Budget gone bad: hope Prop 11 is a done deal!

It was inevitable. As suspected, the state budget that was finally passed just a month or so ago has fallen far short of solving California’s money woes. While it enabled most incumbents to get through an election, it now turns out that we have a shortfall of $11.2 billion, may be facing imminent cash flow problems, and the Governor has called the legislature back into emergency session.

I’ll save most of my comments for now, but I can’t help but wonder if the majority leaders in the Assembly and Senate capitulated and “cooperated” with the minority on the certainty that the budget would come back very soon with proposed tax increases.

Nah…. they wouldn’t do that. Would they? Oh how I hope Prop 11 did indeed pass!

Everything is still in flux as the legislature considers what to cut. In the meantime, the special interests will be lobbying, legislators will be posturing, and frankly, this county and every other one in the state will be scrambling to maximize the amount of money that is allowed to dribble back home so we can continue providing the services you need and expect.

This afternoon I’m meeting with a homeowners group to answer to: “What do we get from the county for the taxes we pay?” If they aren’t happy now, just wait until I share the latest. Oh joy! Suffice to say, this is very bad news. Good thing we held off on approving our final budget until Nov. 18th – it’s going to have to change.

If you are concerned about a specific state budget issue, please contact Senator Dave Cogdill and Assemblyman Tom Berryhill. I plan to do the same. And if you’re a praying person, that might not be a bad idea too.

The Executive Director of the California State Association of Counties (CSAC) put out the following this morning.

November 6, 2008

Governor Schwarzenegger Calls Special Session to Address State’s “Revenue
Problem”, Proposes Significant Program Reductions, New Revenues

That dark cloud you felt pass over the state this morning was the announcement
by Governor Arnold Schwarzenegger that the state’s 2008-09 budget was
$11.2 billion in the red. The Governor announced a special session of the Legislature
to address the budget crisis, as well as an economic stimulus plan, the near-insolvent
unemployment insurance fund, and the foreclosure crisis. The Legislature has
until November 30 to act on the Governor’s proposal.

Department of Finance Director Mike Genest noted today that the state’s
cash flow situation is dire, with barely enough cash to make it through December
and no available cash in January and February. Today’s proposals must
be enacted quickly to ensure that the state can continue to pay its bills.

It was interesting to note the Governor’s perspective on the state’s
current fiscal crisis. He was careful to explain to reporters that he
believed that, due to the upheaval of the financial markets, the state was
experiencing a revenue problem, and that, while he generally did not support
tax increases, he recognized that the current situation required extraordinary
remedies.

To quickly summarize the components of the Governor’s proposal:

• $4.5 billion in program reductions, including reductions to K-12
  and higher education, modifications to CalWORKs, elimination of SSI/SSP
  grants, implementing a one day per month furlough plan for state
  employees, parole reforms for low-risk non-serious offenders, realignment
  of funding for local public safety programs, elimination of Medi-Cal optional
  benefits, and reduction of Medi-Cal benefits to minimum levels.
• $4.7 billion in
  new revenues, including a temporary sales tax increase of 1.5 percent,
  broadening the sales tax base to include appliance and furniture
  repair, vehicle repair, golf, and veterinarian services, a new oil severance
  tax, and an increase in the alcohol tax of five cents per drink.
• An economic
  stimulus plan to include: acceleration of hospital construction by
  streamlining the permitting and review process, acceleration of Proposition
  1B bond spending, provide overtime exemptions to certain professional jobs,
  allow flexible work schedules, clarify meal and rest period laws, and provide
  a targeted tax credit to the film and television industry.
• A plan to
  shore up the Unemployment Insurance Fund by increase employer contributions,
  reducing benefit levels, and taking out a federal loan to ensure
  funding in the interim.
• A foreclosure relief plan that includes a 90-day stay
  of the foreclosure process, a “safe harbor” if lenders can prove
  that they have an aggressive loan modification program in place,
  as well as reforms to prevent a future mortgage crisis.

The Governor and legislative leaders have previously announced the formation
of the Commission on the 21st Century Economy to provide options for
modernizing the state’s tax system.