Transcript: Press briefing Q&A with CA Assembly Speaker John Perez on the May revised budget for FY2013-14

Partial transcript of press briefing Q&A with California Assembly Speaker John A. Perez on Gov. Jerry Brown’s May revision of the fiscal year 2013-2014 budget. The press briefing was held on May 15, 2013:

Question: [Inaudible]

Assembly Speaker John A. Perez:
Well, we expect the Governor to start from a point. We expect others to start from a different point. That’s what you deal with from a budgetary process. We’ve been very clear that the first tenet of our framework is fiscal stability. But in the second tenet in talking about strengthening our middle-class and using education as the corner stone of that work in the middle-class, we understand that students live in the real world. They do not just exist in the classroom. And so we believe strongly as we’ve outlined in our budget blueprint that you’d have to deal with the crisis of childhood poverty in the state of California. We will continue to look at that in our budget subcommittee process, our budget committee process, and I think that we’re going to reach an accommodation with the Governor in this area.

Question:
…The Governor has said that California has this trend of boom and bust and that the capitol is sort of like a funding machine. Do you think that there is the same sort of desire for fiscal discipline in the legislature that the Governor seemed to be saying he wanted during the press conference?

Assembly Speaker John A. Perez:
If you listen to everything that the budget chair and I have said over the last couple of years, if you listen to what we’ve outlined in our blueprint, you’ll know that the answer is emphatically yes. We absolutely believe in fiscal discipline. And when you look at the tenets of our blueprint, they’re predicated on that.

With respect to the boom and bust, that’s exactly what informed our view of how to deal with a rainy day fund.

One of the areas of greatest volatility is individual income tax and in particular capital gain tax. Over the last 20 years, they fluctuated anywhere between 3% and 14.5% of the general fund. And so we think the most responsible way to deal with that boom and bust is to deal with the area of greatest volatility and that’s where we’ve proposed a rainy day fund that captures any portion of the general fund that comes from capital gains above 6.5% and divert it into a rainy day fund so that you smooth out the peaks and you smooth out the valleys.

So we’re in absolute agreement with the Governor about fiscal discipline and stability.

Question:
[Inaudible]

Assembly Speaker John A. Perez:
We’re where we are, which is that we have got to look at the formulaic changes and make sure that we address the questions that the Governor outlines by looking at a couple of things. First, in making sure that as voters approve Prop. 30 as an expression of their desire to save public education and invest in public education that any change in formula has to result in an increase of funding for all schools. Second, that you have to deal with the reality of individual students and that you can’t only look at clusters. You can take clusters into account, and I believe one of you asked the Governor about clustering – is it related to his formula? Yes, you can look at clusters but you also have to make sure that you’re making the proper decision that impacts students even when they attend schools or live in school districts that don’t have the clusters that the Governor’s identified.

So in broad terms, we’re in agreement with the Governor but in areas of specific work, we would like to work out details to make sure that it works for everybody. And you’ve seen that play out in both our education policy committee, our budget committee in general, and our budget subcommittee on education.

Question:
[Inaudible]

Assembly Speaker John A. Perez:
Well, it’s not getting rid of. It’s making sure that to the extent that you include a concentration grant that you also figure out ways to deal with the issues of individual students. We believe that there’s a way to do this where all school districts get an increase over time and that is really important for us.

It’s also important for us that as you’re changing the formulas that you insulate school districts from any one-time hit that could happen during the transition.

And again, we’re very optimistic that we can reach an agreement with the Governor…

Question:
[Inaudible]

Assembly Speaker John A. Perez:
[Response in Spanish]

Question:
[Inaudible]

Assembly Speaker John A. Perez:
I think it’s a good starting point. Again, we’re at the starting point of the discussion. The May revise gives us the new framework in terms of dollar amounts. It builds on all the work that the budget committee, budget subcommittee has done up to this point, and then we start narrowing in on issues.

One of the things that’s most significant with the Governor’s [budget] with respect to the Medi-Cal expansion is that he agrees with us that we should have a statewide approach. The second thing that’s important is he understands that there’s a need to protect counties from the unintended consequences from the real-life impact of those people who will not get coverage either through expansion. The rest is detail work that we’re committed to do with the Governor. We think we’ll get to an accommodation.

Question:
[Inaudible]

Assembly Speaker John A. Perez:
So this is a 72-page document that I got at the same time you did. Until we review every page of these 72-pages, until our budget committee and our budget subcommittee go and look at every single line of what’s in there, we can’t give you an accurate assessment on how far apart we are.

In broad terms, we’re in the same place but the details matter and we’re going to do the detail work.

Question:
…His forecast for essentially lower personal income taxes…do you share that kind of pessimistic approach of what’s coming?

Assembly Speaker John A. Perez:
What you characterize as pessimistic, I would agree with your characterization. Budgeting is all question of projections and assumptions. So what we see in the Governor’s proposal is very conservative sets of assumptions at every fork in the road. The reality is you never get all the upsides and you never get all of the downsides. There’s always a combination of the two.

So a quick review of what the Governor proposed assumed all of the negative potential outcomes. We believe that there’ll be some mixed. We’re waiting to see what the LAO [Legislative Analyst’s Office] comes up with with respect to his analysis, and then we’ll use both sets of data to drive this discussion.

…Many of you stuck around with the Director of Finance where you were asking how perfect the science of projection is and she basically gave you the same answer I gave last week. This is an imperfect science. You use the best evaluations of what’s ahead of you and the best rearview look at what has happened in the past to try to discern what’s happening.

So the areas of the most important agreement are that we agree with the Governor on fiscal discipline and on making sure that we don’t make out-year expenditures that are not supportable with long-term revenues.

How we finally look at what those numbers look like will be informed both by what happened today and what the LAO did and a deliberative process of the committees. Because I know that the Chair will have both sets of experts come forward and try to discern what makes the most sense from those sets of data.

I think I’m also – I was fascinated by one of the answers the Governor said when somebody…asked him about franking, and the Governor said “I stand on intelligent analysis of the issues.” We, too, stand on intelligent analysis of the issues.

Question:
[Inaudible]

Assembly Speaker John A. Perez:
We have to. When you look at our democracy, it is predicated on a balance between the three branches. And so we need to make sure that the courts are able to operate efficiently because they play such an important role in our democracy, and we think the courts will have their voices heard. We’ll add our voices to theirs in making sure that as we recover, the courts are able to recover along with us.

Question:
[Inaudible]

Assembly Speaker John A. Perez:
Yes. But even before we had a super majority, the last two years we’ve had on-time budgets. So the controlling question isn’t whether or not we have a super majority. The controlling question is whether we have a budget chair and budget subchairs that are going roll up their sleeves and do the hard work that’s necessary. Over the last several years, our chairmen have proven the ability to do that and been able to work together with the Governor and with the Senate to get on-time budgets two years in a roll. This will be a third year in a roll. Each of the last two years, we saw an improvement in our credit worthiness. We expect to see the same this year.

One of the things that’s highlighted in the Governor’s May revise is that the estimate for the cost of financing debt decreased $480 million. That’s $480 million that can be set aside to build our reserve, set aside to make the investment in education, set aside for the purposes that are much more important than managing debt. And the reason that we have that $480 million upswing because of the decreased cost of carrying our debt load is because of the responsible work that we’ve done with this Governor over the last couple of years to balance our budget, act on time, and increase credit worthiness.

Thank you all very much.

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One Comment on “Transcript: Press briefing Q&A with CA Assembly Speaker John Perez on the May revised budget for FY2013-14

  1. Pingback: Spotlight: California State Budget 2013-14 | What The Folly?!

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