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California Budget Crisis Diaries: Day Nine of the budget impasse


By Hoa Quach, SDNN

Friday, July 10, 2009 2 comments  |  read comments  |  post a comment

San Diego: ca-budget-diary-ad

Legislators will spend yet another weekend at their chambers squabbling over how to balance the California budget. Since Day Seven, a former MIA assemblymember is back, IOUs are seeing (possibly) their last day of redemption, a couple of long-established battles have gotten hotter, California is transforming into Texas and more.

From now until August: On Thursday, analysts and state fiscal experts said lawmakers actually can procrastinate up until August or even longer.

Without a plan to balance revenue with spending, California will fall into the red in September, even with billions of dollars in IOUs going out. That will raise the possibility that the state will be unable to make contributions to its pension funds and will be forced to extend its IOUs to employee paychecks.

“It’s not a situation anybody’s happy to contemplate,” said Gabriel Petek, director of credit market services at Standard & Poor’s.

New figures: State Controller John Chiang released year-end figures on Friday. California began the fiscal year with a cash deficit of $1.45 billion, which grew to $11.9 billion on June 30.  While, personal income taxes in June were $987 million below (-18.0 percent) estimates in the May Revision, and sales taxes were short by $154 million (-5.8 percent). In addition, corporate taxes were $1.31 billion above estimates (41.2 percent).

“California continues to pay for its history of unbalanced budgets,” Chiang said. “The State spent $10.4 billion more than it collected last year alone, and is now without enough cash to cover all of its payment obligations.”

“Our major sources of revenue have continued their trend downward, leaving no viable option but to craft a new budget that recognizes California’s recovery has yet to begin.”

Assembly Speaker Karen Bass: Bass (D-Los Angeles) is back in action after missing budget meetings because of her self-proclaimed frustration with Gov. Arnold Schwarzenegger. The caucus leader held a news conference earlier this week blaming Schwarzenegger for not taking the budget concession seriously. But Bass told Reuters that she is “hopeful” the Big 5 deliberations will resume Friday.

The Big 5 include Schwarzenegger, Sen. President Pro Tem Darrell Steinberg (D-Sacramento) and Republican minority leaders Assemblymember Sam Blakeslee (San Luis Obispo) and Sen. Dennis Hollingsworth (Murrieta).

IOUs: Friday is the last day IOU recipients can cash in their warrants at major banks. Chase, Bank of America, Wells Fargo & Co. said they will stop accepting the warrants after Friday. But according to Bloomberg, smaller community banks are struggling more with the warrants. A recent Bloomberg article highlights undersized banks that only do business in California and have little choice but to continue to accept the warrants in an effort to keep existing customers.

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Marijuana: A pro-legalizing marijuana organization launched an ad on major television networks encouraging legislators to make the drug lawful. Marijuana Policy Project launched the 30-second pot ad on Wednesday claiming that legalizing the herb can generate nearly $1 billion of revenue. While the $1 billion idea may be appealing, Schwarzenegger (who mentioned the idea earlier this year) said he thought “it was the wrong direction to go” should it be based on simply generating money.

Teachers vs. Terminator: Another ad (see video) is catching the eye of the Governor. The California Teachers Association is grading Schwarzenegger tough in an ad launched Wednesday. The ad attacks Schwarzenegger for proposing to suspend $3 billion of funding to public schools. The proposal would alter Proposition 98 of 1998 that guarantees the cash to education. CTA, which represents 340,000 education employees, is asking that legislators consider tax hikes than cuts to education.

The new Texas?: While state Legislators are battling it out, people are talking about California becoming the new Texas and Texas becoming the next California. Economist editor Christopher Lockwood launched the debate in the magazine’s latest issue, stating that the high-taxes route California has taken “is prompting a net 100,000 people to leave each year. Many of them head for Texas.”

San Diego: Schwarzenegger listens to a reporters question concerning his budget proposals Wednesday. (AP Photo/Rich Pedroncelli)

Schwarzenegger listens to a reporters question concerning his budget proposals Wednesday. (AP Photo/Rich Pedroncelli)

Lockwood adds that Texas is home to more Fortune 500 companies in comparison to other states and has even attracted construction company Fluor to move from California. Meanwhile, California simply seems to be falling behind.

University of California: University of California President Mark Yudof unveiled a furlough proposal Friday as part of his plan to address an expected 20 percent reduction in state funding.

Under his plan, most employees at the 10-campus system would see their paychecks reduced while receiving additional days off. Employees would see pay reductions ranging from 4 percent to 10 percent, with higher paid workers taking bigger pay cuts. The furloughs are expected to result in $184 million in savings to the university’s general fund budget.

The UC Board of Regents is scheduled to vote on Yudof’s plan when it meets in San Francisco next week.

The Associated Press staff and writer Judy Lin contributed to this report. Hoa Quach is the SDNN political editor. She can be reached at Politics(a)SDNN.com

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Comment by: Tom Posted: July 11, 2009, 1:59 am

California’s problem is they don’t want to budget. We have two state Congressional groups “DEMOCRATS” and “REPUBLICANS” but both can not agree to make cuts. The democrats want to raise taxes, whether its (Raise Sales Taxes, Property Taxes, Vehicle License Fees, etc) but that will allow State Assembly people and State Senators to just continue raising the taxes on the common workers without making any cuts. BACK IN the 1990’s and 1980’s WE HAD A MUCH SMALLER STATE BUDGET AND PEOPLE WERE RELATIVELY HAPPY THEN. We didn’t have draining programs like class size reduction for K-3rd grade, which costs the state an excessive amount of money. The state actually want’s us to believe that kids can only learn if the class size is under 20 kids per class. MY MOTHER WENT TO A SAN FRANCISCO SHCOOL AND SHE HAD 50 KIDS IN HER CLASS FOR A FEW YEARS, AND SHE HAS A BACHELORS DEGREE TODAY. The Problem is we have such an extreme amount of kids that can not speak English, at an appropriate level for school. Thus, the state adds costly programs to support illegal immigrant’s families like (Class Size Reduction, Medi-Cal costs, Food Stamp Fees, Section 8 reduced rent fees, WIC , TANF Fees.) YES, I DO KNOW THERE ARE ALSO U.S. CITIZENS IN CALIFORNIA THAT UTILIZE THESE PROGRAMS, BUT NOT NEARLY AT THE AMOUNT THE ILLEGALS USE THE PROGRAM. And I do realize that illegals come from country’s that do not give them as much opportunity. But, the state needs to close its border, to restabilize itself, before allowing more immigrants to come in down the road, OR ELSE CALIFORNIA WILL ALWAYS HAVE A SLUGGISHLY DRAINED ECOMONY INTO THE FUTURE.
Now California’s problem are not just immigrants. State retirees (PERS and STRS retirees) now outnumber active state workers 2 to 1. THAT”S NOT GOOD. Thus, for California to get things straigtened out they need to budget and make cuts. THE ONLY THING THAT IS SAVING THE COMMON PERSON, IS WE HAVE A REQUIRED 2/3 MAJORITY VOTE. IF THE STATE’S CONGRESS PEOPLE HAD IT THEIR WAY, THEY WOULD HAVE CHANGED IT TO 50.1% MAJORITY, AND THEN THEY WOULD HAVE RAISED MORE TAXES UPON US EASILY. THUS, THE 2/3 MAJORITY VOTE MAY ACTUALLY SAVE THE COMMON WORKER BY ACTUALLY FORCING THE STATE CONGRESS TO BUDGET. If the state congress can not agree to a budget then all the state Democrats and Republicans need to be voted out! Everyone of them. We all have to budget in every day of our lives. Therefore, they need to budget just as we do.
Its about time that they do the right thing.

Comment by: mr. ihavehadit Posted: July 12, 2009, 5:16 am

Yes on A.B. 390 !!!! Save California State Employees Jobs!!!!
The next time you take a bite of that Mc Hamburger think about who’s inspecting that restaurant for roaches, rodents and other common vermin. They won’t have the staff to do as many inspections as usual so what use to be annual will become every 5 years or 6 years and that’s a lot of unchecked rodent hair getting into our food. The Feds don’t inspect or have authority to inspect State food facilities. Dog pounds will cut the euthanasia waiting time over half which can be a problem if your pet gets out of the yard and picked up. You will have only 24 hours to claim your pet before it will have to be euthanize. City maintenance will cut their staff so soon those safety signs, lights and reflective paint on the roads will be a thing of the good old days. No the only State employees California will have left will be the politicians they elected who took it all away from them, right Arnold?

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