This was reported for San Diego News Network on May 26, 2009.
We, Californians, have the weather, the sand, the surf – but we’ll crash and burn if we don’t solve the deficit by the end of June, that’s what State Controller John Chiang said.
It’s been one week since 23 percent of California voters riotously rejected five of the six propositions slated on the May 19 Special Election ballot. And, state legislators are hopeful that their budget woes will be, at least, temporarily resolved before the start of the next fiscal year.
For now, the state’s projected deficit for fiscal year 2009 to 2010 is $24.3 billion – more than one-quarter of the state’s general fund.
“My suggestion to you is, don’t delay the pain,” California Treasurer Bill Lockyer told the legislative budget committee Friday. “It’s going to be awful, but just get it done. It’s going to be worse if it doesn’t get done.”
Talk about June Gloom.
In light of the election results and the expectancy of its failure, Gov. Arnold Schwarzenegger laid out a three-part formula for resolving the deficit: cuts, cash from local municipalities and a little comfort, known as a bailout, from the federal government. Schwarzenegger is expected to further delve into his concept Tuesday with a full presentation.
Some cuts to the state budget have already been made. The California Citizens Compensation Commission voted immediately after the May 19 election to impose an 18 percent pay cut for all state elected officials. In addition, the Governor’s office will cut 27 positions and will take a 9.3 percent reduction in work hours and pay.
The Governor’s potential cuts could include ending the state’s main welfare program for the poor, halting cash grants for about 77,000 college students, shortening the school year by seven days, laying off thousands of state workers and teachers, slashing money for state parks and releasing thousands of prisoners before their sentences are finished.
“I understand that these cuts are very painful and they affect real lives,” Schwarzenegger said. “This is the harsh reality and the reality that we face. Sacramento is not Washington – we cannot print our own money. We can only spend what we have.”
He also has advocated selling state assets to raise cash, including the Del Mar Fairgrounds, Los Angeles Memorial Coliseum and San Quentin State Prison.
Another cut that have most people worried is the elimination of health coverage for more than 2 million people, about 1.5 million of them children, said Anthony Wright, executive director of Health Access California.
“It would place their families in financial jeopardy for any ailment, injury,” he said. “A child won’t be able to see a dentist if they have a toothache or see a doctor if they don’t have the ability to see the blackboard at school.”
The second variable in the equation includes borrowing from $2 billion of property taxes from local governments – a proposal that has all San Diego County officials loathing the state government.
In an interview last week, San Diego Mayor Jerry Sanders said the state needed to fix its own problems not rely on local governments. Sanders is in Sarcramento Tuesday with other mayors to advocate using other means to fix the state deficit.
The governor has seen a major opposition campaign on this proposal led by three organizations: League of California Cities, California State Association and California Special Districts of Counties Association. The organizations sent a joint letter to the governor’s office prior to the special election stating that local governments are feeling the same pain the state is.
“The amount of local opposition to this is going to be stronger than ever,” said Chris McKenzie, executive director of the League of California Cities.
The final variable of Schwarzenegger’s plan includes asking for a little love from the federal government – the same kind of love given to the likes of AIG, Fannie Mae and Freddie Mac and most recently, GMAC.
Although state legislators haven’t released an exact figure requested from the federal government, Lockyer said the proposed bailout is wishful thinking.
During the budget committee hearing, Lockyer said he spoke to federal legislators, all of whom said a federal investment into the Golden State is highly unlikely.
Assemblymember Noreen Evans (D-Santa Rosa), budget committee chair, said the cuts would hurt the people most in need.
“The governor’s newly-revised budget proposal is what ‘drowning government in the bathtub’ looks like,” Evans said. “But the reality is that those most hurt by these cuts are those most in need who need government services. The champions of draconian cuts may finally get their wish this year. But these will come with a great human cost and have lasting implications on future generations.”
Unless a compromise is struck by the end of June, the state could have trouble paying its bills by the end of July. And, while the future of the state looks anything but golden, Schwarzenegger is looking back to what the root of the problem is.
The crisis is a sort of political come-uppance for Schwarzenegger, who took over a state with a projected $16 billion gap in 2003 and promised to end California’s “crazy deficit spending.”
The gap has two primary causes: The state has been living beyond its means for years by spending generously on all sorts of programs that the voters, the politicians and the special interests wanted. And the recession has hammered California’s economy.
– Reducing short-term borrowing
– Delay payments
– To offer exemptions to the most financially distressed entities – including local governments and school districts
– Act quickly
Personal income declined this year for the first time since 1938 and unemployment is 11 percent, one of the highest rates in the nation. Nearly $13 billion in tax increases and $15 billion in cuts enacted earlier this year, as well as billions in federal stimulus money, have not been enough to make up for the drop-off in revenue.
“This is the year everything has fallen apart,” said outgoing Assembly Minority Leader Mike Villines, a Republican from the Central Valley. “We don’t have an alternative. We’re literally at the day of reckoning and have to cut it all out.”
The drastic cuts that appear to lie ahead will, by accident, accomplish the stark reduction in state government that many Republicans have long advocated.
“We should have been limiting the growth of government for years,” Villines said.
Associated Press writer Juliet Williams contributed to this report. Hoa Quach is the political editor for the San Diego News Network.