State of Deadlock (J. Shultz)
State of Deadlock:  A Case Study of the 
California Budget War

California is in the midst of an unprecedented and ongoing fiscal 
crisis.  Three straight years of budget shortfalls have led to 
massvie cuts--in public schools, public health care, aid to the 
poor and other key social and human services.  Budget advocacy, as 
it has been practiced in the past, no longer works.  What was once 
a series of "insider" discussions about specific programs has been 
drowned out by one central question--what are the responsibilities 
of state government and how shall they be financed?  This paper 
examines how human and social service advocates have responded to 
that question.
The Evolution of Fights Over Spending
	In the past, when the state budget pie was growing reliably 
from year to year, the budget process was primarily about 
tinkering with the nuts and bolts of programs, not a large schale 
debate about overall spending.   Throughout the 1980s, Governor 
George Duekmejian had one consistent theme to his budgets--nothing 
new, except prisons.  The Democrats would push in the opposite 
direction, adding money to schools, welfare and health programs 
and witholding money from prisons.  The result was a limited 
expansion of services in addition to prisons--prenatal care, 
transportation, the GAIN workfare program, and other areas that 
attracted bipartisan support--as well as cost of living 
adjustments for poor families, the elderly, and state employees.
	In the 1980s, revenues grew steadily and program growth was 
modest.  Generally the legislature and governor were able to reach 
a compromise without enormous delay.  On the surface it appeared 
that the state could continue modest spending increases without 
having to bit the bullet of a major tax increase.  However, budget 
analysts now say that the state had set in motion a dangerous 
pattern.  Those modest increases in spending were dependent on a 
tax base that was really in decline.
	In 1990, these fiscal chickens came home to roost with a 
state budget shortfall of $3.6 billion.  At the time, most people 
believed that this shortfall, like previous ones, was a cycilcal 
one-year problem due to the recession.  With a lame duck governor 
and a legislature up for reelection, all sides agreed, in the 
words of one aide, "to paper over" the budget gap by 
underestimating state costs and over-estimating state revenues.
1991:  The First Major Fiscal Quake
	Even before voters went to the polls in November, 1990, it 
was becoming clear that the new governor would be welcomed to 
Sacramento with a second major budget shortfall.  Early estimates 
placed the fiscal year 91/92 gap at $2-3 billion.  As Pete Wilson 
took office at the start of 1991, those estimates quickly 
ballooned to $12-13 billion, a revenue gap unprecedented in the 
state's history.
	Program advocates and legislative Democrats prepared for an 
all out battle with the new governor, to prevent him from making 
up the shortfall exclusively through massive cuts in state 
services.  Legislative leaders vowed that program cuts should make 
up no more than half the shortfall, with tax increases to make up 
the other half. To their surprise, the governor quickly agreed and 
the debate turned to what type of new taxes the state would 
impose.  "It was a gamble," said Roberti aide David Panush.  
"Wilson wanted to take care of it [the fiscal crisis] inthe first 
year."  According to Punsh and others, Wilson wanted an early and 
significant boost in the state's revenue base at the start of his 
term so he would be spared governing at fiscal edge for the 
following three years.  Wilson's main challlenge was winning 
sufficient votes from anti-tax Republicans in the Assembly.
	On the revenue side, the governor proposed to raise the bulk 
of the new funds from a hike inthe state sales tax.  "The Wilson 
team was the business team," said Kealey.  She and many others 
aruged that the governer's sales tax push was a preemptive strike 
against more progressive taxes on the state's businesses and 
corporations.  On the spending side, the governor adopted a new 
mantra--downsizing.  The governor's plan was to blend a boost 
inthe tax base with some long-term policy changes that would slow 
the growth in state spending.
	Even with new taxes, state programs faced $3 billion in cuts.  
Advocates responded with a mix of new unity and traditional 
friction.  Forty organizations concerned with children issued a 
joint call against cuts in AFDC and for new top brackets in the 
state personal income tax.  However, some children's advocates 
complained that the most powerful voice among them, the California 
Teacher's Association, fought for its own interests even at the 
direct expense of programs such as child development.  "They were 
cannibalizing other children's programs," said one advocate.
	In the end the shortfall was bridged with $9 billion in new 
taxes and $3 billion in spending cuts.  The state employees lost 
on the pension issue but were successful in fighting off the 5% 
pay cut.  The state also suspended the automatic cost of living 
increase for AFDC and welfare recipients.  "If Diane Feinstein had 
been governor in 1991 we wouldn't have gotten as large a tax 
increase," said Assemblyman Phil Isenberg.  In fact, there is a 
broad agreemetn that the bulk of the 1991 shortfall was made up 
for in new revenues only because Wilson spent significant 
political capital to win GOP support.  Wilson did so, betting that 
he had put the state's fiscal crisis behind him.
	Governor Wilson hoped he had put the fiscal crisis behind him 
when he supported the 1991 tax increases.  However, within just a 
few months it became clear that his budget headaches were just 
beginning.  First, California's economy, led by a collapse in the 
defense and housing industries, was getting worse.  State 
unemployment was headed for the 8% mark, and state revenue 
forecasts were more pessimistic by the day.  Second, GOP 
conservatives were still bristling over Wilson's tax hike.  As Pat 
Buchanan began to taunt President Bush with images of "read my 
lips," Wilson began to see ominous previews of coming attractions 
for himself.  Finally, the sales tax increase that Wilson had 
hoped would be relatively invisible, particularly the new tax on 
snack foods and newspapers, began to draw strong attention and 
opposition from the public.  Wilson's popularity with voters began 
to nose-dive along the same curve as the state's finances.
	In November and December Wilson signaled a dramatic change in 
his budget strategy.  First came a report, "California's Growing 
Taxpayer Squeeze."  It warned that the number of "tax receivers" 
(children, seniors, and the poor) was increasing faster than a 
shrinking proportion of taxpayers could support.  Wilson 
proclaimed that the state's fiscal crisis was severe and long-
term.  Wilson then translated that warning into a political 
broadside that surprised even his severest critics--Proposition 
165.  The proposal combined a 25% cut in AFDC benefits wrapped 
around sweeping new budget-making authority for the governor.  
Wislon had chosen his political target for 1992--welfare repients.  
"What the governor proposed went so far beyond what we expected, 
it definitely shifted the debate to the right," said Casey 
McKeever of the Western Center on Law and Poverty.

The Budget Fight and the Limits of "Inside" Advocacy
	In past years, when the budget pie was growing, budget 
advocacy was an insiders' game.  Advocates relied on strong direct 
relations with legislators to work their agenda.  However, 1992 
showed pressures broght to bear from outside the Capitol were 
becoming increasingly important.
	"A lot of people relied on those connections, and they 
weren't enough," said Lynn Kersey fo the Children's Advocacy 
Institute.  Educating and moving the public has become as 
important as convincing legislators.  "Part of what has to happen 
is a change at the grassroots," said Beth Capell of the CNA.  One 
of the most lasting lessons of the 1992 budget war was the need to 
link inside advocacy with effective work on the outside, aimed at 
the public and the media.
	The most concerted organizing effort against state budget 
cuts cmae from those conerned with Wilson's welfare cuts.  Anti-
poverty advocates, facing the deepest cuts while lacking financial 
and political clout, began to mobilize the only resource they had-
-the people who would be most directly affected by the cuts.
	In November 1991, the Coalition called a meeting of groups 
concerned about the welfare cuts.  Fifty people from both ends of 
the state--lobbyists and grassroots organizations--met and gave 
brith to a "Campaign for a Fair Share."
	The next month Governor Wilson unveilved Prop 165 and 
proposed cuts of 25% in AFCD grants.  "The initiative made people 
bonkers," said Hutchinson.  Los Angeles organizers said that their 
organizing lists quickly swelled from thirty five names to more 
than seven hundred.  "Little groups were springing up everywhere," 
remembered Hutchinson.
A New Strategy
	The Fair Share Campaign began with three clear goals:  
restore the previous year's welfare cuts; block any new cuts; and 
close tax loopholes to provide the needed revenue.  The campaign 
set its primary sights on the legislature.  "We were able to stay 
focused on the budget because labor was taking care of polling and 
fundraising against Proposition 165," said Fair Share coordinator 
Beth Steckler.
	Fair Share focused its pressure on legislators who they 
thought should have been allies but who had "caved in" on the 
previous year's budget cuts.  The strategy was, "let's make it an 
issue for them in their districts," explained Steckler.  "We had 
to making closing loopholes a part of the political conversation," 
added Hutchinson.


Tactics
	Lobbying and Media:  The campaign published a weekly 
"Campaign Update," distributed broadly by both mail and fax.  It 
included information on developments in Sacramento and 
instructions about the most important legislators and committees 
to contact.  Local activists visited with legislators, staged 
press events and sponsored a "child of the week" campaign through 
which profiles of children on AFDC were sent to legislators' 
offices.
	Protest:  Some communities took more direct action.  In 
Santa Cruz a picket was held outside the district office of 
Senator Henry Mello.  In Los Angeles a major demonstration and 
otehr organizing efforts were disrupted by the uprisings following 
the Rodney King verdict.  On the morning of the rally Los Angeles 
police withdrew the permit and arrested several organizers.
	Outreach and Public Education:  An effort was made to 
have local officials speak out against the welfare cuts.  
Activists in Santa Cruz developed an "alternative budget."  In San 
Francisco advocates successfully lobbied the local Chamber of 
Commerce to remain netural on Proposition 165.
	In July, still in the midst of the budget effort, Fair Shre's 
limited funding ran out.  Many of its formal operations ceased, 
but participants continued their local pressure on the budget and 
in the fall shifted their efforts to the campaign against 
Proposition 165.
Lessons
	Hindsight offers some useful lessons for Fair Share and 
others interested in mobilizing public pressure on budget issues.
	Strategy:  Even if Fair Share had moved everyone on its 
target list of legislators, it would still not have reached the 
Republicans needed to win the 2/3 vote for new taxes.  Campaign 
leaders said they were relying on the Democratic leadership to get 
those votes.  As with advocacy at the Capital, organizers 
continued to struggle with the tension between short-term and 
long-term strategy.
	Tactics:  Organizers are also struggling to find tactics that 
can apply pressure at the Capitol and motivate participation at 
the grassroots level.  As one activist noted, "We're not going to 
organize people by inviting them to a meeting."  In 1992 it became 
clear that traditional communication with legislators was losing 
its power.  "We just turned off our fax machine," said Joe Caves 
of Senator Hart's office.
	Outreach:  In its efforts to develop a grassroots continuency 
for welfare programs, Fair Share tapped into a critical reservoir 
of new advocacy talent--direct service workers who witnessed the 
impact of cuts first hand.  However, social workers and otehrs on 
the front line were already overburdened, precisely because of the 
cuts.  One social work student told of how she and her classmates 
persuaded their professors to incorporate the students' anti-
Proposition 165 work into the semester's curricula.  This merging 
of advocacy into the other demands on people's time is a model for 
organizers to replicate.
The Road From Here:  Emerging Long-Term Strategies
	Even the most optimistic scenarios for the new budget, with 
agreement on some new taxes and rollover, still leave the state 
with a shortfall of $5 to $6 billion.  That gap will need to be 
made up in cuts in programs.  Legislative insiders are urging 
advocates to "face reality" and offer guidance on how to set 
priorities.
	"Everyone's first answer is 'not me,'" says Assemglyman Phil 
Isenberg.  With almost all programs under attaack, advocatees' 
first impulse is to shift to a full scale defense.  Nevertheless, 
the cuts are coming, at least in the short-term.  "The advocates 
who will be influential will be the ones that can provide us with 
real solutions," said Joe Caves of Senator Hart's office.
	More partisan players argue that the only real way to alter 
state buget and revenue politics is through unseating Pete Wilson 
and passing of a constitutional amendment allowing the state 
budget to be approved by a simple majority.  The formula for this 
attack, proponents argue, is to continue to isolate the governor 
on educatin and other popular spending issues and to lay the blame 
on Wilson for the state's faltering economy.  That strategy also 
means an effort to capture the mantle of "economic prosperity" for 
the Democrats.
	Critics charge, however, that the Democratic economic 
development plan doesn't look significantly different from 
Wilson's agenda for new corporate tax breaks and regulatory 
concessions.  The major Democratic document calls California 
business "our customer, whose satisfaction is our business."
	Other advocates point to a different strategy--that if a 2/3 
or public vote for new taxes is going to be won, supporters must 
pursue a combination of outreach to the business community and 
program reform.  Peter Schilla of the WEstern Center on Law and 
Poverty points to Proposition 111 in 1986, when business, labor 
and others joined to win a relaxation of the state spending limit.  
In that case, business watned a gasoline tax increase to finance 
transportation projects.  Schillla says there are otehr issues 
that can be used now to enlist business support for new revenes.  
"There are some loopholes less important to them than an educated 
workfore."
	"Nobody is going to support new revenues without reform," 
said Peter Schaafsma of the Legislative Analyst's office.  
However, the reform impulse is driven by more than just a desire 
for public support.  Many key supporters of public programs also 
believe that it is time to take a fresh look at how these services 
are really working.  "With the way programs are now it is a 
miracle that people do get off welfare," noted Sandy Weiner, a 
Fair Share organizer who has worked for many years helping 
families recieving public assistance.
	Other advocates note that reform can also be used to 
strengthen the political constituency for programs.  The point out 
that when MediCal spending comes under attack recipients have 
critical allies in both the hospitals and the doctors who serve 
Medi-Cal patients.  However, when AFDC is under attack, 
beneficiaries are politically alone.  Program restructuring could 
secure the interest of the state holders in welfare and other 
programs by incorporating landlords and otehrs into the structure 
of how assistance is provided (such as through rent subsidies).
	Neither bridge building nor reform is without politicial 
risk.  Advocates need to develop their own political strength 
before entering into any negotiation with business.  Many also 
fear that public honesty about program effectiveness might be used 
by opponents to undercut programs instead of improving them.  
Nevertheless, the traditioal constituency for public services 
can't win the tax battle alone.  Says Tim Gage of the Ways and 
Means Committee, "None of the old strategies are going to work."
Unity--Tensions in the Way
	"Is there a strategy that would allow everybody to come out 
better?" asked nurses lobbyist Beth Capwell.  There can be a 
unified progressive strategy on taxes and spending cuts.  Along 
the way, however, policy-makers and constituency leaders will need 
to deal with some specific tension points.
1) Tension Between Policy Areas
	In the face of deep spending cuts, it is not surprising that 
the first impulse of each program and policy area has been to 
protect its own slice of the pie.  Programs find themselves stuck 
in a "zero sum" competition pitting them against one another.
	Now state red ink is engulfing even the strongest 
constituencies.  Long-term protection is possible only with a 
unified strategy to increase state and local revenues.  It is also 
true that boundaries between areas of state spending evaporate 
once programs touch the lives of individual Clifornians.  Welfre 
rights advocate Beth STeckler notes, "The way I look at it is that 
it's the people, not the progams.  The same people who get welfare 
send their kids to public schools, go to community colleges and 
state universities and drive on county roads."
2)  Tension Between "Insiders" and "Outsiders"
	There is also a tension between legislative "insiders" and 
"outsiders."  In the eyes of progressive legislators and staff, 
activists don't have a clue what it means to beat the actual 
responsibility of passing a balanced budget in the face of the GOP 
blockade on taxes.  Conversely, in the eyes of activsts, 
legislators and their aides are obsessed with their own political 
suvival and are oblivious to the pain being endured by people 
forced to sleep on the street.
	Even between advocates and community organizers there is a 
tension, between "people who work on the phone" and "people who 
work on the street."  Yet, the insiders and the outsiders need one 
another if there is to be any movement forward on a new revenues 
agenda.  Outsiders need insider guidance about the political 
forces controlling the tax issue.  Insiders need the outsiders to 
help mobilize public education and pressure.  "I don't know how to 
create the shift in public opinion, that's not my job," said CNA 
lobbyist Beth Capell.
3)  Tension Between Providers and Recipients
	Historically, the strongest and most politically potent 
advocates for new renveues have been the major public employee 
unions.  Unlike other advocates concerned with budget cuts and new 
reveneues, the unions come armed with a political war chest.  This 
makes them players both in terms of legislative politics and 
ballot politics.
	On revenue questions, public employee unios and human service 
advocates are strong allies, both having an interest in improving 
the state's cash flow.  "The easiest thing that unifies us real 
fast is taxes," says the CSEA's Steve Smith.  However, that 
alliance is more difficult on the spending side.
	"We have a narrowly defined self-interest," says Smith.  The 
unions are interested in more public services, which means more 
jobs for union members and a common agenda with service advocates.  
The other public employee priority is steady salary increases.  In 
tight budget years, that could create a direct conflict with other 
progressive agendas, like AFDC payments.  In 1992 that conflict 
was avoided, because state employees negotiated the salary issue 
outside the budget process at the bargaining table.
	The provider/recipient connection also faces tension over the 
issue of reform.  Education advocate Peter Birdsall observes, 
"It's easy to move to the first priority--population growth plus 
an inflation adjustment."  Assembly Phil Isenberg says that almost 
every policy constituency uses the same formula nad warms that it 
puts innovation at a very low priority.  Says Isenberg, "It's a 
formula that is 97% for the status quo."  Reform, says Birdsall, 
is much more difficult.  Another source noted that unio members 
tend to look at the issue of reform this way," Under the current 
system I have a job, with reform I may not."  The challenge will 
be for employee and recipient groups to stay together on revenues 
without coming apart over spending priorities and reform.
4)  Tension Between Long-term and Short-term Goals
	Social and human service advocates need two agendas on the 
budget.  One is a short-term agenda that directly addresses what 
is achievable in the current budget year.  The other is a long-
term agenda that seeks to change those short-term realities and 
open up new possibilities for revenue and program support.  
Advocates can't afford to ignore either the reality of cuts, nor 
the long-term need to change the political equation.

Conclusion
	The challenge, when faced with a crisis as complicated and 
politically charged as the state's fiscal disaster, is to be able 
to see the forest for the trees.  This report has sought to give 
its readers a glimpse of that forest.
	A friend of mine asked if it was depressing to put together a 
study about California's fiscal nightmare.  I told her no, that 
actually the project had given me great hope.  it is almost always 
true that in the midst of crisis we are able to catch a glimpse of 
opportunity.  There is an extraordinary opportunity here, to build 
a new vision of what government should be and to rebuild a 
California in which economic prosperity and social justice are 
tended together.


From Jim Shultz, "State of Deadlock:  A Case Study of the 
California Budget War" (Advocacy Institute West: 1992).