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May 13, 2008

arrowBudget is released in 24 hours ... what you should watch for

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Tomorrow the governor releases his revised 2008-09 budget plan. It's big news around Sacramento, and I know at least a couple of you down there are watching. Here are my top ten things to watch for:

1. So what is the problem? Estimates on the state's budget deficit for 2008-09 have ranged from $16 billion to as high as $20 billion. What will the governor estimate the gap to be, and will lawmakers agree on the math?

2. Read my lips. Will he propose a tax increase? I doubt it. The administration furiously batted down a published report that the governor's staff was sounding out business groups about possible sales tax hikes. Perhaps such talks were going on. But the governor would look foolish to propose tax hikes after his staff shot down the rumors. Also, by giving in now, Schwarzenegger would lose some negotiating room. A budget compromise could still very well include a tax increase -- but why cede that ground to Democrats now?

3. What about fees? Fees are another story. Desperate for revenues, the governor could conceivably raise certain fees and claim he is not raising taxes.

4. Across the board. In January, Schwarzenegger proposed 10% cuts in almost every agency. The move was roundly criticized as unsophisticated. Not all programs are alike. Some are efficient and some are not. Will the governor revise his cuts?

5. Schools are watching. As part of the across-the board cuts, the governor in January proposed slashing school budgets by a whopping $4 billion. No one expected that cut would last, what with the ever-present education lobby roaming the Capitol. Will the governor come to grips with that reality and back off some of those cuts?

6. A sacred farm program. One negotiating trick governors have used, including Schwarzenegger, is to slash the Williamson Act, a $40 million program that provides revenue to local governments that give property tax breaks to landowners who agree not to develop farmland. The program is always restored, allowing rural legislators to claim victory. Will we see this again?

7. Off the tracks? It's unlikely, but possible, that the governor would seek to delay the planned November vote on a $9.9 billion bond for a proposed statewide high-speed rail. This would lessen the state's interest payment obligation, but it would also induce an outcry among rail supporters, including many in the Valley.

8. The Big Spin. It's widely expected that the governor will propose leasing the state lottery for a quick infusion of cash. If this is part of the plan, how much revenue does the governor think it will generate, and is his projection realistic?

9. Rolling the dice. Two weeks ago the governor cut a deal with a Madera County tribe for a casino along Highway 99. The project is still a ways off because it still does not have federal approval. But will the governor try to count anticipated state revenues from the deal in future years? Highly unlikely that he'd seek to count the cash for 2008-09, but will he use the numbers to reduce projected deficits in future years?

10. What will they say? The tradition up here is for lawmakers from both parties to immediately bash the governor's plan once its released. Republicans will say it doesn't include enough cuts and Democrats will bemoan a "cuts only" budget. The critics will be out this time for sure -- but how loudly will they complain? And what will nonpartisan Legislative Analyst Liz Hill say, aka the "Budget Nun."

*The left-leaning California Budget Project has its own questions here.

**And for a perspective from the right, there's always the Flash Report.




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