SACRAMENTO -- Gov.-elect Jerry Brown and some of the state's leading politicians laid out a panorama of grim realities as California seeks a way out of its unrelenting economic crisis, emphasizing that gimmicks can no longer be used.
Brown, 25 days away from assuming the governorship, took the extraordinary step of calling hundreds of lawmakers and local officials together to confront what will likely be the defining issue of his term.
One-time solutions such as federal stimulus funds and temporary tax hikes are not options to fill in gaps left by the state's plummeting revenues, Brown said during the two-hour summit.
And, he said, lawmakers must step out of their ideological comfort zones to deliver results to Californians.
"The crisis, I think, will open the way to solutions because our backs are against the wall," he said. "I believe this breakdown will, of necessity, pave the way to a breakthrough because we can't keep going on the way we have. It's getting worse. Beneath the differences there is a zone of potential common agreement. That's where I'll focus in the coming months."
Joining Brown on stage at the venerated Memorial Auditorium blocks away from the Capitol were state Treasurer Bill Lockyer, state Controller John Chiang, Brown's newly named finance director, Ana Matosantos, legislative analyst Mac Taylor, Senate leader Darrell Steinberg, D-Sacramento, Assembly Speaker John Perez, D-Los Angeles, and Assembly Republican leader Connie Conway, R-Visalia.
The meeting took place as lawmakers are ostensibly in a special session after current Gov. Arnold Schwarzenegger declared a fiscal emergency to tackle a $6.1 billion budget deficit for the current fiscal year. Though they will begin hearings on Schwarzenegger's proposal today, Democrats have said it's all but certain that they will not take action until Brown takes office Jan. 3.
Future threats to the state's fiscal health are adding to the current ailments. The state faces as much as $500 billion in future pension liabilities, a depletion by $10.3 billion in the unemployment insurance fund, $15.3 billion in costs for borrowing and $3.5 billion for health care reforms.
Though Brown had hoped to downplay partisan differences, the meeting was not without displays of antagonism between the parties. Senate Republican leader Bob Dutton, R-Rancho Cucamonga, refused to go on stage with the other leaders, saying afterward that the meeting was nothing more than "about setting the agenda for a tax increase."
Conway was the only Republican on the dais, and pointedly reminded Democrats that voters "resoundingly defeated tax measures" in November. She complained when Perez raised the issue of taxes, sarcastically saying, "I'm so glad we're not talking solutions and about raising taxes because I know that's not what we're here for."
She also voiced frustration that the discussion didn't delve deeply enough into spending problems.
"Are we getting the whole picture here?" she asked. "I want the truth on the table."
Brown drew laughter from the crowd when he quipped: "I thought we had enough bad news for you. I think I can get you some more."
Brown avoided any direct reference to taxes, saying he was concerned about laying bare the problems the state faces before he tries to get at how to solve them.
"It's hard to come to agreement if there's no consensus on what the underlying facts are," he said. "Because we're a divided state -- north-south, Republican-Democrat, urban-rural -- it becomes difficult to come to a consensus and a solution when they are as painful and difficult as they will be in the coming year."
The newly named chairman of the Senate Budget committee, Sen. Mark Leno, D-San Francisco, however, was more direct on taxes in comments he made after the conference. He said he can't see how to dig out of what could be a $28.1 billion revenue shortfall without asking voters for a tax increase through a ballot measure. He said he hopes it's done within the first six months of 2011.
"If Bob Dutton's suggestion is that we can resolve this hole with cuts alone, California needs to know what it means," Leno said. "It would be devastating."
Leno said that forums like Wednesday's will be important in laying the groundwork for the dire choices they face. He said taxes would have to be targeted to specific areas such as higher education and K-12 schools, services that have high levels of approval.
Brown is planning another forum Tuesday in Los Angeles, to be focused on schools.
Adding further to the mounting problems facing the state, California's credit rating is the lowest in the nation, Lockyer said. The state pays 1.1 percent an interest rate 1.1 percent higher than other states, which leads to an added $12 billion in interest rate charges to pay off $54 billion in debts over the life of loans.
"It's substantial and we're paying a lot because of our credit rating problems," he said. "I worry we could be downgraded further if there aren't genuine balances adopted."
He said the state needs to "lose the gimmicks," put forward honest revenue projections, quit borrowing, make better midyear budget adjustments and "think longer" range.
Chiang said the state does not appear to be facing a cash crisis through the end of the fiscal year on June 20, but thereafter, "we see a very different story." The state could be short of cash by $2.3 billion on July 1; $3.5 billion in August and $4.6 billion in September.
"I want to urge caution so we don't revisit the cash crisis of 2009," when the state had to issue IOUs to state vendors and delay tax refunds to taxpayers.
Contact Steven Harmon at 916-441-2101.
Medi-Cal: $17.6 billion
Employee payroll: $9.2 billion
State prisons: $9 billion
Funding for UC and CSU: $5.4 billion
Services for developmentally disabled: $3.1 billion
CalWORKs: $3 billion
In-Home Support Services: $1.7 billion
Mental health hospitals: $1.2 billion