Writing a new state budget in June turned out to be, in an old saying, easy-peasy.
However, it was easy not only because the state has reaped a bounty of revenues from economic recovery, but because the budget package didn’t address three major Jerry Brown priorities: housing reform, transportation financing and the state’s cap-and-trade program of reducing carbon emissions.
The Legislature will return to Sacramento on Monday for the final month of its biennial session and work on all three.
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This time it won’t be simple. The politics of all three are confoundingly complex, involving scads of “stakeholders” – Capitol jargon for narrow interest groups – the usual interparty rivalries, plus discord within the dominant Democrats and election-year sensitivities.
The short versions:
Housing: With the state facing a wide gap between supply and demand and skyrocketing costs, Brown wants the Legislature to give projects that meet certain criteria a regulatory fast track.
His proposal is aimed at overcoming fierce local opposition to housing – the not-in-my-backyard syndrome. But local governments don’t want to lose land use authority, environmental groups don’t like watering down the much-criticized California Environmental Quality Act, and service unions are opposed because they often use, or misuse, CEQA as a unionization tool.
Construction unions, meanwhile, are demanding that any action on housing deregulation include a “prevailing wage” requirement usually reserved for public works.
Administration officials have been traveling the state to build support for housing action, but it will be a tough political nut to crack.
Transportation: Brown wants a new, multibillion-dollar financing package to chip away at a huge backlog of deferred highway maintenance. But new taxes would require at least some Republican votes, local governments want a share of the proceeds for their roads, and mass transit providers also want in on the action.
Proponents have been working the Legislature for months, trying to find a magic formula to attract the requisite votes. But Republican legislators have been leery, suggesting that they would want CEQA reforms and perhaps more privatization of highway maintenance work as prices for their votes.
One wild card is whether revenues from cap-and-trade auctions could lubricate a highway deal. However …
Cap-and-trade: Brown proposed to spend $3.1 billion in proceeds from auctions of carbon emission allowances. Yet May’s quarterly auction was a bust, generating just 2 percent of its $600 million estimate, due largely to a glut of allowances in the secondary market at prices below the state floor.
The legal and political uncertainty surrounding cap-and-trade clearly was a major factor in the dumping of allowances, and the administration is desperately trying to shore up the market. It has a plan to continue the program beyond 2020 by rule and simultaneously is seeking legislative reauthorization.
To be legally airtight, however, legislation would require two-thirds votes, giving Republicans a pivotal role, and Democrats appear to be divided. Some environmentalists are worried that Brown will sacrifice other anti-carbon programs to save cap-and-trade.
If the program isn’t shored up, chances are that future auctions – the next is scheduled in mid-August – will be just as disappointing. Projects dependent on their proceeds, including Brown’s bullet train, will be in jeopardy.