This story was reported for San Diego News Network on September 15, 2009.
The California Legislature can say goodbye to its fall recess thanks to the budget crisis.
Special sessions: After California lawmakers failed to pass major bills Friday – a number of special sessions will not come into play during the legislative recess.
Traditionally, the legislature is on recess from Sept. 11 until January. However, with the budget crisis, Gov. Arnold Schwarzenegger is calling for special sessions until bills are passed.
As of Tuesday, Schwarzenegger has called on the legislature to meet to reform California’s tax structure so that it is less reliant on income tax. The governor has also asked to change the state’s public education system in order to qualify for President Obama’s “Race to the Top” stimulus funds.
But after a last-minute effort to make critical improvements to the state’s water delivery system failed again Friday, Senate President Pro Tem Darrell Steinberg said he would ask the governor to add a special session on water to the already long policy agenda.
Republicans rejected a Democratic water package that included $12 billion in bonds, half of which they said would go toward reservoirs, underground water storage and restoring the Sacramento-San Joaquin Delta, the heart of California’s water-delivery system.
By California law, fiscal-related bills require a two-thirds majority vote and without Republican support – the bills failed to pass, not an uncommon problem for California.
Hanging over it all is the threat of a budget deficit the Schwarzenegger administration has already pegged at $7 billion to $8 billion in 2010-11, which could again divert lawmakers’ attention from the critical issues.
Changing the way California does taxes: A governor-appointed commission is ready to present its ideas on how to reform California’s taxing system to the legislature.
According to The Los Angeles Times, the Commission on the 21st Century Economy was created “in hopes of reducing the state’s dependence on income tax revenue, its boom-and-bust volatility blamed for spawning this year’s gargantuan budget deficits and the resulting deep cuts in health and wealth programs that largely serve the poor.”
Among the major changes include a reduction in state income taxes and an increase in business taxes, which in turn, will reduce California’s income tax revenue from 44 percent to 31 percent – according to the Times.
Debt ratings and current standings: Credit agencies such as Moody’s Investor Services and Standard & Poor’s are upping their ratings of California.
According to Reuters, Moody has given the state its top MIG 1 rating. This allows “the money market funds to buy the [state’s] short-term debt.”
Meanwhile, Standard & Poor’s gave California an SP-1 rating, “which indicates a strong capacity for paying principal and interest.”
This news comes after state Controller John Chiang released his August report indicating the general fund revenue was down $237 million from estimates in the recently passed budget.
However, Chiang said he expected the drop in revenue even if lawmakers didn’t.
“My office’s stress-testing of the budget anticipated some revenue loss, so the State’s cash outlook has not changed,” said Chiang. “While those revenues can be made up in the months ahead, I am concerned that they constitute nearly one half of the State’s $500 million budget reserve. What is more troubling to me is that consumer activity and unemployment continue to be a drag on California’s recovery.”
In addition, August personal income tax revenues were $247 million below estimates (-8.9 percent) and sales taxes were down $185 million (-5.5 percent). Corporate taxes came in above projections by $27.3 million (22.6 percent).
Associated Press writer Juliet Williams contributed to this report. Hoa Quach is the political editor for the San Diego News Network.