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Interim Hearings at the Capitol
On Monday December 14th, the Assembly Budget Committee held an informational hearing on California's debt service obligations. Major testimony came from State Treasurer Bill Lockyer, and Mac Taylor, the State's Legislative Analyst. Treasurer Lockyer pointed out that California's credit rating is now the worst of all 50 states, having passed Louisiana, which had previously been at the bottom. As a consequence, he said that California pays a significant penalty for its low credit rating when issuing General Obligation (GO) bonds. In fact, compared to states with "AAA" rated GO bonds, California pays an additional $380 million for every $1 billion of Bonds issued over a 30 year term. More importantly, the Treasurer said that because of California's poor credit rating, it is "getting harder and harder to go to the capital markets," and he adds that "back East, writers, bankers, and others are very critical of California." Lockyer concluded by telling the Committee, "It has been twelve years since California has had a balanced Budget, and the best thing to benefit the state would be a balanced Budget."
Mac Taylor, the Legislative Analyst, informed the Committee that if all authorized bonds, including the potential $11 billion Water bonds (that will appear on the November 2010 ballot), were sold, California's debt ratio would be close to 10% of the state's General Fund - traditionally it has been less than 6%. Over the longer run, Taylor noted that the Legislature has virtually total control over the debt service through their ability to determine Bond amounts submitted to the voters, as well as when most bond proceeds must be appropriated by the legislature. Further, the legislature can also statutorily suspend authority for previously authorized lease-revenue bonds, as they have done in the past.
On Tuesday, December 15th, the Senate and Assembly Select Committee on Improving State Government, held a hearing at the Capitol titled: Untangling the State and Local Government Relationship: Moving Government Closer to the People. While the three previous hearings dealt with state government operations, this hearing focused specifically on state and local government relations. Committee Co-Chair, Senator Mark DeSaulnier, who previously served four terms on the Contra Costa County Board of Supervisors opened the hearing by stating, "It is not a stretch to say that the relationship between state and local government is dysfunctional." He noted the hearing was "meant to be a starting off point to stimulate ideas that are best for both state and local government." The principle witness, Maryanne O'Malley, of the Legislative Analyst's Office, summarized what she called "Ten events that shaped California's state-local fiscal relations," including early redevelopment laws, Proposition 13, the so-called "AB 8 bailout after Proposition 13," ERAF shifts in the early 90's, and Proposition 1A which limited the state's authority to shift property taxes.
Following O'Malley's presentation, the Committee heard from a panel of local government witnesses, as well as Mike Genest, the Director of the Department of Finance, and Steve Peace, former Assemblymember and Senator. Chris McKenzie, Executive Director of the League of California Cities, outlined the 2010 proposed ballot measure by the League, the California Alliance for Jobs, and the California Transit Association, that would revoke the state's authority to borrow property taxes, highway user taxes, and redevelopment agency funds. Other witnesses emphasized the need to prevent "state raids" on local government funds. The Committee is scheduled to have its final hearing on January 14th, with the goal of developing legislation to further define the roles and responsibilities of state and local governments.
Submitted by Michael Dillon & Christina DiCaro, CLA Lobbyists
Posted on December 17, 2009 4:24 PM | Permalink