California Insider

Many insiders have been saying that San Quentin warden Jeanne Woodford would make a good choice by Schwarzenegger to reform the state Corrections Department, but those same people assumed she would never take the thankless job. Well, she has. The governor's office just announced the appointment.

According to the press release, this is her biography:

"Woodford served more than 25 years in corrections. Since 1999 she has been the warden for San Quentin State Prison where she was directly responsible for a budget of $110,000,000, 5,800 inmates and 1,500 staff. Prior to taking over as warden, Woodford served first as an associate warden and later as the chief deputy warden. Since first joining the staff as a correctional officer at San Quentin in 1978, she has served in several other positions including seven years as a correctional counselor and five years as a program administrator. She is also a member of several law enforcement and community organizations including the Association of Black Correctional Workers, the Sonoma State Alumni Association and the California Public Safety Leadership and Ethics Program. Woodford, 50, is a graduate of Sonoma State University with a Bachelor of Arts degree in criminal justice. She is a Democrat from Benicia, CA."

Attorney General Bill Lockyer has just issued a statement saying he strongly supports same sex "civil unions" (no mention of gay marriage) but will defend the state against a lawsuit from the city and county of San Francisco over the state's refusal to recognize San Francisco's same-sex marriage license. "The people of California have spoken," Lockyer said. Read the whole thing here.

UPDATE and CORRECTION: An earlier version of this item said Lockyer supported gay marriage. His statement, however, says only that he supports civil unions and extending the rights and responsibilities of marriage to domestic partners.

Yesterday’s report by Legislative Analyst Elizabeth Hill wasn’t exactly a warm embrace for Gov. Arnold Schwarzenegger. But Hill’s conclusion might not be as bleak as it sounds at first blush – a $7 billion gap in the budget a year from now even if Schwarzenegger gets everything he’s asking for. And buried deep inside her report are a number of helpful ideas that could lead the governor back to a balanced budget.

First, on the bottom line. Hill says Schwarzenegger’s reliance on a number of Davis-style one-time measures to balance the 04-05 budget will come back to haunt him. Beginning the 05-06 budget process, the governor would be facing a new gap between revenues and spending, to the tune of $7 billion.

But even using her number as a starting point, here’s one way to deconstruct it and see why Schwarzenegger thinks he can get to a balanced budget without tax increases:

--Schwarzenegger is proposing to reserve $2 billion from his bond to use toward the 05-06 budget. That shrinks Hill’s shortfall number from $7 billion down to $5 billion.

--About $1 billion of Hill’s projected gap is due to her lower estimate of state revenues this year and next. If the Department of Finance is right and Hill is wrong, her gap shrinks to $4 billion. A bit more economic growth would accomplish the same thing.

--Hill assumes that the transfer of Proposition 42 money – the sales tax on gasoline – back to the general fund will end after this coming year. If lawmakers continue the transfer into 05-06, the gap shrinks to $3 billion.

--Schwarzenegger has yet to put a number on the savings that could be generated from any of the reforms he is proposing throughout the budget, or on potential savings from his California Performance Review, due June 30. If those efforts combined yield just $1 billion in 05-06, Hill’s gap shrinks to $2 billion – in a general fund of about $80 billion.

Pretty soon Schwarzenegger is within shouting distance.

Of course, Hill also points out that perhaps $4 billion of Schwarzenegger’s proposals are at risk of never coming to fruition. So that’s the other side of the ledger. More on that later.

Beyond that, Hill’s report lists dozens of suggestions that Schwarzenegger and the Legislature could use this year or next to bring the budget closer to balance. They include more than $600 million of specific recommendations for the coming year and about $3 billion in cost-saving options that Hill doesn’t recommend outright but offers for the consideration of policymakers. (Not all of them could be implemented, because in some cases, if you do one, you can’t do the other). Beyond that, Hill offers a list of potential revenue-raisers that combined would generate about $3 billion a year without an increase in tax rates. They include:

--Mortgage interest deduction. Currently taxpayers can deduct interest on mortgages up to $1 million. Limiting that to $600,000, and to one home only, would raise about $525 million a year.

--Dependent exemption credit. Until 1997, the dependent exemption was equal to most other exemption credits. Beginning in 1998, the dependent credit was increased to more than three times the personal exemption. Equalizing them again would bring in about $885 million a year.

--Sales tax broadening. Expanding the sales tax to cover certain entertainment services, including cable television, sports, movie and amusement park admission, and private clubs would generate $500 million to $700 million annually.

--Teacher retention tax credit. Hill says this Gray Davis creation is the wrong way to retain teachers and sets a bad precedent by using the tax code to single out certain professions for special treatment. Repealing it would save $190 million.

--Research and development tax credit. Hill says evidence supporting the effectiveness of state-level R&D credits is weak, and California’s is the highest in the nation. Cutting it in half would generate $170 million.

--Subchapter S tax treatment. This tax break allows corporations to file their taxes so that income is taxed at the individual level rather than the corporate level. It was intended to help small- and medium-sized businesses. Limiting its use to companies with receipts incomes of $20 million or less would generate $300 million.

--Renter’s credit. It’s been suspended before in tough times. Suspending or repealing it would generate $100 million annually.

--Dependent care tax credit. The dependent care credit subsidizes families who choose to put their children in day care as opposed to juggling their parenting or having one parent stay home. The credit is limited to those earning less than $100,000. Limiting it to families earning $50,000 or less would generate $80 million.

You can find her full report here.

Treasurer Phil Angelides this morning proposed an alternative to Gov. Schwarzenegger $15 billion bond and to the legally questionable "back-up" bond approved last year by the Legislature and former Gov. Gray Davis. The Angelides plan would retire the accumulated deficit in three years through a series of short-term loans repaid by raising taxes on high-income earners and dedicating a 1/4-cent share of the sales tax. Schwarzenegger's plan would retire the deficit in 9 to 14 years without raising taxes. The Angelides proposal focuses only on the accumulated debt and does not address the ongoing $15 billion structural gap in the budget. Under his scenario, without further long-term borrowing, Schwarzenegger and the Legislature would have to come up with an additional $3 billion in further spending cuts (beyond all of those already proposed) or new tax increases to balance the budget. Here is a link to the treasurer's web page laying out his plan.

Sen. Don Perata is considered a leading candidate to succeed John Burton as president pro tem. The SF Chronicle has uncovered some interesting things about the connection between his personal, business and political finances. Here is the latest installment.