Back In Charge

By Mark Paul Arabo Leave a Comment
Jerry Brown is back in charge as California's newly elected Governor

On January 4th, 2011, Governor Jerry Brown was sworn in for an unprecedented third term as California's governor, taking the reins of a state battered by the national economic downturn and a seemingly endless budget crisis. Twenty seven years after he ended his first round as governor, Jerry Brown handed Republican gubernatorial candidate Meg Whitman a sizeable defeat despite her spending more than $140 million in her quest for the governor’s office. Governor Brown is the son of the late former Governor Pat Brown. He first became governor in his own right in 1975, when the Golden State economy was vibrant and the envy of the nation. Stating that he has “not come here to embrace delay and denial," the Governor has called upon Democrats and Republicans in the oft-gridlocked state legislature to work together in making the tough choices needed to get California back on a strong economic footing. Much has changed in Sacramento between the tenures of Governor Brown, who held the governor's post before term limits were instituted, as he works toward that goal. In the decades since he left office, state officials and legislators lost flexibility on budget matters in large part due to the property-tax cap instituted by Proposition 13, the strict school funding mandates resulting from the passage of Proposition 98, and a host of other voter-approved ballot measures.  Those fiscal constraints, coupled with a dramatic increase in spending on permanent programs, have created an unsustainable dynamic that the new Governor has pledged to permanently unwind. Confronting a state with high unemployment and a record deficit, Governor Brown used his inaugural speech to pledge fiscal austerity, job creation and a broad effort to rebuild public trust in state government. In the speech, the Governor referred to Californians’ intrepid spirit as he outlined the monumental task ahead: closing the multi-billion dollar budget deficit and getting the California economy moving again. “From the native peoples who survived the total transformation of their way of life, to the most recent arrival, stories of courage abound. And it’s not over,” As he acknowledged the magnitude of the state’s problems, he stated that California was up to the challenge, and that innovators in Silicon Valley, Hollywood, and in small businesses throughout California “give hope to an even more abundant future up ahead,” On behalf of the members and Board of the … [Read more...]

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California’s Budget Woes Continue

By Brian Rees Leave a Comment
The Sacramento Scene. The latest legislation that affects your business.

Last year, while facing a staggering budget deficit, the Governor and the Legislature increased taxes by nearly $12 billion, cut state spending by a similar amount, and were forced to furlough state workers, freeze spending on infrastructure projects, and issue IOUs to state contractors. Unfortunately, little has changed in Sacramento this year. Lawmakers have already begun budget meetings in an attempt to rein in the latest structural deficit. However, even if significant mid-year progress is made during the emergency budget session, it will not tackle the entire $20 billion deficit that is projected over the next year and a half. These actions will simply deal with the short term cash flow issues associated with last year’s budget. The longer-term funding for core services such as public safety, education and health services will remain in a state of uncertainty, and will inevitably be dealt with later in the budget cycle. Over the past two years, Governor Schwarzenegger and legislators have cut more than $18 billion (nearly 18 percent) from the state’s general fund spending. These cuts have had significant effects on public schools, higher education, and health care, and support services for the state’s disabled population. Complicating the state’s long term ability to deal with the ongoing deficits is the fact that the temporary tax increases enacted by last year’s budget will begin to expire at the end of the year. Additionally, avenues for Sacramento to extract money from local government entities have largely been exhausted. Both of these factors are threatening to widen the state’s budget deficits in the coming years. The Democratic leadership of both houses of the Legislature, have already criticized Governor Schwarzenegger's January budget proposal, and have promised to fight what they consider to be draconian cuts to education and state social services. Conversely, Republicans have pledged to hold the line against any and all new tax proposals, stating that the $12 billion in tax increases implemented by last year’s budget have had a detrimental effect on taxpayers and the state’s struggling economy. In reaction to the Republicans’ stance on tax increases, Democrats – as they have during the last two budget cycles – are searching for ways to sidestep the rule that requires a two-thirds vote of the Legislature for tax increases and to pass state budgets. The dynamics that have led to the … [Read more...]

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