Dan Walters

Jerry Brown hopes to leave on high note, but fears downturn

Obliquely and perhaps unwittingly, Jerry Brown has acknowledged that as his remarkable political career nears an end, he’s concerned with how history will remember him.

While unveiling a revised state budget on May 13, and five days later in a speech to business leaders, Brown referred to his hopes of leaving on a positive note.

As he described his new budget, Brown ticked off errors that his three immediate gubernatorial predecessors – Republicans Pete Wilson and Arnold Schwarzenegger and Democrat Gray Davis – had made that either undermined their popularity or, in Davis’ case, led to his recall.

Each, he said, ended his governorship on a sour note – as did Brown’s first governorship in 1983, by the way.

“Bye-bye Jerry?” he added, “Not if I can help it.”

Brown leaves no doubt that he perceives the greatest threat to his legacy to be a volatile state budget that’s very sensitive to the “zigzags” of the economic cycle, compounded by its very lopsided dependence on income taxes paid by the top 1 percent of taxpayers.

He repeatedly warned that the state is overdue for a recession, and should avoid big new spending commitments, saying that even a moderate downturn could cost the state $55 billion in lost revenue over three years.

“To manage this budget is like riding a tiger,” he told reporters at the budget session and later the business leaders, twice citing a recent Moody’s Investor Services report that California is 19th among the 20 most populous states in its ability to cope with recession.

Although Brown’s description of the chronic fiscal dilemma is dead on, he also displayed another attitude that marks his second stint as governor – an unwillingness to shoulder the difficult task of fixing it.

If, as he says, the underlying factor is a dangerous dependence on how well a handful of Californians are doing in their investments, the solution to that volatility and uncertainty would be to reduce that dependence and make the revenue stream more predictable.

But Brown has gone the other way, making the state even more erratically dependent on taxing the rich by sponsoring a temporary increase in their taxes in 2012, one that voters will be asked this year to extend for 12 more years.

Although he says he’s noncommittal on the extension, Brown gave its proponents some ammunition by warning that without it, the state faces future budget deficits. And from a political standpoint, he says, “the best tax is one that 99 percent of the voters don’t pay.”

Moreover, Brown has shunned even trying to overhaul the tax system, citing the high likelihood that it would fail. He relies, instead, on what he describes as “a very small rainy-day fund” to cushion a downturn’s impact.

Even were it to reach its legal maximum (currently $12 billion), the fund would cover only a fifth of the revenue shortfall Brown says a mild recession would cause – a conundrum that the Moody’s analysis cites.

As Sen. Bob Hertzberg, D-Los Angeles, who’s been seeking traction for tax reform, so far unsuccessfully, observed after Brown’s budget release: “We need a stable, growing tax base, not one that will fall off a cliff when the next recession comes, (and) until this outdated tax system is fixed, we won’t be able to deliver real and sustainable progress for Californians.”

That’s quite true, and Brown knows it. But he’s not willing to spend political capital to make it happen. Hoping to depart before the economic ax falls, as he semi-jokingly told the business leaders, is not exactly a profile in political courage.