California Budget Shortfall May Hit 28 Billion; Expect More Gridlock and IOUs

December 10, 2010 · Posted in Government · 2 Comments

Bloomberg writes California Deficit May Reach $28 Billion as IOUs Loom:

California’s budget gap may widen to $28.1 billion over 18 months, according to Governor-elect Jerry Brown, who takes charge of the most-populous U.S. state next month. A cash shortage may force the use of IOUs by July, Controller John Chiang said.

The deficit estimate takes into account a $2.7 billion drop in projected estate-tax receipts, and compares with the most recent forecast of a $25 billion gap for the period, Brown said today at a public meeting of state officials. The cash accounts may be short by $2.3 billion within eight months, Chiang said at the meeting in Sacramento.

“I don’t want to say it, but this could mean IOUs and more tax-refund deferrals,” Chiang said.

Every year it’s the same spiel in California. Political gridlock, delayed budgets, IOUs, and deferred tax refunds. It’s the political class trying to figure out how to screw the taxpayer in the most propitious and palatable manner.

When a system lacks logic and reasoning from first principle in its conceptualization, then chaos will always arise in the long run.

Tags: california budget

California Refuses its Own IOUs

August 11, 2009 · Posted in Government · 1 Comment

I expected this to happen, California Won’t Accept Its Own IOUs:

Small businesses that received $682 million in IOUs from the state say California expects them to pay taxes on the worthless scraps of paper, but refuses to accept its own IOUs to pay debts or taxes. The vendors’ federal class action claims the state is trying to balance its budget on their backs.

Lead plaintiff Nancy Baird filled her contract with California to provide embroidered polo shirts to a youth camp run by the National Guard, but never was paid the $27,000 she was owed. She says California “paid” her with an IOU that two banks refused to accept – yet she had to pay California sales tax on the so-called “sale” of the uniforms.

The class consists mostly of small business owners, many of whom rely on income from government contracts to keep afloat. They say California has used them as “suckers” as it looks for a way to bankroll its operations while avoiding its own financial obligations.

“Instead of seeking funds through proper channels, the State has created a nightmare,” the class says. “Many of these businesses will not survive if they are required to wait until October 2009 to have these forced IOUs redeemed by the State.”

The class claims the state is violating the Fifth and Fourteenth Amendments. It demands that California be ordered to honor its own IOUs, plus interest. They are represented by William Audet.

…time to flood the FTB with IOUs. Let them issue a public explanation as to why they do not want to accept the state’s own IOUs.

Tags: california, california budget, iou

California Budget – Schwarzenegger Cuts Another $500 Million

July 30, 2009 · Posted in Government · Comment

Governor Schwarzenegger used the line item veto to slash the bloated California budget by another $500 million:

Gov. Arnold Schwarzenegger on Tuesday signed a budget plan sent to him by lawmakers to close the state’s monumental deficit, using his veto pen to impose nearly $500 million in additional cuts.

The new reductions will affect child welfare and children’s healthcare, the elderly, state parks and AIDS treatment and prevention, going beyond the dramatic cuts that were part of the deal Schwarzenegger negotiated with legislative leaders.

Democratic leaders in the Assembly and Senate reacted angrily to his use of the line-item veto, disputing the Republican governor’s authority to wield that power in this situation and portraying him as callous.

Schwarzenegger’s aides said the cuts were proper, and the governor said they were necessary.

“This has been a very tough budget, probably the toughest since I have been in office here in Sacramento,” Schwarzenegger said. “This budget is kind of like the good, the bad and the ugly.”

The good, the governor said, is that the plan does not raise taxes and includes changes he says will make government more efficient, such as reorganizing and abolishing some boards and commissions.

The bad are the deep cuts to state programs that will touch millions of Californians, particularly its most vulnerable citizens, he said.

The ugly, Schwarzenegger added, are the new reductions he made because lawmakers left town after failing to fully close the state’s deficit.

The Assembly on Friday capped a 20-hour session by rejecting provisions worth $1.1 billion that had been agreed to by the governor and legislative leaders.

The extra cuts the governor made Tuesday — $489 million — took nearly $80 million that pays for workers who help abused and neglected children; $50 million from Healthy Families, which provides healthcare to children in low-income families; $50 million from services for developmentally delayed children under age 3; $16 million from domestic-violence programs; and $6.3 million from services for the elderly. Among other reductions was $6.2 million more from parks, which could result in the closure of 100, rather than 50, of California’s 279 state parks.

In addition, Schwarzenegger effectively gutted a program that provides local governments with funding to encourage property owners to preserve open space and to use land for agriculture.

Ted Lempert, president of Children Now, an advocacy group, called the cut to Healthy Families “particularly galling.” He said a coalition, including his group, is spearheading a campaign to put a universal children’s healthcare measure on the fall 2010 ballot.

“A struggling family puts their kids first,” Lempert said. “What the governor and what the state has done is the opposite.”

Assembly Speaker Karen Bass (D-Los Angeles) and Senate leader Darrell Steinberg (D-Sacramento), in questioning the legality of Schwarzenegger’s moves, suggested that the governor’s veto power can be used only on original appropriations. The new spending plan is a revision of a budget Schwarzenegger and lawmakers ratified in February.

Both leaders said they would attempt to restore the cuts when they return from recess, in mid-August, and Bass said she would seek an opinion from the Legislature’s legal office.

In a long and harsh statement to the media, Bass called the governor “so eager to tear down the safety net that he appears willing to break the law to do it.” She faulted Schwarzenegger for rejecting taxes that Democrats proposed on “big oil and big tobacco” and instead attacking “the sick, the young, the elderly and battered women.”

In response, Schwarzenegger’s aides said Bass and the Assembly had forced his hand.

“The governor understands how difficult these cuts are,” said his spokesman, Aaron McLear. “But because the speaker sent him an unbalanced budget, he had no choice but to make these cuts.”

Assembly lawmakers turned down a plan to seize $1 billion in gas tax money that belongs to local governments and rejected a new offshore oil drilling project that could have produced $100 million in royalties.

The Senate approved the entire budget deal, including those measures, early Friday morning.

By killing the two proposals, lawmakers wiped out a reserve fund the governor has insisted upon to cushion future shortfalls. His aides said the cuts announced Tuesday would allow the state to put aside $500 million.

Even as he signed the plan, Schwarzenegger warned that the state’s troubles were not over. Finance officials are already predicting future deficits, and the governor said he was ready, “if our revenues drop further, to make the necessary cuts and live within our means.”

Overall, the new budget is expected to fundamentally alter life for many Californians, with reductions to K-12 education, state colleges and universities, healthcare and public assistance for the elderly and the poor.

It appropriates billions of dollars from local governments, which could force cities and counties to further reduce their own spending on roads, law enforcement and other services.

The package was approved to address a deficit that administration officials previously projected at $26.3 billion. Schwarzenegger’s aides now say that, although the budget plan contains $24 billion in solutions, it will close the entire shortfall because of changing revenue forecasts, a recalibration of education funding formulas and a decision to reduce the reserve fund.

The plan’s cuts, accounting maneuvers and other measures should soon enable California to resume paying all of its bills again. From July 2 until the end of the day Monday, the state had issued 209,219 IOUs worth $1.09 billion, according to Garin Casaleggio of the state controller’s office.

The state’s credit rating has declined to nearly junk status after two months during which elected officials could not agree on how to resolve the crisis.

I agree that the budget is a lot like the good, the bad, and the ugly. But in a different way:

The good: No more taxes for now.
The bad: No tax cuts.
The ugly: The tax hikes that will follow sooner or later if the budget is not slashed further.

Tags: california, california budget, schwarzenegger

California Budget – Expect Another Shortfall

July 24, 2009 · Posted in Government · Comment

I agree with the Wall Street Journal’s assessment of the current California budget solution, California Budget Woes to Persist:

State lawmakers on Thursday evening were preparing to vote on a proposal to close a $26 billion budget deficit, but the plan likely will be a stopgap that passes the state’s financial woes on to the next year and the next governor.

The state will probably amass an additional shortfall of as much as $10 billion during this fiscal year, economists say, calling revenue projections for the proposed budget too optimistic. And the financial woes will likely persist for at least the next several years. Though lawmakers are cutting $16 billion in spending, they are closing the remaining $10 billion gap with borrowing, accounting gimmicks and asset sales that will be impossible or difficult to replicate in the future.

“The state has just once again failed to address its underlying problem,” said Bill Watkins, executive director of the California Lutheran University’s Center for Economic Research and Forecasting. “They do some of the hard choices they have to, and they essentially have to pass on part of the problem for later.”

The budget mess is already taking center stage in the race to succeed Gov. Arnold Schwarzenegger, who must leave office after the November 2010 election because of term limits. “It’s the issue that transcends all other issues,” San Francisco Mayor Gavin Newsom, a Democratic candidate, said in an interview Thursday. “You can’t talk about issues in health care, education and infrastructure improvement until you focus on the issue of these structural imbalances in the budget.” Mr. Newsom blasted the spending plan for taking $4.7 billion from local governments, saying the governor should have been open to new taxes on tobacco and oil extraction instead.

My comment: If you are thinking about voting for Gavin Newsom for next governor, think again. Keep this statement of his in mind. He may be personable and nice, I know that … he’s my mayor. But he has it exactly backwards. He is seriously considering to continue raising taxes on Californians.

Republican contenders such as Meg Whitman, the former eBay Inc. chief executive, condemned the budget as well. “As painful flaws begin to appear in this agreement, Californians should demand strong leadership focused on job growth, fiscal restraint and the effective management of our state,” she said in a statement earlier this week. Through a representative, Ms. Whitman declined to be interviewed.

Steve Poizner, a Republican gubernatorial candidate and the state’s elected insurance commissioner, said he gives the budget compromise a C-minus because it contains too few overhauls and pushes the fiscal problems to future years. “We’re going to go from one budget issue to another until we get a couple of basic reforms that are going to turn the state around,” he said. “I’m advocating modernization and overhaul.”

Former U.S. Rep. Tom Campbell, a Republican candidate who has served as the state’s finance director, didn’t return calls for comment.

Even California legislative leaders who negotiated the budget pact acknowledge they will probably have to revisit the spending plan by January to close a new shortfall.

They already are spoiling for another fight along party lines over taxes and spending cuts. “My clear message after tonight is that we have cut enough,” said Senate President Darrell Steinberg, a Democrat. “When you see people writing about the California dream and is it still real, I think that is a reflection of very common feelings that public services, education, transportation, public safety matter to the quality of life in California.”

My comment: Ah yes, those good old values that made California the great state it once was. The values that made innovative entrepreneurs and pilgrims come here to start a new life, dreaming of government service, paying taxes, teaching, train dispatchers, and policework. – The extent to which these state legislators are out of touch is truly staggering.

Republicans, meanwhile, vow to fight new taxes. Almost every GOP state legislator has signed an antitax pledge, though six of them in February broke party lines to approve a plan to close a then-$42 billion shortfall through tax increases and deep cuts. Minority Republicans can hold up budget deals because California requires a two-thirds vote to pass spending plans.

Legislative leaders, who negotiated the budget deal with the governor, have defended the use of one-time fixes in the current budget. Mr. Steinberg said the temporary solutions come in lieu of more spending cuts that would have hurt the poorest Californians. Assembly Minority Leader Sam Blakeslee said the state’s revenue drop amid the recession is historically large, and the fixes are meant to keep California afloat until better times.

Economic forecasters still aren’t sure when that will be. Mr.Watkins said his forecast shows the state won’t show signs of economic growth until early 2011. That’s much more pessimistic than the projection used for the current budget pact. “They’re using old data,” Mr. Watkins said of state finance officials, “and so the revenues will disappoint.”

… which will ensure that the California budget saga is bound to continue.

Tags: california, california budget

California Budget Deal Reached

July 21, 2009 · Posted in Government · 2 Comments

At long last, California reaches budget deal:

California Governor Arnold Schwarzenegger and top lawmakers agreed Monday to close a $26.3 billion deficit in the state’s budget in a deal that includes $15.5 billion in spending cuts, they said.

The government of the most populous U.S. state, also the world’s eighth-largest economy, began its fiscal year on July 1 facing the massive shortfall due to a plunge in revenues caused by the recession and rising unemployment.

Schwarzenegger, a Republican, said during a news conference the budget would be balanced through deep spending cuts and borrowing and shifting of state funds but without raising taxes.

“All around I think it is a really great, great accomplishment,” said the former Hollywood action star, noting the closing rounds of budget talks, which dragged on for weeks, had been like a suspense movie.

The Legislature’s top Democrats and Republicans said they would brief rank-and-file lawmakers on the agreement in the hope of holding votes in the Democratic-controlled state Assembly and Senate Thursday.

Democratic leaders acknowledged the agreement contained painful spending cuts in popular programs, the result of mounting financial woes for the state’s government since 2007.

Public schools, colleges and universities would lose $9 billion in funding, prisons more than $1 billion and cities and counties roughly $4 billion. Many state employees would have to take three furlough days each month through June 2010, which amounts to a roughly 14 percent pay cut.

“There isn’t a whole lot of good news in this budget,” said Senate President Darrell Steinberg.

Well, the good news is the $15.5 billion in spending cuts. The bad news is that taxpayers will be on the hook for yet another $10.8 billion. Those should also have been financed by cutting spending. And in fact, California needs to cut a whole lot more spending beyond that, remove bureaucracies, cut the crushing tax burden, phase out unsustainable pension plans, etc…

This will be a temporary fix for now, California will be running out of cash again sooner or later, and once that becomes evident, the bureaucrats will be back at the table to discuss how to cover the next shortfall.

Tags: california, california budget

California – Ready, Set, IOU!

July 2, 2009 · Posted in Government, Politics · Comment

California is about to issue its first IOUs as a response to the budget crisis, State IOUs loom as foes’ battle lines harden:

Reporting from Sacramento — After trying for weeks to fix a state budget gone out of control, Gov. Arnold Schwarzenegger and state lawmakers stood frozen in conflict Wednesday with the state at the brink of a meltdown.

A day after the state Senate failed in a late-night bid to close part of a deficit now projected at $26.3 billion, California Controller John Chiang took steps to begin issuing IOUs today to tens of thousands of companies and individuals that are owed millions of dollars by the state.
…
When the scale of the budget crisis became clear in May, Bass, the governor and other state leaders expressed confidence that they could attend to it swiftly. A budget put in place in February to take the state through the middle of next year had fallen out of balance. Revenues declined amid a continuing economic downturn, and voters rejected a slate of ballot measures that were intended to raise nearly $6 billion.

I should point out that the scale of the budget crisis was clear for much longer than since May, unless your ability to look forward is limited to 1 month. I wrote about it in January (and others actually did way before me) …

California has to wake up to reality. Whether we like it or not, the state needs to stop paying unionized workers outrageous wages. Instead of reducing expenses for some departments and programs, it needs to dismantle and abolish entire departments and programs. It needs to stop funding unsustainable pension plans. In return it needs to drastically cut the overwhelming taxes and fees that are stifling its economy.

If it doesn’t do it now, then it will have to do it later, by declaring bankruptcy, which will completely wipe out all programs and departments that can then no longer be funded anyway.

The LA Times article concludes with:

The governor and lawmakers appeared resigned that they could no longer avoid the IOUs. A panel of finance officials will meet today to determine the interest rate for banks and other financial institutions that accept the IOUs. Some banks have already agreed to honor them, including Bank of America, which will accept the scrip until July 10. Other banks have not decided.

Note that BofA will be accepting IOUs until July 10th only. Then what? Time for California legislators to come to their senses and wake up to reality. Will they listen this time? Take your guess.

Tags: california, california budget, iou

California Budget Showdown – Schwarzenegger Courageously Holds the Line

June 30, 2009 · Posted in Politics · 2 Comments

Governor Schwarzenegger says Democrats are wasting time on flawed budget plans:

Reporting from Sacramento — With only days before the state begins issuing IOUs, Gov. Arnold Schwarzenegger scolded Democrats Monday for “wasting time” on budget fixes he won’t support while they accused him of making unreasonable demands.

Democrats in the state Senate passed proposals to balance the state’s books with the help of $2 billion in new taxes. But Schwarzenegger had already promised to veto the plan, which the Assembly approved Sunday night.

“I will never sign those kind of things, so why waste the time and why run out of time and then all of a sudden we have to hand out the IOUs?” Schwarzenegger told reporters.

“We are on the brink,” said Sen. Denise Moreno Ducheny (D-San Diego) during the Senate floor debate. “. . . We’re passing it to make sure that we’ve done our job,” she said.

My comment: What Sen. Ducheney is completely oblivious to: They have NOT done their job. In fact they have done the opposite. They have not balanced the budget, they have not cut Californians’ record high taxes, they have not addressed any long term structural issues. She is trying to fool the people into believing that her and her fellow Democrats have done what they could. This kind of mentality is sadly what one has to expect from an average California legislator these days.

California will begin issuing IOUs for some of its bills Thursday, according to Controller John Chiang.

Democratic leaders used a series of legal maneuvers to push the levies through without the GOP votes normally required to raise taxes. The package includes a tax increase of $1.50 per pack of cigarettes, a new 9.9% extraction tax on oil companies, a $15 vehicle license fee surcharge to fund state parks and a new charge on homeowner insurance premiums to pay for emergency response systems.

My comment: So the plan is to raise taxes on the most taxed state in the country, and that in the midst of one of the worst recessions in decades. Is there one person who seriously believes that this will help us solve the problems at hand?

Schwarzenegger has drawn several lines in the sand: He says he will not raise taxes, wants to address California’s entire projected $24-billion deficit at once and wants a number of fundamental changes to state government.

That stance does not sit well with the majority Democrats.

“I’ve never quite heard of a negotiating strategy that says, ‘I want $24 billion my way, and I want all my reforms over the next 37 hours,’ ” Senate President Pro Tem Darrell Steinberg (D-Sacramento) said in an interview Monday. “That’s not helpful.”

Steinberg said Democrats would be willing to meet Schwarzenegger “more than halfway,” even on a deficit-reduction plan without taxes. No such plan has been publicly released by the Democrats.

My comment: But these kinds of “half way” games are what brought California to where it was. If anything, Californians need someone who firmly stands up for the right thing and refuses to play games with a corrupt legislature.

Steinberg, meanwhile, was pressing Senate Republicans on Monday evening to agree to cut roughly $3 billion from education and push other education costs into the future. The Senate planned to meet into the night to consider that proposal, which was approved last week on a bipartisan vote of the Assembly but blocked by Republicans in the Senate.

Schwarzenegger has promised to veto that plan as well, calling it a “piecemeal approach.”

It must be signed into law by midnight tonight or the potential savings expire with the end of the fiscal year.

Meanwhile, some looming budget cuts were already being prepared. Regulators on Monday voted to freeze enrollment, starting in mid-July, in Healthy Families, the state’s decade-old health program for the poor.

The decision could deny coverage to nearly 350,000 children around the state over the next year if money cannot be found to enroll them.

Advocates hope that the state’s First 5 program, which collects nearly $600 million each year in tobacco taxes for children’s programs, can ride to the rescue. In December, First 5 provided $17 million in funding to help the Healthy Families program stave off cuts.

My comment: … so Californians, please make sure you all smoke a few extra packs a day, so your kids are covered.

Even if the tax hikes were to go through somehow, they will not solve any problems. We will back to the same debate in no time at all, discussing how to address the next shortfall.

As I wrote in January:

California has to wake up to reality. Whether we like it or not, the state needs to stop paying unionized workers outrageous wages. Instead of reducing expenses for some departments and programs, it needs to dismantle and abolish entire departments and programs. It needs to stop funding unsustainable pension plans. In return it needs to drastically cut the overwhelming taxes and fees that are stifling its economy.

If it doesn’t do it now, then it will have to do it later, by declaring bankruptcy, which will completely wipe out all programs and departmens that can then no longer be funded anyway.

…I consider the commencement of IOU issuance nothing but insolvency, for all intents and purposes a declaration of bankruptcy.

Tags: Add new tag, california, california budget, california tax

California Controller Considers Paying in IOUs

June 25, 2009 · Posted in Government · 3 Comments

As Democrats in California continue to try and shove their tax hikes down Californians’ throats, the state could begin issuing IOUs next week:

As lawmakers rejected the core of a Democrat-backed budget plan intended to tame California’s $24-billion deficit, a top finance official warned that the budget crisis could force him to begin issuing IOUs next week.

Controller John Chiang announced that he would have to start paying many of the state’s bills with IOUs on July 2 if the partisan tug-of-war over the deficit isn’t ended by then.

With a scant seven days to that deadline, both houses of the Legislature took up one of the 20 bills that make up the latest spending plan but failed to garner the two-thirds vote needed to pass it.

…

Chiang met with legislative leaders earlier this week to warn them of the consequences of further delays in adopting budget revisions. He said in a news release that resorting to IOUs “sends a signal” from Wall Street to Main Street that California is out of options.

Lawmakers said they were aware of the stakes.

“The clock is ticking and it’s ticking fast,” declared Assemblywoman Noreen Evans (D-Santa Rosa), chairwoman of the legislative budget panel that crafted the deficit-reduction package.

“Everybody’s talking about jumping off the cliff,” said Sen. Bob Dutton (R-Rancho Cucamonga). “We’re already off the cliff.”

The best signal would be for California Democrats to come to their senses, adopt the cuts to state spending and finally get it over with. As to whether or not they will make the deadline for this budget, I’m making a “bold” prediction: No. They absolutely won’t.

Tags: california, california budget

California Democrats Continue to Drag Their Feet

June 17, 2009 · Posted in Government · Comment

In an unsurprising ordeal, Lawmakers’ plan eases governor’s proposed cuts:

Reporting from Sacramento — A state budget panel Monday rejected some of Gov. Arnold Schwarzenegger’s most extreme proposals to close the state’s deficit through cuts to government programs as the leaders of the Assembly and Senate announced their own plans for billions of dollars in additional taxes.

The joint legislative committee nixed Schwarzenegger’s plans to borrow $1.9 billion from local governments, close adult day-care centers and eliminate a health insurance program for low-income children. The panel voted to shave $70 million from the Healthy Families program that serves those children, but that cut, like most others the members agreed on, was significantly smaller than the governor’s.

Committee members also said no to cutting off state funds for roughly 220 parks, proposing to keep them open with a new annual $15-per-vehicle fee on California drivers.

At the same time, Assembly Speaker Karen Bass (D-Los Angeles) announced that she wants $1 billion in new taxes on the tobacco and oil industries. And Senate President Pro Tem Darrell Steinberg (D-Sacramento) said Democrats in his house will push next week to suspend $2 billion in corporate tax breaks that were passed in February but have not yet taken effect.

Both leaders said the revenue from such moves would soften the blow for the state’s neediest, who rely on services that will certainly be reduced as the Legislature looks for ways to plug a projected $24.3-billion shortfall.

“Would you rather take 900,000 kids off the healthcare rolls or delay a corporate tax break?” Steinberg said in an Internet question-and-answer session with Californians on Monday evening.

Bass said she expects the Legislature to take “a balanced approach” combining new revenue and service cuts.

“The cuts will be deep and painful,” she said, “but we will not eliminate basic safety net programs.”

Bass said a 9.9% tax on oil pumped from California land is “absolutely on the table.”

Democrats are also eyeing possible tax hikes on tobacco products and liquor, though they did not provide details.

Schwarzenegger and GOP lawmakers, some of whose votes would be needed, have said they would not support new levies to balance the budget.

Schwarzenegger’s spokesman, Aaron McLear, said Monday that the governor was not prepared to go along with the proposals to raise taxes or roll back corporate tax breaks, and he said the legislators’ efforts at cutting state programs so far have been insufficient.

“They are nowhere near solving the $24-billion deficit that the state faces,” McLear said.

The jockeying comes as California faces the prospect of being unable to pay all its bills as of July 28, according to Controller John Chiang. Members of the panel, which includes both Assembly and Senate members, said they hope to complete their work and send a budget plan to the full Legislature for approval within the week.

Though lawmakers have raised the possibility of resolving only part of the deficit immediately and addressing the rest later, Schwarzenegger has insisted that they send him a plan to close the entire shortfall.

Republicans on the committee criticized the dominant Democrats for not tackling the full deficit.

“We’re falling well short,” said Assemblyman Roger Niello (R-Fair Oaks).

Schwarzenegger had said that eliminating the Healthy Families program would save roughly $368 million. The panel’s proposal for a $70-million reduction in the program says panel members hope charitable donations will make up the difference.

The governor proposed shuttering any state parks that could not generate enough in visitor fees to operate without government money. Niello said Republican votes for the higher car fees the committee wants instead are about as likely as the “survival of a scoop of ice cream on the pavement in the middle of July.”

“This is our best effort to save the parks,” countered Assemblywoman Noreen Evans, the Santa Rosa Democrat who chairs the joint budget committee. “If the Republicans want to close the parks, then the Republicans want to close the parks.”

Schwarzenegger would eliminate Adult Day Health Care programs, a $170.5-million savings. But the panel restored much of that money, lowering the savings to $26.8 million. Cutbacks to a handful of AIDS/HIV education, prevention and treatment programs were lowered by roughly $50 million, to $33.5 million.

The lawmakers agreed with the governor’s proposal to shift $336 million away from transit programs to the state’s general fund. And they supported his one-year suspension of state payments for an open-space program that gives property-tax exemptions to certain landowners. Under the program, the state reimburses counties, mostly in rural areas, for the exemptions. But counties would be on the hook for the $34.7-million tab in the fiscal year that begins July 1.

The panel also agreed to reduce a state requirement that local governments keep shelter animals alive for six days before euthanizing them, shortening the mandate to three days for a projected savings of $25 million.

The lawmakers rejected Schwarzenegger’s proposals to save $28 million by indefinitely suspending a state law requiring local governments to give absentee ballots to any voter who requests one and to maintain lists of permanent absentee voters. And they dismissed his plan to save $14 million by putting on hold another law requiring local officials to intervene in child custody disputes, including the recovery of abducted children.

Meanwhile, on Monday evening Steinberg announced that he would voluntarily cut his salary by 5%. He urged all other legislators to follow his lead.

“We have to demonstrate we will share the sacrifice, share the pain as well,” he said. Steinberg’s salary is $133,639 a year.

I say: Democrats in California must be jointly suffering from a severe case of brain damage. It is absolutely unacceptable to even think for a second of any more tax hikes. How much more do these people want to loot Califorians, the highest taxed state in the nation?

All that needs to happen is for someone to go down the list and cut one program after another, get is over with, stop procrastinating and digging a deeper hole.

Tags: california, california budget

Schwarzenegger Plays Hardball with California Legislature

June 11, 2009 · Posted in Government, Politics · 1 Comment

With California operating in de-facto bankruptcy mode, Schwarzenegger threatens to shut down state government:

Gov. Arnold Schwarzenegger vowed Wednesday to let California government come to a “grinding halt” rather than agree to a high-interest loan to keep the state afloat if he and the Legislature do not close the yawning budget gap in coming weeks.

(…)

State finance officials say California coffers will be empty in late July unless the projected $24-billion budget shortfall is resolved quickly. Schwarzenegger said that emergency borrowing would be too expensive and that his threat to block it was necessary to prod lawmakers into swift action.

A loan would only “give them another reason why we don’t have to do it now,” the governor said. “What we need to do is just to basically cut off all the funding and just let them have a taste of what it is like when the state comes to a shutdown — grinding halt.”

(…)

In the Senate, Democrats have sketched a counter-proposal that would drain the state’s reserves and rely on hopes for a rosier economic future to hold off the deepest of the cuts. Their plan would resolve up to $20 billion of the projected $24-billion deficit.

The governor called that approach “hallucinatory” on Tuesday and “irresponsible” on Wednesday. “We have not hit the bottom” of the economic crisis, he told The Times.

Some rank-and-file Democrats are holding out hope of raising taxes to close the deficit. And the state’s largest labor group, the Service Employees International Union, launched a $1-million TV advertising campaign Wednesday to press for more taxes on oil, tobacco and liquor.

Eliseo Medina, SEIU’s national executive vice president, said the governor “ought to be worrying about trying to maintain services instead of trying to kill the messenger.”

I say: Eliseo Medina is the one who ought to be worrying … about having his head examined. California is suffocating from over regulation and over taxation. It is already the highest taxed state in the country. And his recommendation to fix a structural budget problem is more taxes. You can’t make this stuff up …

Schwarzenegger said the financial crisis should be the impetus for a leaner and more functional state government. But he said he had no confidence in the Legislature to change the status quo and hoped a constitutional convention — the radical notion of tossing out California’s oft-amended legal framework to start from scratch — would.

I applaud Schwarzenegger for the unmistakable stance he is taking. Unlike other politicians he is not trying to use the financial crisis as an opportunity and an excuse to expand government powers, he is actually trying to do the exact opposite, to finally dismantle its bureaucracies and shrink its size and scope. This is what will have to happen eventually sooner or later anyway.

What is also interesting is that he is actually one of the few politicians who realize that we have not even come close to a bottom and that there is more pain to come.

Tags: california, california budget, california tax, schwarzenegger