When it comes to budget gimmickry, the Assembly Democrats deserve some sort of prize. They have released a budget plan that would avoid most of the governor's $12.4 billion in proposed cuts, though it also involves borrowing nearly $9 billion from Wall Street. On top of all that, the scheme would only require a majority vote, eliminating any chance that Republicans could stymie the legislation. So here's how it seems to work, courtesy of Capitol Alert:
1) The state borrows $9 billion.
2) Investors are paid off with about $600 million a year from the Beverage Recycling Fund (that's what consumers pay on beverage containers).
3) Taxes are increased on oil production in California, raising $1.2 billion a year. Half of that would go to replenishing the Recycling Fund.
4) The state lowers its state sales tax by one-quarter cent but receive the equivalent amount of money in oil tax dollars.
5) Local governments raise their sales tax by one-quarter cent and the state reduces its payment to local schools by a like amount.
6) Since all the flimflam is theoretically "revenue neutral," it doesn't require a two-thirds vote in the legislature.
Clever, huh? Of course none of this begins to deal with the structural issues that have brought California to its knees - stuff like pension obligations and spending beyond the state's means. The governor's office blasted the plan, though Democratic leaders said Schwarzenegger tried a similar maneuver last year when he asked the Legislature to borrow $5 billion against the California Lottery. More from Capitol Alert:
Assembly Democrats did not have estimates for what happens after 2010-11, but their proposal presumably would put the state in a difficult bind in 2011-12. That's because their plan would sustain spending at a higher level, including the Proposition 98 guarantee for schools. Meanwhile, there would no revenue source next year to provide the same influx of money unless the economy does substantially better.