Money & Politics | Daily Report

Thomas Hawk/FlickerGov. Jerry Brown: GOP "moving to a knowing mode" on possible state budget compromises.

Gov. Jerry Brown announced today that he is scrapping plans to sell 11 state buildings to private investors, reversing a controversial plan by the Schwarzenegger administration that sought short-term profits to help close the state's crippling budget deficit.

“Selling state buildings is the ultimate in kicking the can down the road,” Brown said at a press conference.

The nonpartisan Legislative Analyst’s Office, along with many real estate experts, had said that the proposed building sale was a bad idea, arguing that any financial gain would be more than offset by rent paid on the sites over the next 20 years. The office wrote in a November 2010 report to the Joint Legislative Budget Committee that the plan “would add to the state’s structural deficit” and was “poor fiscal policy.”

While the sale–leaseback would transfer the state’s costs and risk of owning the buildings to the new owner, the state would make ongoing lease payments to the new owner that would be greater than the amount the state currently spends to own and operate the buildings. We estimate leasing the facilities would cost $30 million more than ownership in the first year and continue to increase over time – eventually costing the state approximately $200 million more annually than maintaining ownership.

It concluded: “We recommended the Legislature strongly consider other alternatives to the sale-leaseback in putting together the 2010-11 budget.”

And a report in the Sacramento Business Journal suggested that the deal could have eventually cost the state $1.3 billion in rent that would likely increase over time.

Sen. Leland Yee, D-San Francisco, said in a statement that he supported Brown’s decision. Yee is running for mayor of San Francisco, which had two state buildings that would have been sold.

“I applaud Gov. Brown’s decision to not sell our state buildings at this time. His decision is not only fiscally responsible, but will save many jobs in San Francisco and throughout the state,” Yee said. “Hundreds of California workers – including janitors and engineers – and their families can now breathe a sigh of relief.”

Since the budget had projected a $1.2 billion profit from the sale of the buildings, Brown said he would make up for that by borrowing Medi-Cal funds as well as funds allocated for prison construction through AB 900. It will take three years to repay those funds, he said. The state will spend about $18 million in interest on the loans.

At his press conference today, Brown also said he would consider making the June special election one that uses only mail-in ballots, but would have to investigate whether it would disenfranchise voters and if it would be practical in a state as large as California.

Elections in Oregon already take place only by mail, and the state boasts a 70 percent voter turnout rate. Critics have said that mail-in ballots disenfranchise groups of people that move frequently or do not have a fixed address, like renters, college students and the homeless. A Pew Center on the States study [PDF] said that requiring people to vote by mail decreased the odds of someone voting by 13.2 percent and had negative effects on urban and minority turnout.

The governor said negotiations with lawmakers on his budget proposals were continuing to progress and he was optimistic about his chances of reaching an agreement with state Republicans. He said the Republicans could be persuaded to make compromises to support a package of cuts and tax increases that will be put to voters because of the severity of the state's problems.

“Even though they’re in sort of a 'no' mode, they’re moving to a 'knowing' mode,” Brown said.