Jerry Brown said the budget he’ll propose as California’s new governor, 36 years after he first stepped into the job, will be “painful.”
Brown, 72, a Democrat who served two terms as governor from 1975 to 1983, faces a self-described “day of reckoning” over a $28 billion budget gap that promises battles with lawmakers, unions and investors threatening to shun the bonds of the most- indebted state.
“The budget I present next week will be painful but it will be an honest budget,” Brown said at his inauguration today in Sacramento, the state capital. “It is a tough budget for tough times.”
Brown takes over the U.S. state with the largest economy, the biggest population and the highest deficit. He thanked his predecessor, Arnold Schwarzenegger, who grappled with shortfalls that totaled $100 billion combined since June 2008. Brown said he wouldn’t raise taxes without public approval.
Brown has pledged an austerity budget, due Jan. 10, that will be free from gimmicks and that will skirt the gridlock that forced the state to pay bills with IOUs two years ago.
His budget reductions may include eliminating local redevelopment agencies, shrinking social-service benefits, slashing aid to state universities and closing parks, the Sacramento Bee reported today, citing a source close to Brown.
Reagan Budget
“If you look at Jerry’s history, in 1975 the first thing he did was cut Ronald Reagan’s budget,” said David Shulman, a senior economist with the Anderson Forecast at the University of California, Los Angeles. “The Democratic legislature didn’t like it, but his poll numbers were high. It wouldn’t surprise me if he did that again.”
The son of former two-term governor Edmund G. “Pat” Brown, the younger Brown earned the nickname “Governor Moonbeam” for his support of programs such as a state-sponsored space program in the 1970s. His first two terms were immortalized in the song “California Uber Alles” by the punk- rock band Dead Kennedys, which included the lyrics “Mellow out or you will pay!”
The audience laughed in the middle of the oath when Chief Justice Tani Cantil-Sakauye asked Brown to repeat that he had no mental reservation about taking the job.
“Really, no mental reservation,” Brown joked.
Super-Size Stress
Brown faces a super-size version of the stress governors confront coast to coast. States will contend with about $140 billion in deficits in the next fiscal year after closing $160 billion in gaps this year, the Center on Budget and Policy Priorities, a Washington research group, estimated Dec. 16.
Brown’s budget task was eased by voters’ decision in November to allow lawmakers to authorize spending plans with a simple majority, doing away with a 77-year-old rule requiring a two-thirds vote.
“The day of reckoning is upon us and I’m determined to bite the bullet and get it done,” Brown said in Los Angeles last month.
Brown is likely to call for a special election to ask voters for money, said Jaime Regalado, executive director of the Edmund G. Brown Institute of Public Affairs -- named for Jerry Brown’s father -- at California State University, Los Angeles. Options include extending temporary tax increases on income, retail sales and vehicle registrations put in place in 2009. They are set to expire this year.
“What he’s doing is setting up expectations of a very dire situation and choice for Californians,” Regalado said in a telephone interview. “But it’s going to be the voters’ choice of what services they want to keep -- and for those that they keep, are they willing to be taxed for them.”
Third-Highest Unemployment
The governor inherits the nation’s third-highest unemployment rate at 12.4 percent, what the treasurer’s office says is $88.3 billion of bond debt and as much as $500 billion of pension liabilities following the longest recession since World War II.
Brown, the former state attorney general, succeeds Schwarzenegger, the movie star and former body-building champion swept into office in 2003 through the unprecedented recall election of Gray Davis, a Democrat. Schwarzenegger, a Republican, couldn’t seek re-election because of term limits.
Brown takes charge of a state whose $1.89 trillion economy is bigger than Russia’s. It is home to 14 percent of the companies in the Standard & Poor’s 500 Index including Apple Inc., Google Inc., Chevron Corp. and Wells Fargo & Co.
‘Sober Approach’
The new governor brings “a tell-it-like-it-is sober approach to the problems facing California,” Eli Broad, the billionaire philanthropist, long-time Brown supporter and former SunAmerica Inc. chief executive officer, said in a telephone interview. “People are waiting for some plain talk and are tired of politicians using smoke and mirrors to solve the problems of the state.”
While Democrats control both the Senate and the Assembly, they lack a so-called supermajority of 60 percent. Starting a ballot measure that would extend temporary levies, or increase taxes and fees, would need the assent of two-thirds of lawmakers or a citizen initiative drive.
California shares with Illinois the lowest credit rating of any state from Moody’s Investors Service. The A1 grade is Moody’s fifth-highest. Standard & Poor’s rates California A-, its fourth-lowest level for investment-quality securities.
Only Illinois and Arizona are financially weaker than California, according to a Dec. 30 report from BMO Capital Markets in Chicago.
Betting on California
Investors are betting that California will surmount its difficulties. The extra yield that buyers want for 10-year California bonds compared with top-rated municipal bonds fell to 115 basis points Dec. 30, from 150 on March 11, the 2010 peak. A basis point is one-one hundredth of a percent. The Bloomberg California Index of stocks outperformed the S&P 500 by 1.63 percentage points in 2010.
Curbing the cost of state workers’ salaries and their pensions may put Brown at odds with the labor unions that supported his campaign, such as the 120,000-member California Federation of Teachers. The state will spend $9.2 billion on payroll this year, according to the Finance Department. Payments to the two public-employee pensions, the largest in the U.S., will consume 5 percent of the general fund.
Collective Bargaining
Brown signed legislation during his first term that gave teachers and state workers the right to bargain collectively, which Schwarzenegger and other Republicans later criticized.
Brown won office in November, defeating Meg Whitman, 54, a former EBay Inc. chief executive officer who poured at least $141.6 million of her own fortune into the campaign, a U.S. record for self-funding by a candidate.
The governor, who ran for president unsuccessfully three times, studied Buddhism in Japan, worked with Mother Teresa in India, and was elected mayor of Oakland in 1998. Since 2007, as attorney general, he had been the state’s top law-enforcement officer.
As governor in the 1970s, he shunned the official mansion and predecessor Reagan’s Cadillac limousine in favor of a two- bedroom apartment near the Capitol and a Plymouth Satellite he drove himself. He dated rock star Linda Ronstadt and they were featured together on the cover of Newsweek magazine in April 1979.
For his first inauguration, he took the oath of office in the Assembly chambers followed by an eight-minute speech. He declined to have an inaugural ball and instead celebrated with dinner at a Chinese restaurant in Los Angeles. Four years later, he gave another short inaugural speech in Sacramento and then ordered food from a Chinese restaurant that he ate with friends and staff in his office.
This year, Brown was sworn in at a Sacramento auditorium with seating for 3,849. He planned a private reception later in the day at the nearby state railroad museum.
To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net; Michael Marois in Sacramento at mmarois@bloomberg.net
To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net
댓글 없음:
댓글 쓰기