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GOVERNOR HOLDS PRESS CONFERENCE ON BUDGET STALEMATE AND ISSUES COMPROMISE PLAN:
"Pain will Become Even Worse If We Delay"
Yesterday afternoon Governor Arnold Schwarzenegger held a quickly called press conference to express his frustration with the Budget stalemate and his perception of the lack of progress during the so-called "Big 5" negotiations. The "Big 5" consists of the Governor, Senate President pro Tem Don Perata, Senate Republican Leader Dave Cogdill, Assembly Speaker Karen Bass, and Assembly Republican Leader Mike Villines. Opening the press conference, the Governor quipped, "I hope you all had lunch, because I didn't." The Governor noted that the prolonged Budget stalemate has "caused difficulty in the State and the pain will become even worse if we delay." He added, "It is time for everyone to compromise. The Republicans must step out of their ideological corner and the Democrats must step out of their ideological corner."
The Governor, stated that "California's Budget problem has reached crisis proportions" and then went on to roll out the terms of the compromise proposal entitled "August 2008-2009 Update Proposed Compromise." Key provisions of the compromise include:
1. An Additional $2 billion in cuts beyond the $9.3 billion in reductions adopted by the Budget Conference Committee.
2. An increase in the sales tax of one-cent for three years, after which time the current sales tax would be reduced by 1/4 cent. A requirement that 3% of General Fund revenues would be transferred into the "Budget Stabilization Account" (BSA) until this so-called "rainy day fund" reaches 12.5%. Transfers from the BSA to the General Fund would only be allowed when revenues are insufficient to cover baseline spending increases.
3. Provisions to allow future Governors to make mid-year State Budget cuts.
A proposal to place a ballot measure before the voters to "securitize" the Lottery, which is estimated to provide $5 billion in 2009-10 to pay down General Fund debts or to augment the State's "rainy day fund."
During his press conference the Governor emphasized that his plan did not borrow money from local government and transportation, that it was not a "get out of town Budget," and that it "puts the state on its way to fiscal sanity." When a reporter asked: "You don't like borrowing, but would you do it?" The Governor responded: "We have already borrowed and next year we will have the same (Budget) problem and would have to raise taxes." The reporter pursued: "Is that a 'no I won't do it'?" After a pause, the Governor responded, "I don't like it, no I won't do it."
Subsequent to the release of the Governor's plan, Senate Republican Leader Dave Cogdill, and Assembly Republican Leader Mike Villines, expressed their opposition to the proposed sales tax increase. As of today, there is little agreement on a Budget compromise and several Democrats have told us the have cancelled their plans to attend next week's Democratic National Convention. Stay tuned.
Submitted by Mike and Christina Dillon, CLA Lobbyists
Posted on August 21, 2008 1:55 PM | Permalink