from Kevin Pedrotti, Legislative Advocate for the Golden State Builders Exchanges
The Legislature and Governor passed the 2009-10 budget in February 2009, the earliest adoption of a budget in modern history. About $6 billion of the budget solutions were premised on success in the May Special Election. That’s out the window. And the continuing bad economic news since February has also increased the size of the problem.
The budget conference committee got underway yesterday with a presentation of the Governor’s May revisions and presentation of a new round of possible budget cuts totaling $5.5 billion, two days after voters rejected five special election initiatives that would have brought in about that same amount in new revenues.
The cuts presented to the Legislature's Budget Conference Committee on Thursday afternoon would eliminate support for Healthy Families, a program that provides health insurance to hundreds of thousands of low-income children, and CalWorks, an assistance program benefiting low-income families with children. The administration said these are options they are examining to get to an addition $5.5 billion. The administration said the governor's plan also would phase out all General Fund support for the state parks system, and gradually eliminate grants to college students through the Cal Grants program.
Earlier Thursday, Schwarzenegger said in a written statement that based "upon information I gathered in meetings I held while in Washington D.C., discussions with the legislative leaders, and the will of the people who said loudly and clearly in Tuesday's election that they want Sacramento live within its means, yesterday I directed my Department of Finance to bring me additional options to cut state spending so that we can eliminate the need to seek borrowing in the form of a revenue anticipation warrant in the revised state budget I have proposed."
On Wednesday, the governor held a "Big 5" meeting with the Senate and Assembly leaders from each party. That meeting reportedly failed to reach any agreement on new revenues.
By the end of June, the state is going to have a really big cash flow problem, perhaps as much as $20 billion. Just to keep things going, just to pay ongoing bills, the state has to borrow. The increasing possibility that the state’s fiscal crisis makes even short-term borrowing impossible has led State Treasurer Bill Lockyer and the Governor to ask the Obama Administration to guarantee our borrowing. On Thursday morning, Treasury Secretary Timothy Geithner said that the federal government would not guarantee billions in Wall Street loans to California without Congressional action.
The Legislative Analyst Office also released a review of the Governor’s budget plan. The Legislative Analyst thinks the Governor’s revenue and spending estimates are fairly reasonable, but the problems may be $3 billion larger than projected. That would take the potential budget shortfall from about $21 billion to $24 billion. Perhaps more important, even if the Legislature were to approve each and every action recommended by the Governor, the following year budget for 2010-11 will start $15 billion in the hole.
One of the numerous recommendations of the LAO was to suspend Prop 42, the pot of money dedicated to transportation funding.
Stay tuned.
AB 1523 set for hearing on May 27th
AB 1523 will be heard in the Assembly Appropriations Committee on May 27th. AB 1523 is legislation to not apply the recent sales tax increase to fixed priced contracts entered into before April 1, 2009.