This story was reported for the San Diego News Network on January 12, 2010.
California will see a reduction in cash and poor residents may feel the pain from budget cuts first, while a columnist offers creative ideas to Gov. Arnold Schwarzenegger.
Postponing those payments: The state government may delay paying some bills because its cash flow will drop in March, but officials say it’s no biggie – it’s “like an overdraft charge,” a spokesperson told Bloomberg.
According to Bloomberg, “the balance in the state’s cash accounts will decline to about $1.7 billion by the end of March, below the $2.5 billion minimum that budget officials prefer.”
In case of that possibility, the California government would delay some payments but it doesn’t affect repayment of short term notes.
“The March cash decline doesn’t mean the state will lack the funds it needs to repay $8.8 billion of short-term notes due in May and June, [Department of Finance spokesperson H.D.] Palmer said, since the bulk of tax revenue comes in April and May. The notes must be repaid in the fiscal year they are issued, and the current period ends June 30.
A political struggle over a $24 billion gap last year drained California of cash, forcing Controller John Chiang to issue $2.6 billion of IOUs in July and August to conserve money for expenses, including interest on bonds, that the law gives highest priority. Once resolved, the state in September sold the revenue anticipation notes, an advance on taxes it will collect later this fiscal year.”
Bloomberg also notes that California “has the lowest credit rating among U.S. states.”
Poor Californians may feel it first: Schwarzenegger’s budget proposal released last Friday would have a major affect on the state’s low-income communities.
According to Reuters, the Governor is “relying mostly on $8.5 billion in reduced expenditures including drastic cuts to health and social spending that has long made California one of the leading U.S. states in providing help to the need.”
This would “force 200,000 children off low-cost medical insurance, end in-home care for 350,000 infirm elderly citizens and slash income assistance to hundreds of thousands more.”
He also includes his hope of the Obama Administration offering $7 billion to the state.
But, given that Democrats outnumber Republicans in the Golden State, Schwarzenegger’s plan may not be adopted.
“Enactment of the Republican governor’s proposal, with or without Washington’s cooperation, is far from certain given that leaders of the Democratic-controlled state legislature immediately rebuffed it as too harsh.
Even representatives of Schwarzenegger’s own government acknowledged the drastic scope of his proposed cuts, which the governor himself described as ‘draconian.’
‘They are major reductions in health and human services in California, whether we get the federal funds or not,’ said Amy Palmer, spokeswoman for the state agency overseeing many of the programs hardest hit. ‘If we don’t get the federal funds, the reductions … are devastating.’
Critics say many such cuts ultimately would cost the state more money than they save, as when elderly patients forced out of adult day-care facilities end up in nursing homes.”
Construction jobs also at ‘risk’: If not enough investors purchase California bonds, construction jobs may see a cut, according to the Sacramento Business Journal.
“California State Treasurer Bill Lockyer said Friday that jobs tied to state construction projects are at risk if the state can’t sell bonds due to budget woes.
‘Thousands of infrastructure projects will be threatened with delay or closure if the state cannot reenter the bond market soon,’ Lockyer said in a statement. ‘To do that, we need to quickly and credibly solve this fiscal year’s budget problem.
‘Infrastructure development is crucial to California’s economic recovery. It creates and protects jobs, helps put our businesses back in the black and strengthens our competitiveness,’ Lockyer said.
In January 2009, more than 300 bond-funded projects worth a total of $1.25 billion were delayed in the four-county Sacramento region because of the state’s finances.”
Weighing in on California’s dilemma: A couple interesting columns appeared on the Web during the daily search for fascinating takes on the state’s budget crisis.
First, George F. Will writes in The Washington Post, that liberals are hurting California’s bank account. He uses the University of California system as an example.
“California, a laboratory of liberalism, is spiraling downward, driven by a huge budget deficit. So the University of California system’s budget was cut 20 percent. Then, the system increased in-state student fees 32 percent to . . . $10,302. But that is still 70 percent below student costs at Stanford and other private institutions in California that Berkeley considers no better than it is.”
Will goes on to address the income tax, he calls “liberalism codified” and notes that “between 1990 and 2007” the state “lost 26 percent of its factory jobs and 35 percent of its high-tech manufacturing jobs.”
In another entertaining opinion piece, Bill Whalen offers some creative ideas for fixing California’s budget mess in The Los Angeles Times.
But first, he writes, Schwarzenegger’s top priority shouldn’t be jobs — as he noted in his final State of the State address — rather, it should be money.
Whalen’s ideas include meshing California and Nevada into one state so that Schwarzenegger could benefit from the “profits” of the brothels and casinos. Another idea includes changing the name “California” to “Egypt” so that the Golden State could benefit from the financial assistance the federal government gives to the North African country.
Hoa Quach is the political editor for the San Diego News Network.