Assembly Budget Chair Steinberg Critiques Governor's Local Budget Deal

Darrell, the governor announced just prior to the submission of his May budget revision that he had struck a budget deal with some of the core constituencies in the state, both for this year and out years. One of those deals was with the League of Cities, CSAC and other organizations representing local government. You've been the driving force in the Assembly both on the budget and also for fiscal and structural reform. Give us your assessment of the deals that the governor has struck, specifically with the League, and the likely reaction by the legislature.

First, let me say that I don't begrudge the governor's right to go out and try and make understandings with various constituencies. That's his job as governor, and I respect that. But, the Legislature's constitutional obligation actually to draft a budget and the accompanying legislation is just beginning and we are going to do that.

On the substance of his understanding with local government, I have a significant problem with it. I favor constitutional protection for local government, but only if it coupled with real reform. The understanding that the governor made with local governments does two things that I find objectionable. First, it fails to take advantage of this small window of opportunity, which comes around once in a decade or so, to change what we know is broken about our system of state-local government finance. Second, and even worse, is that this proposal not only fails to take advantage of the window, but by virtue of imbedding this dysfunctional system into the constitution, it specifically prohibits the Legislature from enacting reform next year and beyond.

I've been very clear about my objections. We are just beginning the budget process, and I'm looking forward to continuing to work on this issue to obtain a positive result.

Darrell, over the last decade, blue ribbon commission after commission-from the Constitutional Revision Commission, to the Speaker's Commission, to Senator Peace's hearings-have tried to reform the dysfunctional state and local finance arrangements. Almost uniformly. each has come up with recommendations for change, but they haven't found enough political champions to be adopted. What's missing here? What's the disconnect that keep us from making the fiscal and budgetary reforms that you and these commissions have advocated for years?

A couple of things. One, it is one of these archaic issues, kind of under the category of non-sexy political issues, that most people don't understand. Two, the fact that up to now we have not been able to even begin to achieve reform is a function of short-term thinking. The League of Cities plays to the lowest common denominator. Their own studies show that 80-percent or more of the cities benefit from a half-cent sales-property tax swap. Yet, they fight this tooth and nail, unwilling to even talk about a phased-in approach or something that would meet some of the legitimate concerns that have been raised throughout the debate.

From the administration's perspective, what they are interested in is $1.3 billion of budget savings for two years, which is very legitimate. They're also interested in protection for local government. But those two priorities in and of themselves, without reform, create a consequence that will affect the way we grow for the next 10 to 25 years. I don't think they have gotten it right.

And where are your colleagues on this issue, especially as we move into the legislature's deliberative phases?

Here's what's interesting. I thought that when the governor announced his deal, and as people began talking about local government, that there would be overwhelming support for constitutional protection. What has surprised me, frankly, over the last week or two, is that I would describe the reaction among many colleagues, in terms of support for the larger picture, as rather tepid. There are serious concerns that the state is limiting itself again in terms of its own budget problems; that the direct impact of constitutional protections could be harmful to education, but especially to health and human services. Some people are unhappy about the $1.3 billion and how that's distributed.

Of course, there's my proposal regarding the property-sales tax swap, which I think is gaining resonance. Senator Burton is now talking about it. Speaker Nunez is now talking about it. So there's not a clear consensus that we ought to do the basic framework of the deal in the first place. Even though I have questions about constitutional protection, to me it is appropriate and it's worth it if it's coupled with reform. But if it's not, and it in fact prohibits reform, it's not a good thing.

Some League members, when they hear your criticism, say he's not really for protecting local revenues. He's a state legislator and the state's the problem. You went through this experience with AB 680. What have you learned about the debate and how it's carried on that instructs you going forward?

I understand and recognize how emotional this issue is to cities and firm stance they have taken. But again, I would urge them to think beyond the short term. Secondly, what is most harmful about the debates that have occurred on this issue over the last number of years is the following: I disagree with the notion that it is "us versus them." That is too convenient and too easy. The fact is we're all part of a dysfunctional system.

A county supervisor from Orange County said to me, and I use this a lot because it really struck home, "that my constituents predictably care about police, fire, libraries and parks, as do I. Basic services, that's why I favor the constitutional protection. But at the same time, my constituents also attend the University of California. They also attend the community colleges. They also wait in line at the DMV. They're also part of the foster care system, and the health care system. And the same is true of every mayor and every councilmember's constituents. And so to continue on this line that "the state is doing this to us" does not get us very far."

I support the very protection that the cities want, but if you imbed in the constitution a system that bipartisan commissions have said for the last decade is dysfunctional and needs to be changed, why is that a good thing? So, I understand politics and the excessive rhetoric about how "the state's doing this to us and we can't trust them." I'm not asking for trust; I'm willing to support constitutional protection. But it needs to be coupled with reform.

How bipartisan is your effort? It clearly began that way. Is it still bipartisan?

John Campbell and Ross Johnson are both strong supporters of the reform, and there are others as well. The fact is that the Legislature has the responsibility either to draft a constitutional amendment or not, and to draft it in a way that reflects the best long-term interests of California. So, we're going to begin considering that process.

Lastly, it would be valuable to learn how the budget debate is going to conclude this year. Please prognosticate!

At the end of the day, I remain ever hopeful that we are going to be able to make an agreement that includes reforming the system. I have to think that way. I'm kind of like a dog on a bone here. It's got to get done. It's got to get done right. We need to not lose this window of opportunity. And, believe me, I don't overstate my own power authority in any way – I'm just one member. But I am involved in the budget process on the Assembly side, and I'm going to fight hard for this. It's a cause that brings little glory, but it will have profound impacts on the way we grow for the next twenty years or more. And it's worth the fight and worth the debate.