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California Gov. Jerry Brown Makes Tough Choices to Balance State Budget

January 15, 2013 at 12:00 AM EST
Gov. Jerry Brown has been able to turn in a balanced state budget for California by pushing for tax increases on the wealthy, hiking sales taxes for everybody and cutting many state services. But detractors have said Brown used fiscal tricks to achieve the balance. NewsHour correspondent Spencer Michels reports.
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JEFFREY BROWN: And next: to a remarkable turnaround in the nation’s most populous state.

Last week, California Gov. Jerry Brown proclaimed his state’s huge budget deficit had disappeared. But some politicians in the GoldenState are skeptical.

NewsHour correspondent Spencer Michels sat down with Brown in San Francisco.

His report is a co-production with our colleagues at KQED San Francisco, and begins with some background on the fiscal troubles and the budget fix.

SPENCER MICHELS: California’s sorry financial state and cuts made to health and welfare programs have prompted nearly nonstop demonstrations at the state capitol in recent times.

Those protests got going four years ago when California and its then governor, Republican Arnold Schwarzenegger, faced a staggering budget deficit of $42 billion.

The recession, built-in spending, a large population in need of state services like health and welfare, a limit on property taxes, plus Republican legislators’ refusal to raise taxes created a dilemma in the world’s ninth largest economy.

With budget cuts coming like clockwork, the state’s vaunted college and university systems declined in offerings and in reputation. Schools suffered cutbacks in personnel and programs. Services for the poor were trimmed by $15 billion since 2008. State workers were furloughed.

Then, in 2010, promising to use his long-honed political skills to fix the state, Jerry Brown, a Democrat, was elected governor, 30 years after he held the job in the ’70s.

He faced a $26 billion deficit and started making more cuts and changes, like transferring inmates from the state’s overcrowded prisons to county jails and closing down local redevelopment agencies, using the money for the state budget.

Meanwhile, the economy started to improve in fits and starts, bringing in more tax revenue.

But it all wasn’t enough. Brown proposed to California voters a measure to raise income taxes on the wealthy and sales taxes for everybody, to the tune of $5.6 billion. Brown campaigned vigorously from what was called Proposition 30 in last November’s ballot.

GOV. JERRY BROWN, D-Calif.: Hey, let’s — let’s hold up our Prop 30 signs, will you, just a little bit, make sure everybody sees where we are, why we’re here.

SPENCER MICHELS: The measured passed with 54 percent of the vote. California voters had actually agreed to tax themselves.

With that new money beginning to come in and the recession fading a bit and previous cuts in effect, Brown could declare last week that the budget deficit had vanished.

JERRY BROWN: But, right now, for the next four years, we’re talking about a balanced budget. We’re talking about living within our means. This is new. This is a breakthrough.

SPENCER MICHELS: Brown proclaimed that California is finally spending less money than it takes in. And a few critics said the governor had used fiscal tricks to achieve the balance.

We asked him about those charges and if his budget really solves California’s problems.

Gov. Jerry Brown, thanks very much for talking to us.

JERRY BROWN: Sure.

SPENCER MICHELS: Is the budget really balanced? Is the deficit gone completely at this point?

JERRY BROWN: The budget is fixed. I inherited a $27 billion deficit. That’s what it was two years ago.

And that’s gone. This budget will be balanced. Now, is the world absolutely safe from any contingency? No. 1, the world is change and turbulent. So, if the economy gets worse, then we get less money.

No. 2, the federal government often blocks budget reductions that we make in the social services. And sometimes we win, sometimes we lose. Number three, we’re going to be part of the Affordable Care Act, President Obama’s health care plan, by expanding our Medi-Cal program for low-income families.

He is promising 100 percent of the cost. Now, what if, because of the cliff negotiations and the debt — maybe they will renege somewhat on that. I don’t know.

SPENCER MICHELS: So, you’re being kind of careful here.

JERRY BROWN: What I’m saying is that people sometimes think a budget is like a piggy bank, the money is in there. No, the money comes in every day, and the spending goes out every day.

And we are in a position for the first time in 15 years where we can say this year’s budget will be balanced and the next several years’ budgets, they will also be balanced.

SPENCER MICHELS: You sound, though, almost dismissive of people who are poor and people who need the state’s help and all kinds of things that have been cut.

You’re almost saying, well, it’s more important to cut the budget than it is to really worry about those folks.

JERRY BROWN: Are you serious? I mean, what you’re saying is, we should lie to people and say we have money, and then spend money we don’t have, and then in two years cut the programs that we just spent for the same people.

That’s the boom-and-bust, the roller coaster, up and down, up and down. That’s what’s been going on. And it’s not fair. So what I’m trying to do here is recognize California as a very compassionate state. We spend more than twice as much as all — as other states do on dependent families, essentially our welfare program, CalWORKs.

We have more money going to child care. We have more money going to many of these things to bolster the safety net and to compensate for the ravages of the world economy. And I didn’t come back the second time to be governor to be part of some masquerade. I’m here honestly to fix the budget now and over the long term.

SPENCER MICHELS: But the interesting question, I think, from a national standpoint is, how did you do it? And is what you did transferable to the national government, where there are the same forces at work, where there’s gridlock in government?

JERRY BROWN: Well, one, the national government needs to stimulate the economy in the short term, because just austerity will never allow us to climb out of this hole of borrowing and debt and unemployment.

But what I did was, I cut $3 for every dollar that we got in taxes from the Proposition 30. We cut the universities 25 percent. We cut child care. We cut all the good programs, because government doesn’t do that many bad things. We cut the prisons.

Government does public safety. It does education. It does programs for the children, for the elderly. So what you retrench in government, you cut the good, which in many respects is a bad.

SPENCER MICHELS: Is there a lesson here for the national government and the national politicians?

JERRY BROWN: Yes. Well, the lesson is one that you have got to make tough choices. And you have to live within your means. And that means you have to not do everything you want to. But you also have to raise more money.

We did raise a tax on all citizens called the sales tax a quarter of a cent. And we raised the tax on individuals who make more than $250,000 or couples who make more than $500,000. So that’s what we did.

And there’s no doubt America is overcommitted. We’re overcommitted abroad with our several hundred military installations. We’re overcommitted in our borrowing, 40 cents for every dollar.

SPENCER MICHELS: Answer me a question about the ideology and the gridlock between Republican and Democrats. It seems to be parallel to what’s going on in the United States Congress at the same time.

JERRY BROWN: Well, we attacked it in California through the initiative process.

The Republicans refused to give me even two votes in each of the houses to put my tax, not into effect, but before the people for judgment in a statewide election. They wouldn’t do it.

So I had to go to the people directly through the California initiative. And they voted by 55 percent, say, yes, raise these taxes and help our schools and help our universities. So, that was a way to break the logjam.

SPENCER MICHELS: Are you saying that’s the only way to get some meeting between the two parties?

JERRY BROWN: No. Other than…

SPENCER MICHELS: Which isn’t really meeting.

JERRY BROWN: Other than violence, how else can you get it?

I took the Republicans to my loft in Sacramento on more than one occasion. I got them expensive wine. I met their wives. I went to their homes. I went to their offices. They came down to meet with me on Sunday morning, in the evening.

Here’s the problem. The Republicans are in different localities than the Democrats. They’re not in San Francisco. They’re not in Los Angeles. They’re in Tulare. They’re in Fresno. They’re in Bakersfield. Those people in that community are more conservative. And they don’t want any taxes.

The tax word is very powerful. So, for the Republicans, they’re doing what their neighbors and constituents want.

SPENCER MICHELS: So, it doesn’t sound like you think, at least on the state level and maybe on the federal level, that this ideological split, the Republicans, Democrats, tea party and so forth, it doesn’t sound like you have a lot of hope that that could be bridged.

JERRY BROWN: Well, I don’t want to say there’s no hope, because I’m a very hopeful person, and I’m optimistic about California that we have found a way around the logjam.

But I have to tell you, the ideology of the Republicans is different than the Democrats. They don’t mind the inequality, or they believe that by giving more money to the most well-off, it will trickle down and everyone will get better off.

So, yes, America is facing a — not a problem, a crisis of governance. And if we can’t overcome it, then we will deteriorate and no longer be a world leader. It’s that serious?

SPENCER MICHELS: And just one question. You reported you had prostate cancer.

JERRY BROWN: Yes.

SPENCER MICHELS: How are you doing? How do you feel?

JERRY BROWN: I’m doing well. Ask me — ask me in 20 years.

SPENCER MICHELS: But things are good?

JERRY BROWN: Things are good. They’re great, as a matter of fact.

You know, let me tell you something. When you’re 70 — I’m going to be 75 in April. It’s not like being 55, much less 45. You get older. I can’t run as fast. You have got to watch your diet a little more.

And that’s just the way it is. But I will tell you, in my life, I have been able to devote a lot of time to studying California, to studying how its process of governance works.

And I really feel more equipped, physically, intellectually, and spiritually, to do this work than I ever have at any other time in my life.

SPENCER MICHELS: Jerry Brown, governor of California, thanks very much.

JERRY BROWN: Sure.

JEFFREY BROWN: You can read more of Spencer Michels’ interview with Jerry Brown, including the governor’s thoughts on a multibillion-dollar high-speed rail system in California. That’s on our website.