March 31, 2011 7:17 pm

Gloom hits ‘Governor Moonbeam’

In his overwhelming defeat of Meg Whitman last November, Jerry Brown spoke of needing “someone with an insider’s knowledge but an outsider’s mind” to restore California to fiscal health and fix its perennial budget woes.

But only three months into the job, the 72-year-old Mr Brown has discovered that California is not the state it was when he last governed it in 1983.

While his predecessor, Arnold Schwarzenegger, was being feted by David Cameron and Mikhail Gorbachev on a tour of Europe this week, Mr Brown suffered humiliating defeat over his plans to secure Republican support for a budget that addresses California’s record $26bn deficit.

Mr Brown had already signed into law $12bn of spending cuts, with social services and welfare payments among the areas to feel the pain.

Those cuts were contingent on Mr Brown getting the votes of four Republican members of California’s legislature and putting a proposed extension of some tax increases to a public vote.

He had warned that the spending cuts would be “much, much worse if we cannot get the vote of the people and the tax extensions”. But when it came to the crunch he could not muster the Republican support needed, leaving his plans – and California’s fragile economy – in limbo.

“People who voted for Jerry Brown thought they were going to get an established leader who understood Sacramento and who could go beyond what had been accomplished by Arnold Schwarzenegger,” said Mark Baldassare, president of the Public Policy Institute of California. “And they just haven’t got that.”

Mr Brown, who in the 1970s earned the sobriquet “Governor Moonbeam” for his liberal views and enthusiasm for space exploration, enjoyed a brief political honeymoon after defeating Ms Whitman in last November’s election.

While his opponent ploughed more than $120m of her own money into her campaign, Mr Brown courted California’s largely liberal electorate by playing up his image as a wily political operator.

The honeymoon came to an abrupt end this week. Unlike New York and Illinois, two other states that have crippling budget deficits, California’s politicians have been unable to agree on a plan to move the state forward.

Tom Del Beccaro, chairman of the California Republican party, told the Financial Times that Mr Brown “is no Andrew Cuomo”, referring to the New York governor’s success in bringing Democrats and Republicans together.

Mr Brown’s mistake was in not outlining a more radical overhaul of California’s public services, he added. “Jerry Brown is saving the bureaucracy and threatening to gut education instead of reducing bureaucracy to save education.

“The policies that got California into trouble – higher taxes and higher regulation – are still there. Jerry Brown is going to fail as governor unless he deals with the fundamental issue of bloated bureaucracy and an unfriendly employer environment.”

Mr Brown’s hands have been tied by California’s constitution, which requires a two-thirds majority in the state government to pass tax increases. With the state evenly split between Democrats and Republicans this has made passing tax increases impossible without some Republican support.

“He has to come to grips with the fact that the two-thirds majority rule gives the Republicans veto power over anything that has to do with taxes,” said Bill Carrick, a Democratic party consultant who has worked with Mr Brown in the past.

Since admitting defeat this week, Mr Brown has retreated from view – calls to his spokesman were not returned – while he considers the dwindling options left open to him.

The most obvious is to come up with a budget that has no new tax raising measures in it, which would rely instead on $26bn of cuts to close the deficit.

But it is unclear whether such a move would be supported by California’s Democrats, which are the majority party in the state legislature.

If agreement on closing the deficit cannot be reached by June, the state will be plunged into turmoil and poised for a repeat of 2009, when it had to issue IOUs in lieu of cash to pay its bills.

This would leave California in an even more parlous financial position, heightening concerns in the bond markets about its ability to pay bills. “It would be déjà-vu all over again,” Mr Carrick said.

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