what the governor sought in January, when Brown asked for a $1 billion reduction in welfare-to-work.

They predicted Brown will make another run at cuts in Medi-Cal health care for the poor that federal officials and courts rejected in recent months.

“It’s bad, it’s big and it’ll mean brutal cuts,” said Anthony Wright, executive director of Health Access California. “The kind of cuts left to make will have huge impacts not just on families but the economy. There’s no good news here.”

After disappointing tax revenues last month, the Legislative Analyst’s Office said the state should expect a “few billion dollars” less than Brown projected through June 2013.

Brad Williams, a former budget forecaster for the analyst’s office, said Saturday that Brown not only had to assume $3 billion less through June, but he likely reduced his expectations for the 2012-13 fiscal year by a similar amount.

On top of that, the governor alluded to federal court and administrative decisions that blocked spending cuts he had counted on in January.

Federal officials in February rejected $575 million in annual savings from requiring low-income patients to submit co-payments for medical services. A federal judge also has blocked about $500 million in annual savings from reducing payments to doctors, pharmacists and other Medi-Cal providers.

Meanwhile, a judge blocked a $100 million cut to in-home care providers who serve low-income elderly and disabled residents.

“It’s a daunting number,” said Senate President Pro Tem Darrell Steinberg, D-Sacramento, of the governor’s new deficit estimate. “We’ve dealt with a larger number before, but … the choices are even more difficult this time.”

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