Sacramento Update: Start of New Year – and it’s not pretty

 

The old followed the new into 2009 with the legislature and Governor at impasse over the state’s dwindling finances. The 18 month projection for the budget deficit is currently at $41 billion, approximately half of that amount for the current fiscal year which ends June 30.

 

Earlier this week the Governor vetoed the budget package democrats have been working on for the past month. The democrats, unable to get republicans to engage in discussions of new revenues without meeting their demands of a hard cap on spending, CEQA reforms of bond funded projects, and stimulus for business, devised a majority vote budget plan that skirted republican involvement entirely. The primary component of the plan involved eliminating the state excise and sales tax on gasoline and replacing them with a single (and larger) user fee of 39 cents per gallon for fuel. The plan also imposed new increases in the state sales tax, personal income tax and created a new oil severance – all of which would be used to fund the current year deficit. The plan also included $7 billion in program cuts.

 

Among the casualties of the ongoing budget stand off are those in the construction industry who are currently building Caltrans’ projects. This week many contractors failed to receive progress payments for work performed in December for Prop 1B funded Caltrans projects. The decision is now being made by many of these contractors whether to shut down projects or continue not knowing when payments will be made. Without a solution soon, there will be no ability to sell bonds to finance these projects.

 

While there is a current statewide unemployment rate of just over 8%, the construction industry is suffering 20 percent or more.

 

Along with other advocates, construction owners and union representatives, I participated in separate meetings with the Governor and four legislative leaders to provide the picture that public works projects are critical to the construction industry at a time when home building and commercial projects are at a near standstill.

 

Optimistically, a solution will arrive before February 1 but there are hard feelings and dug in policy disputes that will need to be overcome.

 

 

There have been few bills introduced so for this year which is not unusual. The deadline for getting bill requests to counsel is the end of January and the introduction deadline is the end of February. The Senate leader has all but said the senate will impose a 15 bill per legislator limit and has asked the assembly to chart the same course. Legislators have also been told that any bill tagged fiscal (most) will be held in Appropriation Committee. The legislative leaders are telling their caucuses that the focus needs to be on the budget this year.