Legislative Update: No June Special Election on Tax Increase Extensions

Governor Brown is nearly halfway to closing a state budget gap of nearly $27 billion; his original plan for plugging the remainder of the shortfall with extensions on tax increases has been derailed for now. He called a halt to talks last week, blaming Republicans for driving them into a ditch with demands that would “materially undermine any semblance of a balanced budget.” State Senate Republican Leader Bob Dutton shot back saying hard feelings and lack of any meaningful regulatory reform had poisoned talks.

The Governor is now looking to a May deadline for a revised budget plan.

The only thing that is settled is that there will be no special election in June for a ballot measure regarding the tax extensions. The Governor has floated ideas as to how he might get a measure on the November ballot, but then we would likely see a different mix of proposed tax increases that would fare better with the voters – such as a split roll tax or other business-related measures, rather than personal taxes.

On the issue of pension reform, Governor Brown has rolled out a sweeping and sometimes vague list of public employee retirement changes that he wants lawmakers to enact. The 12-point list – five of which were described as “proposals under development” – immediately drew a mix of criticism, confusion and faint praise.

Unfortunately, the most needed and significant changes related to the issue of unfunded liability are either omitted from the plan or placed in the category of “under development.” Outside analysts have pegged the potential unfunded liabilities of Cal-PERS, the California State Teachers’ Retirement System and the University of California pension system as high as half-trillion dollars.

A real pension reform plan would first seek independent and expert analysis of unfunded liability and then lay out what’s needed, in either reduced benefits or increased contributions by taxpayers and employees, to cover it. The Legislature’s budget analyst and the Little Hoover Commission have both called for such reforms and have taken political heat from unions and their political allies for doing so. However, the Governor’s plan seems to avoid the difficult decisions. For more information contact Kate Klimow, Vice President of Government Affairs. Read Lucy Dunn’s take on pension reform in her latest Dunn & Done blog here. Click here to read Mission Viejo Mayor Pro Tem Frank Ury’s call for CalPERS to invest in California companies.

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