The Sacramento Bee‘s Daniel Weintraub speculates that we might actually be getting close to a budget deal. He also has quite a lot of interesting speculation on what that deal might look like:
But by listening to the legislative leaders talk and tapping into the chatter in the Capitol hallways, you can begin to sense what a new budget agreement might look like, whenever it comes. Here’s my best guess:
• It is going to include some borrowing. That’s not exactly going out on a limb, given the recent history of this governor and these legislators.
There is just no way they are going to close a $15 billion gap with spending cuts and tax hikes alone. So expect some gimmicks.
Lawmakers, for instance, might find a way to tap into local government funds, despite a voter-approved initiative that makes that option more difficult than before. Also, the governor’s proposal to borrow against future state lottery earnings, an idea he calls “a gift from the future,” is still very much alive. I would not be surprised if a scaled-down version of the governor’s plan emerged as part of this package.
• The final deal will include some tax increases. The worst-kept secret in the Capitol is that at least a handful of Republicans are prepared to accept some tax hikes in exchange for what they call “budget reform.” The range of possible tax increases probably tracks with the seriousness of the reforms.
If Democrats were to accept a strict limit on future spending, which has been the Republicans’ top priority, the majority party could probably get enough Republican votes to pass a sales tax increase. But the Democrats won’t go there because such a limit would constrain the growth in government services during the next economic expansion.
If Democrats instead will accept only a strengthened rainy day reserve, Republicans will probably vote for nothing more than eliminating a few tax deductions.
The shape of that budget reform has been the subject of intense talks in recent weeks among all of the legislative leaders. Ultimately, the ball is in the Democrats’ court. The stronger the limit on long-term spending they accept, the more tax revenue they are likely to get in the short term, and the fewer cuts they will have to make. Which brings us to the third piece of any deal.
• There will be some spending cuts, or at least some reductions from planned levels of spending. But it won’t be clear how much will be trimmed until we know how much they will borrow and how big the tax increases will be.
