Bloomberg News

California Lawmakers Lose Pay Over Budget, Controller Says

June 21, 2011

(Updates with Brown comment in seventh paragraph.)

June 21 (Bloomberg) -- California lawmakers must forfeit their pay for failing to send a balanced budget to Governor Jerry Brown, the controller said.

The $89.8 billion spending plan that the Democrat-run Legislature passed last week was short $1.85 billion of revenue needed to balance, primarily in terms of school funding, Controller John Chiang said today in a statement.

“Careful review of the recently passed budget found components that were miscalculated, miscounted or unfinished,” Chiang said. “The numbers simply did not add up, and the Legislature will forfeit their pay until a balanced budget is sent to the governor.”

Brown, a 73-year-old Democrat, and lawmakers are at an impasse over how to bridge a $10 billion deficit. Without a budget, the biggest issuer of municipal debt in the U.S. is unable to borrow on Wall Street to pay bills when the fiscal year starts July 1.

Chiang, a Democrat, said lawmakers forfeited their rights to salary and expenses for every day after the June 15 deadline, under a penalty set by voters in November through Proposition 25.

Brown vetoed the budget June 16, saying it used legally doubtful maneuvers. The Democrat-designed measure was drawn up after Brown couldn’t get Republican backing to extend more than $9 billion of expiring taxes and fees he wants to make up the shortfall.

Brown Reaction

“The controller has made his determination,” Brown said in a statement after Chiang’s announcement. “We should all work together to pass a solid budget.”

The $95,291 annual base salary for California lawmakers is the highest in the nation, according to data compiled by the National Conference of State Legislatures. In addition, they receive about $142 for expenses each day in session. The salary for legislative leaders is as much as $109,584 a year.

Chiang, 48, is “going to get a lot of support from the general public,” said Joel Fox, a Republican political consultant in Los Angeles. “These are the same people who passed Prop. 25. The focus was legislators not getting paid if they don’t do their job and it worked.”

Jon Coupal, president of the Howard Jarvis Taxpayers Association, named for the author of California’s tax-limiting Proposition 13, said he expects Chiang’s decision to spur quick passage of a balanced budget.

‘Significant Motivator’

“This will be a significant motivator,” he said by telephone. “There really was no incentive for them not to drag this out in previous years.”

Brown took office in January on a pledge to fix the fiscal malfunctions that have left California with an A- credit rating from Standard & Poor’s, its lowest for any state. He began the year facing a $26 billion deficit through June 2012. Since then, spending cuts passed in March and better-than-projected revenue have narrowed the gap to $10 billion.

“We believe California’s near-term credit quality is affected by its budget situation more than most states because of the implications for the state’s cash position,” S&P credit analyst Gabriel Petek, based in San Francisco, said today in a report. “If a budget is not adopted in time for the state to issue its revenue anticipation notes before its cash runs low, the state’s basic operating liquidity can become inadequate.”

Temporary Taxes

Brown wants lawmakers to temporarily retain a 1 percentage- point boost in the retail-sales levy, to 8.25 percent, and a 0.5 percentage-point increase in vehicle registration fees to 1.15 percent of value. His plan also calls for extending a reduction of the annual child tax credit to $99 from $309. All were put in place temporarily in 2009 and are set to expire by July 1.

The governor said he would later ask voters to decide in a statewide election, possibly as early as September, to keep the measures for five years.

Brown said after he vetoed the budget that he’d “move heaven and earth” to get four Republican votes needed for his plan. So far, he hasn’t met with top Republicans, according to Jann Taber, a spokeswoman for Senate leader Bob Dutton of Rancho Cucamonga, and Sabrina Lockhart, a spokeswoman for Assembly leader Connie Conway of Tulare.

“He has continued to speak with legislators on both sides of the aisle,” Gil Duran, a Brown spokesman, said in an e-mail.

Republican Stance

Republicans have indicated they’d be willing to allow a referendum on the taxes after initially opposing a vote, following polls that showed voters would reject the extensions.

The Legislature’s minority party wants lawmakers to pass a balanced budget now, without prolonging the revenue measures, and give voters the chance to reinstate the tax increases later.

“I continue to maintain that the Legislature met our constitutional duties in passing the budget last week,” said Assembly Speaker John Perez, a Democrat from Los Angeles. “We carried out our responsibility to pass a budget reflecting all the options available to close the deficit without new revenues and without cuts so deep as to cost the state jobs and jeopardize our economic recovery.”

New York lawmakers have their pay suspended when budgets are overdue, said Meagan Dorsch, a spokeswoman based in Denver for the Legislature Conference. A law in Guam cuts off paychecks to the governor, lieutenant governor and senators of the territory when budgets are tardy, she said.

A Washington state law holds that lawmakers who fail to adopt a budget by the July 1 deadline commit misdemeanors, although none have been charged, Dorsch said. A 1979 opinion by the state’s attorney general concluded that while the Legislature as a whole may be guilty of a misdemeanor, individual lawmakers weren’t subject to prosecution.

--Editors: Pete Young, Ted Bunker

To contact the reporters on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net; James Nash in Sacramento at jnash24@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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