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SACRAMENTO — Governors are like card sharks when dealing out budgets. They’ve usually got gimmicks tucked up their sleeves.
Legislatures tend to follow suit — at least when there’s lopsided one-party rule, as there has been in Sacramento for the last 14 years.
Budget season has just opened in California’s Capitol. Gov. Gavin Newsom proposed a $322-billion state budget in January for the fiscal year beginning July 1. After an inexcusably long pause required by outdated legislative rules, budget committees now have begun plowing through the weeds of the governor’s spending plan.
One Newsom gimmick has drawn little attention amid Los Angeles-area wildfires and all the focus on chaos generated by President Trump.
To help balance his budget, the governor wants to grab roughly $300 million from the $10-billion climate bond approved overwhelmingly by voters in November.
OK, that’s only a fraction — 3% — of the bond total. But it’s the principle of the money grab. It could set a pattern for this governor and his successors to continue dipping into the climate bond pot to balance budgets.
“We could probably expect to see more of that in the out-years,” says Republican Sen. Roger Niello of Fair Oaks, a Sacramento suburb, who is vice chairman of the Senate Budget Committee.
“The governor certainly uses whatever funds he can find to balance the budget, and the Legislature does pretty much whatever he asks.”
The climate bond, Proposition 4, passed with 60% of the vote — a landslide. The ballot measure’s official title read that it authorized bonds “for safe drinking water, wildfire prevention and protecting communities and natural lands from climate risks.”
So here’s the problem: Voters weren’t told that some of the money would be used for sopping up budget red ink. They were led to believe — among its most saleable pitches — that it would accelerate preparation for facing the perils of climate change.
There was $1.2 billion to reduce the risks of sea-level rise and $850 million to support the shift to more renewable energy, such as offshore wind.
The biggest item, however, was $3.8 billion to increase the amount and quality of water available for people, and to reduce flooding risks. Also, there was $1.5 billion for wildfire prevention and $1.2 billion for land conservation and habitat restoration.
“I didn’t support it,” Niello says. “It was a real hodgepodge of stuff. My interest was flood control, and it became almost de minimis.”
Newsom, a Democrat, didn’t support it either. He was publicly neutral. Privately, he repeatedly told legislative leaders he didn’t want the bill. When it landed on his desk, he was conveniently out of state, and Senate leader Mike McGuire (D-Healdsburg), the acting governor, signed the measure, placing it on the ballot.
Here’s how Newsom proposes to use Proposition 4 to help balance the budget: He wants to shift into bond financing $273 million worth of natural resource and climate projects previously authorized to be paid for by the general fund. That’s the state’s major cash checking account, currently pegged at $232 billion.
The governor also proposes to shift $32 million in Proposition 4 bond money to pay for clean energy projects previously authorized for financing under the state’s cap-and-trade program. It’s funded by businesses buying permits to emit greenhouse gases and is horrendously complex.
Just know that the most uneconomical way for the government to spend money is through bond financing because that means borrowing and paying interest. It can practically double the cost of a project. It’s like driving up long-term credit card debt rather than paying cash.
The $10-billion climate bond is designed to be paid off over 40 years at $400 million annually. Newsom’s budget officials point out that shifting the cost of some general fund projects to bond financing won’t increase the total tab for interest because $10 billion will be borrowed regardless.
But the $10 billion won’t buy as much as originally anticipated. Newsom’s plan will reduce the number of new projects envisioned under Proposition 4. That’s because the bonds will be paying for some old projects previously approved for the general fund.
In budgeting lingo, this scheme is called “backfilling.” When general fund money for a project is withdrawn, it’s often backfilled from another source — like robbing Peter to pay Paul.
“Voters passed this climate bond as a supplement, not as a replacement for general fund spending,” protests Gabriela Facio, senior policy analyst for the Sierra Club. “The status quo is not enough. The need to invest more on environmental resilience is critical.”
“Voters don’t pay any attention” to such weedy ballot measures, asserts Jon Coupal, president of the Howard Jarvis Taxpayers Assn., which opposed Proposition 4. “They saw ‘climate change.’ They were like Pavlov’s dog and voted for it.”
The proposition’s author, Sen. Ben Allen (D-Santa Monica), hopes for a compromise. He chairs the Senate budget Subcommittee on Resources, Environmental Protection and Energy.
Proposition 4 “was crafted to provide additional investments” in the fight against climate change, he says. “It wasn’t meant to amount to a clawback … to be raided and utilized as a backfill.”
His subcommittee believes that Newsom “is raiding into Proposition 4 far too much,” Allen says. “We’re happy to work with him and come up with a reasonable set of compromises if he doesn’t cannibalize too much of it. We’re not interested in it becoming a grab bag to cover budget problems.”
H.D. Palmer, spokesman for Newsom’s finance department, says the governor is being “fiscally prudent” because of economic uncertainty and threatened federal funding cutoffs.
But the news media and public should keep their eyes on the card shark.
What else you should be reading
The must-read: Newsom says trans athletes’ participation in women’s sports is ‘deeply unfair’
The TK: San José mayor proposes jailing homeless people who repeatedly refuse shelter
The L.A. Times Special: Trump’s 1% policy wars: Transgender people, USAID funding and now Canadian fentanyl?
Until next week,
George Skelton
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