This story was reported for San Diego News Network on December 31, 2009.
Gov. Arnold Schwarzenegger and the State Legislature must be looking forward to 2010, because the last days of 2009 are getting worse.
On the search for Plan B: Schwarzenegger’s attempt to raise about $1 billion by selling part of the California Compensation Insurance Fund is failing.
According to The Los Angeles Times, the Governor’s plan is being stalled in the state courts after Insurance Commissioner Steve Poizner pointed out flaws with the deal.
“That idea was one of a handful of creative solutions and accounting maneuvers concocted to balance the $90-billion, recession-wracked spending plan, at least on paper.
But the planned sale of part of the State Fund was tied up in court after California Insurance Commissioner Steve Poizner filed a lawsuit contending that a sale could weaken the insurer, raise premiums for thousands of employers and damage an already weak state economy.
‘State Fund was set up in the California Constitution for the sole purpose of supporting the workers’ compensation system,’ Poizner said. ‘It’s not there for the purpose of taking out money.’
The upshot means ‘we can’t move forward until there is a resolution of this suit,’ said H.D. Palmer, a spokesman for Schwarzenegger’s finance department.”
The Times had California Chamber of Commerce president Allan Zaremberg chime in on the plan. He said Legislators accepted the idea but it was “illusionary.” He also said there was no such thing as “easy answers” for solving the California deficit as lawmakers have not even found “answers period.”
‘Crazy’ judges: Schwarzenegger is calling federal judges “crazy” for not assisting lawmakers in the resolution of the budget mess.
According to The Sacramento Bee, lawmakers attempted to “divert transit and redevelopment money” to garner funds but judges ruled the move is “illegal.” Judges have also determined that some workers cannot be furloughed and “they have blocked rate cuts for in-home care workers and Medi-Cal providers.”
“Beneficiaries of those rulings say courts serve a corrective purpose after lawmakers and Schwarzenegger have resorted to legally suspect methods of balancing the budget.
‘Everything that hasn’t been nailed down has been cut,’ said Anthony Wright, executive director of Health Access California. ‘What’s left is the legally questionable stuff.’
But Department of Finance spokesman H.D. Palmer defended the state’s budget decisions as legally sound.
‘I don’t think it’s an issue of being questionable; I think it’s an indication of the budget crisis we’ve been in since the recession took root,’ he said. ‘We’ve had to propose extremely difficult budget solutions the last two years. Groups that don’t like the solutions are willing to go to court to enjoin us from acting on them.’
Schwarzenegger suggested in October that when judges make decisions, they should take into account the fact that California is grappling with a historic shortfall.”
The Bee also reports that the Terminator has threatened to cut the “In-Home Supportive Services program altogether if courts continue to reject partial cuts.”
Losing $30 bil: In other judiciary news, a Reuters report notes that California could lose $30 billion from the court system due to “deep budget and job cuts.”
A study commissioned by Los Angeles County, reported by Reuters, poses a what happens when worse comes to worst.
“The internal study, commissioned by Los Angeles County and made available to Reuters, posits a worst-case scenario of a 30%-per-year cut to state court budgets through 2013. That would slow economic recovery by trapping $15 billion of unresolved corporate deals and disputed assets in legal limbo, and have additional negative ramifications.
Many lawyers and judges agree that operating at current funding levels over the long term would damage already strained trial courts, slow economic growth and hurt business by raising legal costs and delaying settlements.
The National Center for State Courts says court operations in many states are near a ‘tipping point’ at which they may not be able to handle constitutional duties and are trapped in a cycle of widening budget deficits and falling tax revenues.”
Examining the study further, Reuters reports that tax revenue could drop by $1.6 billion in the next three years and “court closures would disproportionately hit civil trials.”
Other states in the hole: As to not completely crush our California dreams, another article highlights other states suffering from major fiscal blues.
The Christian Science Monitor notes that Oklahoma, Arizona and Illinois among other states are being hit hard by budget cuts too.
For example, Oklahoma – which relied heavily on oil and natural gas prices – saw a “big drop in those prices” and now faces a budget gap of 18.5 percent.
In Arizona, the desert state is dealing with its housing crisis and “lawmakers are forecasting a 30 percent budget gap in the next fiscal year.”
There, you have it, loyal CBCD readers, your last budget woe entry for 2009. Like always, leave us your thoughts and I’ll be certain to continue giving you the info you need in 2010.
Hoa Quach is the political editor for the San Diego News Network.