Good Times Newsweekly

Seeing Red

Curious tax breaks and dropped funding stand out in the 'new' California budget

After 54 days of gridlock, the state budget was signed on Aug. 24. Held up in the state Senate by Republicans, the final act in the bitter drama saw Gov. Arnold Schwarzenegger excise about $700 million from the general fund to pull down the state’s ongoing operational deficit.

While fully funding education and public safety, and setting aside $4.1 billion in reserve, the budget cut deeply into the social services sector. All told, $523 million of the $700 million “blue-penciled” out of the budget by Schwarzenegger in the last minutes came from the Department of Health and Human Services. Other big losers included public transportation and the California Air Resources Board.

Assemblymember John Laird, chair of the Assembly budget committee, believes that these cuts, when coupled with the long procedural delay getting the budget signed, are a political gambit by the Republican minority to forestall the business of the state. “The budget fight was an intra-squad war this year,” Laird says. “The legislative Republicans are not excited about health care reform. [Unlike the governor], their goal is to take the wind out of our sails when it comes to reforming it. We’ll find out in the next few weeks if that happened.”

The line item causing the most uproar is the $55 million excised from the Integrated Services for Homeless Adults with Serious Mental Illness program. Birthed in 2000, when Sen. Darrell Steinberg (D—Los Angeles) passed AB 2034, the program expanded homeless services beyond the clinic door by setting up integrated support structures for mentally ill homeless persons, including job training, housing support, counseling and consistent, preventative medial care. The program has served 13,000 clients since its inception.

The Los Angeles Times reports that the program has produced “81 percent fewer days of incarceration, 65 percent fewer days of psychiatric hospitalization and 76 percent fewer days of homelessness” in the lives of its clients. The program funded large portions of the Homeless Person’s Health Program’s Puentes project.

Highly successful, the program inspired the creation of Proposition 63. Approved by the voters in 2004, the ballot measure set up a 1 percent tax on incomes over $1 million a year, in order to overhaul the state’s beleaguered and overly segmented mental health system.

The ballot measure’s duality between society’s richest and poorest members was echoed in the final negotiations that led to this year’s budget in Sacramento. Sen. Steinberg is calling attention to the fact that while his pet program was sliced out of the final draft of the budget, the cash-hungry state failed to close a tax loophole for yacht owners that costs the state up to $45 million in sales taxes annually.

By parking a newly purchased yacht, RV or other personal watercraft in a different state for 90 days after its purchase, owners are able to shirk their tax liability. Democrats in Sacramento are less than pleased about keeping this loophole open.

“A $45-million tax break for yacht owners stays in the budget,” Steinberg wrote in the aftermath of the deal. “And a nationally recognized, incredibly effective program to end homelessness for those living with mental illness gets thrown under the bus.”

Speaking of buses, public transit also felt the sting of the blue pencil. Les White, the Santa Cruz Metropolitan Transit District’s director, summed up this dismal budget year by saying, “Public transit is taking the biggest proportional disinvestment action in the history of the state. The legislature removed $1.259 billion from our budget already before the ‘green governor’ penciled out another $100 million.”  

White’s agency will face an immediate capital shortfall of $3.3 million, which will force a slowdown of Metrobase construction in Harvey West. But what really concerns White is the governor’s statement that he would like to de-fund the State Transit Assistance program for the next four years, which would eventually force Metro to curtail service from 113 fixed route buses to 63. Paratransit would be proportionally scaled back as well.

Notably absent from the signing ceremony, Laird chose to protest in absentia when it came time to pose for the cameras. “This budget stalemate makes the case for a majority vote budget, like 47 other states, the UC Congress and every city and county in California,” Laird says. “[The Republican legislative minority] undid a tremendous amount of our work. I had some very important meetings back in Santa Cruz the day of the signing, so I choose to attend those instead.”