Day one in Sacramento . . .

I guess the most telling comment from Sacramento today came from Mike Madrid of the League of California Cities, who said that however bad the media is reporting the State budget situation to be, it is worse, much, much worse.

Both Mike and Steve Poizner, Insurance Commissioner (and candidate for governor), said, however, that they believe that the state of the State budge presents a very rare opportunity to fix some things in Sacramento.

The key questions being asked as how much will the state cut verses how much will the state borrow -- read this as how much will the state take from the cities, and counties. The possibilities for revenue based solutions left the building when proposition 1A failed by more than 60%. And, the borrowing scenario went at least part way out the door with proposition 1C failed by a similar margin.

Mike Madrid reported to us that this opportunity may be reflected in a greater control being placed in the hands of local government -- local government is still viewed as more accountable, and more transparent than state government.

Another issue that Mike suggested may be raised as a result of this opportunity relates to the constitution of the legislature. This was manifest in two issues: (1) the possibility of a part time legislature, and (2) the possibility of increasing the size of the legislature. The latter proposal seems to be more difficult than the former, because the electorate seems unlikely to create more politicians, but there are a couple of points in favor of this proposal: (1) the legislature is the same size as it was when the state population was 300,000; and (2) state senators represent more than twice as many people as a member of congress, which can affect accountability.

Abel Maldonado also mentioned the possibility of a part time legislature, and voiced his support for this concept, perhaps a legislature that meeting for 15 days early in the year, and then a few months later for 45 days, and then went home. Some limit would be needed on special sessions.

Mike also voiced his desire to see term limits eliminated, and campaign finance reform, as it exists now in the state of California, eliminated.

Finally, Mike mentioned the sentiment that his sources are indicating that the electorate feels that the legislature is incapable of solving the current budget issues of the state.

Mike also cited the figure that 25% of the state budget needs to go away in order to get us through the current crisis. He further stated that current indications are that the state will be out of money some time between week or two from now, and the middle of July.

Mike indicated that since the 2004 to 2005 time frame $10B more is being spent in California on education, but the numbers of students being served has actually declined during this same time.

Finally, Mike said that "there will be cuts everywhere." For example, there are proposals to eliminate the state's poison control center, and to completely eliminate state welfare programs.

Jon Coupal, President of the Howard Jarvis Taxpayers Association, was asked to speculate on Sam Blakeslee's proposal to call a state constitutional convention. Jon's view was that this is not likely to happen.

Jon also would not take borrowing money from the cities off the table, as Abel Maldonado would. (Sam Blakeslee would leave it on the table.)

Jon said that the state was #1 in terms of the total taxes levied on our residents.

Jon proposes, when asked what he would do to solve the budget problems in our state, eliminating many state boards and commissions, reforming PERS and STERS, and believes that going forward state employees should be invited to participate in a 401(k) plan in lieu of these programs.

Jon also expressed some receptiveness to reducing the requirement for 2/3 approval for passage of a state budget, perhaps in exchange for a 2/3 requirement for ALL fees AND taxes, as opposed to just for taxes, as is presently the law.

Lot's to think about.

We met with Ruth Coleman, Director of the California State Parks. Ruth serves at the pleasure of the governor, and thus has a responsibility to support the governor's budget, but at the same time is in the position of having her department effectively completely eliminated in the current budget proposal.

Ruth's department can be a significant economic driver (and thus tax driver), and evidence of this is needed to make the case for our state parks. This is as contracted to characterizing our state parks as recreation sources, which is presently a less compelling reason to keep the state parks around under the current budget crisis.

Ruth's state suggested that about $2 is generated for state and local governments for each $1 spent by the state, but that not all of this comes back as direct revenue of the state parks.

The most costly parks are historical and cultural in nature. The most profitable parks include the Orange County beaches, OHV area, Asilimar, Hearst Castle, and the State Railroad Museum. But, as parks are closed, starting with the least profitable, after about 10% of the parks are closed, one reaches a slippery slope after which all of the parks may as well be closed, as the money brought in by the more profitable parks does not provide enough revenue to cover the cost of providing basic services/maintenance in the parks that are less profitable.

Ruth also stated that it was likely that user fees would double in state parks, but noted that there was elasticity in these fees, and thus usage would likely decline with higher fees, so there is a limit to how much of the problem can be addressed with this solution.

We also had good meetings to Abel Maldonado, who talked about his decision to vote for the state budget proposal, and his frustration with some legislators who opposed tax increased in the budget, but now refuse to identify spending cuts that they are willing to support.

Dinner was with Sam Blakeslee, who has recently assumed the role of Assembly Minority Leader. As such Sam has been consumed with the budget process over the recent weeks.

When asked about whether there would be a borrowing of funds from cities and counties, Sam's feeling was that this was more likely not to occur than to occur.

A number of our contingent has headed out for an evening in Sacramento.

Tomorrow will begin at 8:30 a.m. in the hotel lobby as we head over for a tour of the Governor's Office, and several meetings in the office, followed by a meeting with State Controller John Chiang.