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Budget Conference Committee Continues to Meet Daily - Legislative Leaders Debate Best Approach
Senate Democrat Leader Does Not Support Governor's $2 Billion Borrowing Proposal
The powerful Budget Conference Committee, consisting of 10 members (5 from the Senate and 5 from the Assembly) has been meeting daily, wrestling with how to close the massive $24 billion budget deficit. At this point in time, there are no direct cuts proposed to the library programs under the State Library, such as the Public Library Foundation, Transaction Based Reimbursement, or adult literacy, etc. As you have been hearing in the media, time is of the essence for the Legislature to act so that the state does not run out of cash at the end of July. We have learned that several of the urban legislators in the Assembly Democrat caucus are very concerned with the large cuts proposed to CalWORKs, In-Home Health services, mental health programs, battered women's shelters, etc. and they are not supportive of authorizing the Conference Committee members in the Assembly to make deep cuts. The Sacramento Bee is reporting today that Assembly Speaker Karen Bass "said Wednesday that her caucus is deciding among numerous revenue-raising options because the $24.3 billion shortfall is too large to bridge without an infusion." Meanwhile, the Senate Conferees have authorized sizeable cuts in sensitive programs - albeit very unwillingly, but all the while recognizing the General Fund cash flow crisis. This perceived divide in the Conference Committee has led to rumors that there is growing dissention between the Assembly and the Senate Democrats.
Also, in the last 48 hours, Senate President pro Tem Darrell Steinberg indicated that he does not support the Governor's proposal to borrow $2 billion in property taxes from local government. CLA and the other local government organizations have been actively lobbying against the Governor's property tax borrowing proposal. When the Mayors of several cities, including Los Angeles, Sacramento and Fresno, met with Governor Schwarzenegger this week on the issue, the Governor continued to embrace his $2 billion borrowing proposal. For the last several days, the Conference Committee has been addressing the severe cuts proposed by Governor Schwarzenegger in his May Revision as they pertain to health and human services, corrections, and resources. They were scheduled to address local government issues yesterday, but time ran short and the discussion was deferred until late this afternoon, or tomorrow (Friday). The Conference Committee is not scheduled to meet over the weekend. However, Committee Chair Noreen Evans said she is optimistic the Conference Committee will wrap up its deliberations late Monday. Based on our observations thus far, we anticipate that Democrats will vote for the Conference Report and Republicans will oppose it. What happens next is anyone’s guess.
STATE CONTROLLER WARNS: "WE ARE LESS THAN 50 DAYS AWAY FROM A MELTDOWN OF STATE GOVERNMENT"
In late May, the State Controller, John Chiang, sent a letter to legislative leaders and the Governor, warning that the state would run out of cash at the end of the fiscal year (June 30). The Controller stated, "Our latest projections show that beginning on July 29, California will not have the cash needed to meet all of its payment obligations. On that date, the state will be in the red by $317.1 million; two days later, on July 31, our cash deficit increases to a negative $1.02 billion." To meet immediate cash flow needs, the Controller stated before the Budget Conference Committee two weeks ago, "As a precautionary measure, I am preparing to sell Revenue Anticipation Warrants (RAWs) to address part of the cash shortage." The Controller added, "Without credible budget and cash flow solutions in place, the rating agencies and potential investors who will be evaluating the credit risk of these securities will be highly skeptical about investing in California." Also of interest were his comments, "that the state has not had a positive cash balance since July 12, 2007."
Yesterday the State Controller indicated that when the state closed its books for the month of May, revenues were down an additional $827 million from the Governor's May Revision estimate. All areas of tax receipts lagged for the month of May - personal income tax, sales taxes, and corporate taxes, with personal income tax declining the most, by $475 million or 23 percent below estimates.
Controller Chiang goes on to warn, "Without immediate solutions from the Governor and the Legislature, we are less than 50 days away from a meltdown of state government. A truly balanced budget is the only responsible way out of the worst cash crisis since the Great Depression."
We have heard that at least one house of the legislature is potentially planning to force a Budget vote by June 15, while some legislative insiders say that June 30th is more realistic. We will continue to keep you posted as details emerge.
Submitted by Michael Dillon & Christina DiCaro, CLA Lobbyists
Posted on June 11, 2009 4:18 PM | Permalink