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News from the Capitol
Budget Conference Committee Wraps Up - What's Next?
Last night the six member Budget Conference Committee wrapped up it's deliberations on the budget. After discussing the several thousand items in the five hundred page budget document for many weeks, all that was left for the committee to do was bring revenues in line with expenditures. The budget was out of balance by more than $8 billion as a result of the Budget subcommittees restoring some of the "draconian" cuts made by the Governor, a bipartisan rejection of the Governor's proposal to "accrue" several billion dollars from the 2009-10 fiscal year into the 2008-09 fiscal year, as well as rejecting the Governor's proposal to "securitize the lottery," which would have provided $5.1 billion in the Budget Year. As the Conference Committee was about to conclude, the Democrats on the committee proposed a plan to generate $8.2 billion in revenues for the 2008-09 revenue year, which included reinstating the 10% and 11% income tax brackets. The Democrats reminded the Republicans that these actions were taken by Governor Reagan in the 1970's and Governor Wilson in the 1990's on a temporary basis (this increase would be permanent.) They also propose suspending the net operating loss carryover for businesses for three years, suspending the indexing of income taxes for one year, etc. The package was adopted with the four Democrats voting aye and the two Republicans voting no. Conference Committee Member Roger Niello commented that there would be no Republican votes for the package and noted "this puts us back to square one."
What happens next is anyone's guess. Earlier today, Senate President Pro Tem Don Perata and Speaker of the Assembly Karen Bass held a press conference to talk about the Conference Committee's actions and the tax increase package. Senator Perata said that the Democratic leaders would work hard during the next seven to ten days with their Republican colleagues with the hope of developing a proposal that could be brought up for a vote before August 1st. Senator Perata stated that if an agreement could not be reached "one way or another a vote would be taken by August 1st." He challenged the Republicans, as did Conference Committee Member Assemblyman John Laird last evening, that if the Republicans were to insist on cuts only, they would need to put the cuts on the table to show where they would be made. Stated Senator Perata: "Saying no is not an option, we are elected to do a job." In the meantime, representatives from the state Controller's office informed a group of us lobbyists at a meeting yesterday that the state was quickly running out of cash and would soon need to resort to borrowing, likely at high rates, because of California's terrible credit rating. In fact, California ranks 49th out of the 50 states in terms of it's credit rating, second only to Louisiana.
Library Construction Bond Bill Sent to Assembly Appropriations "Suspense File" Due To Cost.
This morning Senator Joe Simitian presented his SB 1516, a $4 billion library construction and renovation General Obligation Bond, before the members of the Assembly Appropriations Committee. As you will recall from our previous memos, the Assembly Appropriations Committee evaluates all bills with fiscal implications, and places any bill with a dollar amount in excess of $150,000 on its so-called "suspense file." In early August, the Assembly Appropriations Committee, along with legislative leadership, will prioritize the bills on "suspense" and will choose to send them forward to the Floor for a vote, or hold them in committee - rendering them dead for the year. Due to its $4 billion price tag, SB 1516 was sent to the Assembly Appropriations suspense file this morning.
During his presentation before the committee, Senator Simitian noted that SB 1516 calls for placing a library bond on the November 2010 ballot, which would allow for the state's finances to improve and would give the library community sufficient time to mount a corresponding campaign. The Senator was responding to the committee's fiscal analysis of the bill which stated, "Assuming the $4 billion in bonds are sold at an average interest rate of 5.25% and retired over 30 years, debt service costs for principal and interest would total about $8 billion or $267.7 million annually." The analysis further goes on to ask: "Should the legislature authorize a G.O. bond to be placed on the ballot in 2010 given the state's current fiscal crisis?" The consultant then delineates the financial commitment that the state has made in authorizing $85 billion in bonds since 2000. She adds, "The increase in bond financing has led to a sharp increase in the amount of spending on infrastructure debt service. Specifically, total infrastructure debt service has doubled over the past decade, from $2.5 billion in 1998-99 to $5.2 billion in 2008-09. These costs will continue to rise as additional bonds are sold to fund the November 2006 G.O. bond package and the AB 900 (Solorio) lease-revenue prison construction bond package."
CLA argued that while the bond measure is slated for the November 2010 ballot, if it were passed by the voters, it would also require that library bond board members be appointed, and regulations be developed before any bonds can be sold. In addition, we added that, as was the case with past agreements between the Department of Finance and previous bond authors, the bonds would likely be sold in phases, so as to minimize the impact on the General Fund.
Also present in support of the measure were the lobbyists for the city of Burbank, cities in Marin County, and the California Federation of Teachers. Assemblyman Mark Leno, Chairman of the Appropriations Committee then asked the representative from the Department of Finance to comment. The Governor's representative stated, "We have nothing but respect for libraries. But given the state's fiscal condition...the bill would cost $230 million a year in General Fund debt service." Chairman Leno then asked, "Is the Governor planning any more bonds?" to which Finance responded, "I don't know at this time."
With SB 1516-Simitian currently in suspense, we have been making necessary contacts with legislative leadership. The only chance the bond will have of being released from suspense and sent to the Assembly Floor for a vote at this point in the session, is if there is agreement from legislative leaders and the Governor regarding an overall bond package. In our letter to the Governor, CLA highlights the fact that not only will SB 1516 provide much needed library infrastructure to communities, but it will also stimulate the economy by placing numerous construction jobs into the pipeline throughout the state.
You are encouraged to continue writing the legislative leaders (see July 7 memo for instructions) to ask for their support of SB 1516.
Posted on July 9, 2008 4:48 PM | Permalink