What Lawmakers Learned From the Last Budget Crisis

As the state Legislature takes up Gov. Gavin Newsom’s budget — the one with $19 billion less than before the coronavirus pandemic struck — some legislators say they're hoping to put to use lessons learned from the last state budget crisis in hopes of avoiding some of the same mistakes.

Mark Leno was elected to the state Senate in 2008, just as the economy was in free fall. What he remembers are the lines of people who came to the state Capitol to plead for their favorite programs before the Health and Human Services budget subcommittee.

"That's the committee where those cuts are made and hundreds of people make their way from throughout the state to line up at public comment to get a minute or two or three to tell us they're very sad. Real-life tales. You see the faces, you see the tears and you hear the cries for help," Leno said recently.

As Leno recalls, the state’s credit rating was dropping and Republican Gov. Arnold Schwarzenegger was resisting tax increases. "So it was as black as could be," Leno said.

Eventually, Schwarzenegger agreed to raise taxes and borrow money to help balance the budget. But the problem wasn't fixed and Leno, who went on to chair the state Senate Budget Committee, said the decisions they ultimately made to balance the budget then caused long-term damage.

"And, of course, the social safety net was just destroyed. It took us years and years and years to begin to put it back together," Leno said. "Those with the least suffer the most."

Around that time, a woman named Holly Mitchell traveled to Sacramento to lobby against a proposed billion-dollar cut to subsidized child care. At the time she led a nonprofit organization in Los Angeles. Today, Mitchell chairs the Senate Budget Committee and wields considerable influence around the Capitol. She said it was the last budget crisis that landed her where she is today.

"I sat in that hearing room and I listened to the kind of questions they asked and I saw them take that action. And I decided to run for the Assembly literally in that hearing room," state Sen. Mitchell said recently.

Mitchell won an Assembly seat in 2010 — the same year Jerry Brown was elected governor. But if Democrats thought protecting education and the social safety net would be easier when Schwarzenegger was replaced by Brown, they were mistaken.

"All I can say is that you can’t provide money you don’t have," the newly elected Brown said in dealing with the $26 billion deficit he inherited. "You either cut or you tax, there’s no third way."

When Democrats passed the first "Brown budget" in 2011, the governor vetoed it.

"We said it was balanced. He said it wasn't. And I can smile as I recall this now, but at the time it was very infuriating," Leno said. "I think Jerry did that specifically to show there was a new sheriff in town, that it wasn't going to be the same."

Darrell Steinberg, who was state Senate president pro tem at the time, recalls that after years of deficits, Democrats had run out of patience with slashing programs.

"And the fight was about additional $200 million in cuts he wanted in Health and Human Services and we said: No, we had done enough," Steinberg recalls.

State Sen. Mitchell said she can understand the logic of trimming programs. But now she also appreciates that some short-term cuts have long-term implications, like getting rid of dental care for the poorest Californians and how difficult it was to get that program back on line.

This time around, Mitchell said she’ll be looking for ways to tighten budgets without decimating services.

"How we cut around the edges as opposed to the absolute core of a program. It's a scalpel approach versus a sledgehammer," Mitchell said.

But sometimes what Democrats see as essential programs, Republicans see as nice, but not necessary. Or even wasteful.

"We’ve expected too much from our government," said state Sen. Jim Nielsen, R-Tehama. Nielsen has a very long budget memory, having served in the Legislature when Brown was governor in the 1970s. Like Brown, he returned to Sacramento and today is vice chair of the Senate Budget Committee. For him, the lesson of the last budget disaster is simple.

"I think we learned the value of the rainy day fund. Being prudent. Putting some money aside, retiring long-term debt," Nielsen said this week. He gives Newsom high marks for trying to balance competing budgetary needs, although he's steamed about the governor eliminating $7.3 million for the Paradise Irrigation District, which was decimated by the 2018 Camp Fire.

Fiscal caution and the inevitable recession — those were Jerry Brown’s mantras. But Newsom has a soft spot for government programs.

"Because one thing I know about cuts — there’s a human being behind every single number," Newsom said at his budget press conference last week. "Behind every category is a dream that is either deferred — in some cases a dream that is denied."

Democrats are counting on that sentiment to help protect the social safety net. But in the end, it may come down to Washington — not Sacramento — and how much COVID-19 recovery money the federal government sends California's way.