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News from the Capitol
GOVERNOR RELEASES TWO VERSIONS OF "MAY REVISION" OF BUDGET: ONE PLAN BORROWS $2 BILLION FROM LOCAL GOVERNMENT
In an unprecedented move, today Governor Arnold Schwarzenegger released his annual "May Revision" of the Budget, and proposed two different versions of the "Revise," which are based on the possible outcomes of the May 19th statewide special election. Version #1 of the May Revision assumes that the ballot measures pass, but the so-called "contingency" May Revise assumes that the ballot measures do not pass, thus leaving a $21.3 billion hole in the state Budget. In his afternoon press event, the Governor stated that the state needs to "plan for either proposal." He added that since the enactment of the February Budget package, the revenue numbers have "changed dramatically" and noted that for the first time since 1938, there has been a drop in personal income taxes. The Director of the Department of Finance, Mike Genest, echoed the Governor's statements noting, "Disturbingly, we will close this year (2008-09) $5 billion in the hole."
Most significant is the proposal in the Governor's "contingency" May Revise to borrow $2 billion from local governments if the May 19th ballot initiatives fail. You will recall that we alerted you to this possibility last week. The Governor's "contingency" May Revise reads:
"$1.982 billion - Borrowing from Local Government. The May Revision contingency plan proposes to borrow eight percent of the property tax revenues received by cities, counties, and special districts in 2008-09 as authorized in Article XIII of Section 25.5 of the Constitution. Repayment must be made within the next three years. Legislation is also proposed to create a joint powers authority to allow local agencies to borrow against the state repayment as a group."
When asked about the proposal to borrow from local government, the Governor stated, "I absolutely despise taking from local government. This is the worst case scenario. It affects our services to police, fire, parks and libraries." Later in the press conference the Governor added, "There is no other way out. We have to pay it back in three years and we hope the economy improves." Please note: This proposal, and all other May Revise proposals by the Governor, will be subject to extensive discussion in the legislature in the coming weeks. When this issue is set in its appropriate Budget subcommittee for hearing, we will alert you and you will have the opportunity to write the members to encourage them to reject the Governor's proposal to borrow from local government. In addition, you may continue writing the four legislative leaders and the Governor to express your concerns.
The press asked the Governor if releasing the so-called "contingency version" of the May Revise was merely a "scare tactic" to encourage voters to vote for the ballot initiatives on May 19th. The Governor stated, "It is important to let the people know what the numbers are and the choices ahead." The Governor was also asked if he anticipated looking at new revenues as a solution, to which the Governor responded, "Looking for new revenues is out of the question. We have to do this with cuts and borrowing. Anyone who has a problem with this approach needs to come forward with a pencil and paper and tell us how to do this...Everyone is very clear in this Capitol. I won't sign a Budget with taxes or even a majority vote Budget."
Other major areas impacted by the Governor's proposals are: proposed deep cuts to K-12 education and higher education, cuts to Medi-cal and to programs benefitting the aged, blind, and disabled, and prison programs. The Governor is also suggesting the elimination of several boards and commissions, the imposition of various new fees, and some fund shifts. It is important to note that, at this point, it does not appear that the Governor - in either May Revise document - proposes any additional cuts to library programs under the State Library (such as PLF, TBR, literacy, etc.)
Submitted by Mike Dillon & Christina DiCaro, CLA Lobbyists
Posted on May 14, 2009 3:47 PM | Permalink