California Pension Tsunami – Biggest Plans Lost Almost $100 Billion in ‘09

July 22, 2009 · Posted in Government · 2 Comments

The LA Times writes California’s biggest government pension funds lose almost $100 billion:

With a state budget agreement at hand, look for Gov. Arnold Schwarzenegger to tackle the state’s troubled retirement system.

On Tuesday, the country’s two biggest public pension funds reported losing almost $100 billion in the fiscal year that ended June 30. And the governor is expected to highlight the new numbers as he renews a campaign to trim the cost of providing lifetime, fixed benefits to hundreds of thousands of government retirees.

“No long-term fix is more important to our state’s solvency,” Schwarzenegger wrote in an opinion column in The Times this month. The governor plans to ask the Legislature to approve changes in the system.

The state, he said, would save money by giving smaller pensions to new state workers through changing “our unsustainable retiree pension formulas.”

The governor’s push for a pension overhaul took on a new urgency when the California Public Employees’ Retirement System and a sister agency, the California State Teachers’ Retirement System, separately announced that they’d lost about a quarter of the value of their investment portfolios. CalPERS’ preliminary losses were $56.2 billion, while the teachers’ retirement system lost $43.4 billion.

Schwarzenegger told reporters last week that the big pension funds could face an estimated $300-billion shortfall in covering the cost of pensions to current and future retirees.

The financial hemorrhaging underscores the risk to taxpayers of ensuring generous fixed benefits to retired government workers, said Marcia Fritz, vice president of the California Foundation for Fiscal Responsibility, which seeks to revamp the pension system.

“It’s crazy to put so much of our resources into such a generous retirement,” said Fritz, a certified public accountant in the Sacramento suburbs.

The tremendous drop in the portfolios’ value is expected to have a direct effect on the amount of money that the state and about 2,000 local governments and school districts must contribute in coming years to pay for pensions for more than 1.6 million government workers, retirees and their families.

As income from the pension investments falls, the governments would have to make up the difference to meet the state’s pension obligations to workers and retirees. CalPERS expects to hike government contributions for the state in 2010 and for local governments in 2011.

According to CalPERS actuaries, it must earn an average of 7.75% annually to avoid such annual increases. That target is reachable over time, CalPERS said in a statement Tuesday, noting that its “long-term 20-year investment return remained positive at 7.75%” despite the current global economic crisis.

The most recent losses were not a surprise, CalPERS Chief Investment Officer Joseph Dear said Tuesday.

“The system has more than enough cash through contributions and income from investments to meet our present liabilities, so we are in a good position to ride out the current downturn and come out stronger,” Dear said.

CalPERS has modified its investment mix and risk-management policies in an effort to boost earnings, Dear said. The pension fund, he noted, already has rebounded by $20 billion since dipping to a recent low of $160 million in March.

As of June 30, 2008, CalPERS’ holdings in stocks, private equity, real estate and commodities positions were worth $239.2 billion. The value fell to $180.9 billion by the end of last month, according to preliminary results.

CalPERS hit a record-high balance of $247.7 billion two years ago after earning double-digit returns for the five fiscal years that ended June 30, 2007.

To ease the damage on cash-strapped cities and counties, CalPERS’ board has approved a plan that would spread the latest fiscal year’s deep losses over the next 30 years, beginning in mid-2011.

The teachers’ fund, which provides retirement benefits for 833,000 public school educators and their families, reported investments worth $118.8 billion on June 30, down 25% from $162.2 billion a year earlier.

It suffered severe losses across its portfolio, which was hit hard by a 43% decline in its real estate values, a 28.2% drop in the value of its stock holdings and a 27.6% loss in private equity holdings.

Investment earnings over time won’t be enough to meet all the fund’s obligations to retirees, Chief Executive Jack Ehnes said.

“We are not in a crisis to resolve the contribution gap,” he said. “But the sooner a solution is found, the lower the cost.”

Pension Collapse

Schwarzenegger is on the right track. This pension system is completely unsustainable. Benefits will have to be restructured and slashed. Otherwise they are bound to collapse.

Tags: california, calpers, pension plans

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 – Fitch Cuts Bond Rating – More Downgrades to Come

July 7, 2009 · Posted in General Economics · 2 Comments

As California legislators continue to drag their feet, and As California struggles, Fitch cuts debt rating:

SAN FRANCISCO (Reuters) – California suffered a new setback in its financial crisis on Monday when Fitch Ratings cut its rating on the state’s general obligation debt to just two notches above junk status.

Fitch cut its rating on California’s long-term bonds to “BBB,” two notches above speculative grade, citing the state’s budget and revenue crisis.

The state last week started issuing “IOU” promissory notes for some bills to conserve cash for priority payments, including payments to investors holding the state’s debt.

The rating agency also kept the debt of the most populous U.S. state on watch for additional downgrades. California ranks as the lowest-rated state general obligation credit by Fitch, followed by Louisiana, at “A+.”

Tom Dresslar, a spokesman for State Treasurer Bill Lockyer, said the other two main credit rating agencies, Standard & Poor’s and Moody’s Investors Service, could soon follow Fitch’s example. “I’m sure their patience is not deep,” he said.

Lower ratings could raise California’s borrowing costs during a severe cash crunch in Sacramento, the state capital, where talks between Governor Arnold Schwarzenegger and lawmakers to plug a $26.3 billion budget deficit for the fiscal year that began on July 1 are plodding along.

“If we’re forced to pay tens of millions of dollars, if not hundreds of millions of dollars, in higher interest costs because we have a delayed budget, that’s tantamount to lighting money on fire,” said H.D. Palmer, a spokesman for the state’s Department of Finance. “That’s money that we could be spending on things like health care or education.”

Standard & Poor’s has California’s general obligation bonds rated “A” with CreditWatch with negative implications. Moody’s has warned of a possible “multi-notch” downgrade in its “A2,” sixth-highest investment grade credit rating of California’s general obligation debt.

In a statement, Fitch said it cut its “A-” rating due to the state’s “inability to achieve timely agreement on budgetary and cash flow solutions to its severe fiscal crisis.”

FITCH EYES CALIFORNIA’S CASH

Schwarzenegger seized on the Fitch downgrade to criticize state Assembly Speaker Karen Bass for not meeting for budget talks earlier in the day.

“This underscores the urgency to solve our entire deficit,” he said in a statement. “This is not the time for boycotting budget meetings — all sides must come to the table and balance the budget immediately.”

Bass told reporters it was Schwarzenegger who was holding up budget talks by pushing to include overhauls of state government in negotiations: “The issue of reforms, I think are critical, but we can begin the reform process the day after the budget revision is signed.”

Fitch said its “BBB” rating indicates “expectations of default risk remain low, although the rating is well below that of most other tax supported issuers.”

The ratings agency said California needs a balanced budget agreement quickly because it will need to sell short-term debt for cash-flow purposes once it has a spending plan.

Fitch analyst Douglas Offerman said the rating agency is keeping a close eye on how California manages its cash, sharply reduced as revenues have plunged amid recession, rising unemployment and a prolonged housing slump.

California is experiencing the worst drop in revenues from personal income taxes since the Great Depression.

“The (state) controller having to issue IOUs is one thing, but the controller’s own projection is that the state’s projected cash position in the fall gets dramatically worse without a resolution to the budget,” Offerman told Reuters.

“That raises the urgency to developing a budget solution that is going to address the cash-flow problem the state has in a responsible way,” he said.

Questions have arisen whether California’s tax-exempt IOUs can be bought, sold and traded.

The Securities and Exchange Commission must first determine if the IOUs are securities to regulate them, said Ernesto Lanza, general counsel to the Municipal Securities Rulemaking Board, adding that the board was not working directly with the commission on that decision.

“It looks like it has all the hallmarks of a security,” Lanza said. “If they are securities, I think they’re pretty clearly municipal securities.”

Fitch’s downgrade was seen having little effect Tuesday on the municipal debt market. “I don’t see any huge negative reaction, it’s priced in,” said Parker Colvin, head of municipal securities trading at Stone & Youngberg in San Francisco.

… S&P and Moody’s will be the next to cut California’s ratings. Democrats in the state legislature tell us we need more taxes to cover the shortfall. Being the highest taxed state in the nation is apparently still not enough. Meanwhile, one happy California state retiree after another enjoys pensions of over $100,000 per year.

The first IOUs have already been sent out. Some are offering to buy them for around 85 cents on the dollar:

Several posters on Craigslist are offering to purchase the warrants at a discount. One self-proclaimed investor in Maine will buy the IOUs for 69 percent of face value, while another will pay 80 cents on the dollar.

“If you need CASH now and have a CA issued IOU, please contact us immediately,” said another Craigslist ad, offering to pay 85 percent of face value. “While our state might be insolvent, we aren’t.”

… 85 cents on the dollar, plus a coupon of 3.75%, that would make the annualized yield of a California IOU approximately 63.75%. I doubt that this will be a prevailing market price, but it is certainly likely that some cash strapped recipients of IOUs will go for such deals.

Tags: california, california debt rating, fitch

California – First IOUs going out

July 3, 2009 · Posted in Government · Comment

The time has come. For only the 2nd time since the Great Depression, California sends out IOUs:

Reporting from Sacramento — Deep in debt and short on cash, California on Thursday churned out its first batch of IOUs in nearly two decades amid grumbles from bankers, growing public outrage and scant progress in negotiations to resolve the state’s widening budget deficit.

The state controller’s office fired up a pair of printing presses and began rolling out nearly 29,000 IOUs totaling more than $53 million, most of them destined for residents around the state still awaiting income tax refunds. Recipients also include some businesses, pensioners, health clinics, college students and many others who get checks from the state.

“We never thought we would do it again,” said Dorothy Cottrill, who manages check disbursement at the state controller’s office and still remembers the last time the state spun out IOUs in the lean days of 1992.

The unusual move came hours after a panel of state finance officials set the annual interest rate for the IOUs at 3.75% for banks and other financial institutions willing to accept the vouchers. Some banks, including Bank of America, Citi and Wells Fargo, have agreed to honor the paper, but only until July 10. Many recipients could receive their IOUs after that date.

Those who don’t have a bank that will cash the IOUs can redeem them from the state Oct. 2, or sooner if officials settle on a solution to the financial crisis.

Rodney K. Brown, president and chief executive of the California Bankers Assn., said the state’s failure to resolve the budget crisis “has placed a tremendous burden on California’s citizens, communities and banks.”

State officials estimated that without a budget resolution they will have to issue $3.2 billion in IOUs in July and $1.65 billion in August.

State Controller John Chiang said the IOUs “are a sign that the state is being fiscally mismanaged” and a precursor to further credit downgrades for California, already the lowest-rated state on Wall Street.

The IOUs come two days after state Senate Republicans, with the support of Gov. Arnold Schwarzenegger, blocked an eleventh-hour attempt by Democratic leaders to push through budget proposals that would have staved off the IOUs, at least temporarily.

Outside the Capitol, the mood was cross. Richard Blitz, a 73-year-old owner of a downtown Los Angeles variety store, said the IOUs seem a hollow gesture by a state government struggling for answers.

“It’s candy for a hungry man,” he said. “Banks will accept it for a week or two, but what will happen after that?”

Thomas Bent, medical director of the Laguna Beach Community Clinic, expects to receive more than $10,000 in IOUs and may be forced to dip into reserves after the big banks stop accepting them.

“I can’t pay bills with IOUs,” Bent said. “I can’t pay salaries with IOUs.”

Los Angeles County officials said they should have enough cash in the bank to operate unfettered through the summer and would cash its IOUs with Bank of America. They said that after the July 10 cutoff, the county might become something of a bank, purchasing the IOUs from institutions and individuals, then holding them until they can reap the interest from the state.

The county performed a similar role when the state issued IOUs 17 years ago.

With the state economy hobbled, tax receipts waning and the budget deficit continuing to grow, the governor declared a fiscal emergency Wednesday and ordered state workers to take a third unpaid furlough day each month. He also issued a new list of proposed cuts to schools and public universities to address a deficit that his finance team now says has swelled to $26.3 billion.

On Thursday, the Department of Motor Vehicles announced it will close its offices each of the Fridays that remain in July to comply with Schwarzenegger’s latest furlough order.

But the governor and legislative leaders remained divided on several fronts. Schwarzenegger wants to save money by tackling fraud and waste in the state’s health and welfare programs and to deflate state worker pensions. Democrats are pressing to retain as much as possible the state’s social safety net: welfare, children’s health insurance, in-home support for the elderly and other programs.

The governor said during an appearance in Los Angeles that lawmakers apparently have decided “it is more important to protect state employees and to protect all of the different people and labor and special interests, rather than protecting . . . the people of California, the taxpayers.”

A downcast Assembly Speaker Karen Bass (D-Los Angeles) blamed Schwarzenegger for linking a budget solution to his push for a government overhaul.

“Frankly, I have really begun to be concerned,” Bass said, adding that Schwarzenegger’s priority seems to be “fixing his legacy.”

An additional difficulty looms. Budget negotiators say it seems increasingly clear that a balanced budget could require suspending school funding guarantees embodied in Proposition 98 — and wrangling with the powerful California Teachers Assn.

Still, most lawmakers left the capital for the holiday weekend. Legislative leaders said they would remain behind to continue negotiations.

Meanwhile, the controller’s office pumped out the IOUs for only the second time since the Great Depression. The black-inked documents look like checks but have the words “registered warrant” emblazoned on them.

Workers placed the foot-high piles of paper promises into boxes for sorting, packing and shipping as news photographers watched.

The state’s Constitution requires that education and debt service payments be made — in cash — before all others. After that, those who must be paid in cash include state workers, the state’s CalPERS and CalSTRS pension funds, In-Home Supportive Services and Medi-Cal providers.

Please consider An Economy Bigger than Russia, Brazil, Canada, India or Spain Is About to Default:

An economy bigger than Russia, Brazil, Canada, India or Spain is in imminent risk of defaulting on its debts.

Which nation am I talking about?

Not a country . . . but the state of California.

California’s GDP was around $1.812 trillion in 2007.

According to the International Monetary Fund, that is bigger than the 2008 GDP of every country in the world except the US, Japan, China, Germany, France, UK and Italy.

… of course the author means the government of one of the biggest economies, not the economy itself.

The first IOUs are going out to people who were still waiting for their tax refunds. Lots of people who were expecting to receive cash are now receiving paper with a promise to get paid by October 2nd. Of course the state will do everything possible to push it out to this final date.

Of course this will add significantly to the ongoing drag on consumer spending and investment. Please note that other states may follow California’s example in the months to come. Also, the impact on the US as a whole seems to be rather underestimated at this point.

Aside from the states’ debt crisis, the commercial property implosion and accelerated credit card defaults are only just beginning to unfold. Roughly $2.5 trillion Alt-A resets are only just ahead of us. Whoever talks about a coming inflation and/or recovery is either not looking or fooling himself.

Tags: california, iou

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 Legistlature Seeks to Introduce Internet Tax

June 19, 2009 · Posted in General Economics · Comment

CommissionJunction sent out a call to action today:

Dear California Publisher,

ALL HANDS ON DECK! California’s budget tax bill now includes “affiliate nexus” language and could be voted on as early as next week! Commission Junction is opposed to the internet retail tax and this language in general, and we strongly encourage you to send a letter of opposition to Senator Denise Moreno Ducheny (senator.ducheny@sen.ca.gov). But don’t stop there:

Navigate to the California State Assembly web site

Use the “Find My District” link on the left of the home page and then type in your address and zip code to find your district number. Close that window.

Use the “Assembly Roster” link on the home page to find links to email your assembly member.

We encourage you to use email and phone calls to express your opposition.

Please visit this page and scroll to the California Internet Retail Tax section to find a template you can use and modify accordingly for your email as well as the Senator’s email address.

Let’s join together to oppose this bill!

Sincerely,

The Commission Junction Team

Tags: california, california internet tax, california tax, commissionjunction

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

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