More state budget woes may lie ahead
July 27, 2009
SACRAMENTO – Officials say there is no guarantee that California’s budget troubles are over for now, even after state lawmakers approved a complex package of spending cuts, raids on local government funding and accounting maneuvers to fill a gigantic budget deficit.
“People often ask me, “Well, have you fixed the problem forever?'” State Assembly Speaker Karen Bass said Friday after the Legislature wrapped up a session that lasted about 24 hours.
“I have no way of knowing,” the Los Angeles Democrat added. “We are in the worst recession since the Great Depression, … and we don’t exactly know where the economy is going right now.”
The legislative package of about 30 bills was similar to the deal announced earlier this week by Gov. Arnold Schwarzenegger and legislative leaders from both parties.
But the Assembly rejected two of the most controversial measures: A plan to take about $1 billion in transportation funding from local governments and a measure that would have allowed new oil drilling off the California coast for the first time in 40 years. That was to have brought in $100 million this fiscal year.
The loss of $1.1 billion from the budget package means Schwarzenegger will use his veto authority to make even deeper cuts to close the gap.
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“It’s the only way to solve the problem and to save our great state. The only way to do it is to spread the sacrifice. It saves our state from financial ruin and from drowning into the fiscal abyss,” the governor said.
The measures passed by the Legislature technically amounted to a revision of a 2009-10 fiscal year budget that lawmakers passed in February during an emergency session.
Since then, the state’s fiscal condition has grown worse by the week, led by a dramatic drop in personal income tax revenue.
The cash crisis has become so acute that California has been forced to send IOUs, or promissory notes, instead of checks to thousands of state contractors. It was also facing the prospect of being unable to fund pension contributions and pay employees by September.
While lawmakers agreed the deficit-closing plan was distasteful, most said they had little choice.
“This is the most painful political experience I have ever had, … to make these cuts in the safety net at a time people need this support more than ever,” said Bass.
The budget agreement will be felt in nearly every community of the most populous U.S. state.
Cuts to public schools are expected to force teacher layoffs, more crowded classrooms and scaled-back offerings in art, music and sports.
College students will pay hundreds of dollars more per year in fees, course offerings will shrink and tens of thousands of prospective students will be turned away.
Welfare, health care programs for low-income families and in-home services for the disabled, elderly and frail will be reduced. Nearly 40,000 will have their in-home support services terminated.
Even state workers, long protected by powerful public employee unions, have been affected. Schwarzenegger has ordered them to take three days off a month without pay, equating to a 14 percent pay cut.
An undetermined number of state parks will close after the Labor Day holiday in early September, and the state will be authorized to sell 17 state office buildings to raise cash, renting the space back from the new landlord. The Orange County Fairgrounds also will go on the market.
State Senate leader Darrell Steinberg, a Democrat, said he was pained by the cuts to public schools and health and human services programs. After his chamber passed the series of budget bills early Friday morning, some 12 hours after it began debate, he said he did not feel joy, but only relief.
“I think we did our job well and cut in a way that was as responsible as it could be,” he said.
The oil-drilling measure emerged as one of the most contentious, with Assembly members debating for more than an hour before Democrats prevailed in killing it. Assemblyman Pedro Nava, a Democrat from Santa Barbara who has long opposed the project, said the governor appeared to be willing to hijack California’s future because of a budget crisis.
The spending cuts amount to roughly 60 percent of a budget deficit projected at $26 billion through June 2010. The size of the shortfall is unprecedented, representing nearly 30 percent of the state’s $88 billion general fund.
Spending hasn’t been at that level in California since 2005, underscoring the severity of the state’s economic collapse. Its unemployment rate of 11.6 percent is the highest on record, and personal income tax revenue to the state fell 34 percent during the first half of the year.
When Schwarzenegger signs the budget agreement, state officials hope it will be enough to satisfy the bond markets and allow the state to begin taking out short-term loans.
But other issues loom.
The state’s largest employee union, representing 95,000 workers, is asking its members whether they want to authorize a strike or walkout to protest the monthly furloughs.
Cities and counties, meanwhile, have said they might sue to stop the state from taking some $4 billion in local tax money. Local governments throughout the state, hit by declining property and sales taxes, already are laying off law enforcement officers, firefighters and other employees, while trimming park maintenance, library, trash and other services.
The rapid decline in tax revenue and Republicans’ insistence on no tax increases left lawmakers with few options but to cut spending, borrow money from elsewhere and resort to various accounting tricks to balance its books.
Associated Press Writers Steve Lawrence, Don Thompson, Juliet Williams and Samantha Young contributed to this report.