On a sunny February morning at the Los Angeles Athletic Club, Jerry Brown's cup of black coffee was getting cold. When a concerned waitress in the club restaurant poured him a fresh cup and offered to clear the original one, the governor of California declined. "That's alright. I'll drink both of them," he said in a deep, raspy voice. "We don't want to waste it."
Brown has never been one to waste. He's earned a reputation for austerity ever since his first term as governor in 1975, when he famously turned down living in the governor's mansion and rode in a dull Plymouth Satellite instead of the Cadillac limousine designated for the office. He was a famously busy bachelor, dating among others the singer Linda Ronstadt. Many things have changed since then. He's been married since 2005. He's held several other elected offices in California. He's lost his full head of hair and he no longer has his sights set on becoming President of the United States.
Now back in the governor's mansion, he's spent much of his time trying to preserve as much revenue as he can amid massive state budget cuts, and is pulling out all the stops to fix California's chronic budget deficit. As President Obama takes the issue of tax increases to the national stage, Brown's latest efforts may make the most populous state in the Union a bellwether for fiscal policy in the rest of the nation.
To fix California's mess, Brown is embarking on what is normally one of the riskiest undertakings a politician can assume: he wants to ask voters in November to approve a plan to increase the state's sales tax and its income tax on wealthy individuals in order to generate more revenue for schools and other services. In California, the situation is dire. The coffers in Sacramento are so empty that the public services that helped make California the ninth largest economy in the world are in severe jeopardy of going underfunded or worse, shut down.
The hemorrhaging has gotten so painful that Brown has apparently gained an advantage in his crusade: more than two-thirds of voters actually favor his tax proposal, according to a poll by the Public Policy Institute of California. In an hourlong interview over scrambled eggs and hash browns, the governor explains why. "You can [choose to] not eat a day," says Brown. "You can go a second day. You can go a long time. At some point you have to start eating. At some point people don't want to close their schools. We can't continue to reduce firefighters policemen, teachers, nurses, and water inspectors. It's just simple. Most normal people will come to that conclusion." Brown drove that point home in his budget proposal: should voters reject his tax initiative, funding for schools will be slashed by $4.8 billion, equivalent to the cost of three weeks of instruction.
Brown's initiative isn't just important for his state. If it's successful, California may influence other states and even the federal government to rely more on raising taxes than they are now to narrow some of the most severe budget gaps in history. The issue drummed up emotionally by last year's Occupy movement is at the top of the political debate. "This could affect the re-election," Brown says, referring to the presidential race.
Some experts, like Jon Shure at the Center on Budget and Policy Priorities, say a victory for Brown in California may help persuade more governors to propose tax hikes in other states. That would represent a big shift in policy because, since the recession began in 2008, states have cut $2 in spending for every new dollar in revenue they've raised through taxes, according to Shure's data. Such a change would be positive for the recovery, he says, because the strategy of reducing government spending hasn't stimulated the economy. On the other hand, raising taxes to get the state's finances in order would help the economy in the long term because it will allow for more state spending, says Michael Rossi, Brown's top jobs adviser. "I don't know how you could have a stable economic base without reinvesting in this state, without getting our structural deficit under control," Rossi tells TIME. Shure also thinks a win for Brown in California may set the stage for what he calls "more rational conversation" on tax increases on the national level, which could impact federal policy. "If California voters were to approve this, it would send a pretty strong signal across the country," says Shure, who is an expert on state fiscal strategy. "California would set an example that people would notice."
Others aren't so sure. Tracy Gordon, an expert on state and local finances at the Brookings Institution, says she doesn't see a trend of more tax increases because very few states are proposing such plans right now, and they haven't passed them yet. Furthermore, she says tax hikes may not be necessary because an improving economy is helping revenues come back on their own. California's Controller John Chiang also rebuffed the idea. "People will try to make it a big deal and try to turn it into a national issue," Chiang, a Democrat, said in an interview. "But each state is unique."
Brown himself believes that other states may follow. "California is in some ways unique, but I think most other states will come to the same conclusion," he tells TIME. But, given the sensitive nature of the tax issue, he isn't thrilled about the idea of being a poster boy for raising levies. "Are we leading the way in taxes? It's so hard to talk about that word. I don't even like to talk about it. It's a bad word," he admits. "The whole premise that California is going to be the trendsetter on taxing as a politician, I find that a very distasteful image. We want to be a trendsetter in efficiency and honest public service."
California recent reputation has been for the opposite. Throughout most of the past decade, rather than making tough decisions to solve the deficit, the state's leaders often approved budgets that increased borrowing and used financial Band-Aids to temporarily mask the problem. Add that to a weak economic recovery after the dotcom bust and the major job losses after the collapse of the housing market in the Great Recession, and the state's finances have been in shambles. In fact, fiscal year 2001-02 was the last time state officials projected a surplus without having to balance the budget by cutting spending or raising taxes, according to Jean Ross at the California Budget Project. "They kept pushing the problem from one year to the next," Ross says. It's partly for this reason that the office of the California governor has become a position that's virtually impossible to hold without being tarnished by public contempt: Gray Davis was recalled, Arnold Schwarzenegger's approval rating dropped to the lowest ever recorded in his final year.