Quotes of the Day

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.

There's perhaps no better candidate than Brown to reverse these trends. First, he has the experience. He has been governor, secretary of state of California, chairman of the state's Democratic Party, state attorney general, mayor of Oakland, as well as a three-time presidential candidate. The son of former Governor Pat Brown, he grew up around politics. Secondly, his age helps. The septuagenarian Brown is no longer aspiring to higher office, which gives him more time and energy to focus on fixing the state. He was known as a fiscal conservative in his previous turns as governor as well, cutting spending to build up a large budget surplus in his first term. Brown then spent much of those savings to bail out local governments after California passed Proposition 13, which reduced property taxes.

For his third term as governor, he has rarely traveled outside the state. Compare that with his younger years when he often ran for President while serving in Sacramento. "He used to look out from his office and see Washington, and now he looks and sees Capitol Park," says press secretary Gil Duran, referring to the park in California's capital. "He's not looking for support in some huge future campaign."

According to Chiang, the state's chief fiscal officer, Brown delves into the technical aspects of the state's finances more than his predecessor and doesn't rely heavily on his staff to figure out the details. "A lot of fixing California's fiscal condition depends on a technical understanding of what's happening in the markets, what's happening in the economy," Chiang says. "And Governor Brown asks great questions. He's always inquisitive. He's probing."

Asked if his prior experience as governor gives him more tools to run the state's finances than he had before, Brown snaps back with his characteristic sarcasm. "How is eating breakfast different this time than last time? I don't know," he says. He then shies away from calling himself wiser, saying it "sounds very fat-headed and arrogant." But he does confess that the tax proposal he came up with was "informed by 50 years of being in and around politics." "With that added knowledge, which hopefully will translate to some wisdom, you probably will have a better grasp of things," Brown admits. "I definitely see things more clearly. I understand the process, the need for longer term planning, the need for alliances, the need to be careful."

All of this would seem to contribute to a no-nonsense attitude that may help finally get things done in California. "I propose cuts and temporary taxes," Brown said in his State of the State speech this year. "Neither is popular but both must be done." Already, through agonizing cuts and a slowly improving economy, Brown has cut the shortfall to $9 billion from the estimated $26 billion he faced when he took office. In a bid to close the gap further, he tried last year to get the legislature to put a measure on a ballot to extend tax cuts, but Republican legislators blocked the effort. So now he's going directly to the people.

Ironically, it looks like the voters won't be his greatest challenge. What might normally be the greatest obstacle — opposition from across the aisle or adverse public opinion — isn't as much of a threat to the proposal as are Brown's own allies. The California Federation of Teachers is putting forward its own ballot initiative, dubbed the "millionaires tax," which would increase income taxes on those earning more than $1 million. Molly Munger, a wealthy Southern California attorney, is also pushing an initiative to raise income taxes to fund schools. Brown's initiative differs because it includes other sources of revenue than just income taxes, like the increased sales tax for all Californians. Neither the union nor Munger has heeded Brown's calls to step down. He says a ballot with multiple tax initiatives will lead the electorate to either reject them all or divide their votes, which might rob Brown's of the support it needs to pass. The irony of it all, says Brown, is that the sponsors of the other plans probably voted for him to get elected. "Like Gaul, it's divided into three parts," the erudite Brown says, referring to Julius Caesar's The Gallic Wars. "How was Gaul pacified? By a very strong general. Unfortunately, I don't have the Roman legions at my command."

Brown has been strategic in his approach to this conundrum, and that may have dictated his tactics at the California Democratic Convention in San Diego this month. In his speech to a roomful of supporters holding posters that read, "We're with Jerry," he only mentioned the plan in passing and gave no details. "We've got to pass a tax measure and we've got a few issues there. You'll get your marching orders," he said. The governor then reportedly rushed off to a fundraising lunch for well-heeled supporters of his initiative. In a sign of the challenge Brown faces, there were more people outside the convention gathering signatures for the union's proposal than for the governor's. And there were plenty of convention goers wearing stickers promoting the millionaires tax. "The working people don't need to be taxed," said Angelica Godinez, a supporter of the millionaires tax who attended the convention. "The wealthy need to be taxed. They're not paying their fair share."

Ultimately, Brown says he wants to fix the state's fiscal mess in order to show California is still an economic, cultural and creative leader of the nation. To borrow from his State of the State speech, he wants to ensure California "is still the land of dreams." But at 73, why take on the challenge himself? Why is he facing off against rogue allies when most people his age are retired? When asked, he doesn't say this term is about his legacy. He just gives a bullet point list of policy items he wants to get done. The deficit "is a big problem," he says. "It's serious for the schools." Brown says no backroom deals were in the works — at least not yet — to persuade his ballot opponents to step aside. And if his plan isn't approved in November, he says he'll keep trying, perhaps through a special election. "I think were going to be successful," he says. "But I can't tell you how long it's going to take."

• Jens Erik Gould / Los Angeles
• In a campaign that may influence the policies of other states (and even the federal government), the three-time governor is heading down a hazardous political path