Monday, September 1, 2008



smf sermonizes: Never before has California ended a legislative session, gone more than 62 days or seen the month of September without a budget. This is not good - but rushing ahead and getting a budget for the sake of getting a budget no matter what could and/or would be worse.   "The more is on the line, the easier it is to get swept into an irrational decision." Economist Ori Brafman and his psychologist brother Rom explain in their treatise Sway: The Irresistible Pull of Irrational Behavior. Before there were self-help business books there was the itinerant rabbi from Galilee : "Lead us not into temptation".  Let us not be so led.

Historic failure on state budget


By Edwin Garcia | Mercury News Sacramento Bureau

Article Launched: 09/01/2008 01:31:38 AM PDT

SACRAMENTO - The California Legislature's ambitious effort to improve the quality of education, transform the way political districts are drawn and upgrade the state's vulnerable water supply system came to an unsuccessful and anti-climactic end Sunday afternoon when lawmakers reached the end of their two-year session unable to even pass a budget.

When the final gavel came down, the 120 members of the Senate and Assembly became the first lawmakers in at least three decades - and possibly longer - to close the traditional Aug. 31 legislative deadline without a budget in place.

"What strikes me as interesting is that this is going to go down as one of the least productive sessions in California history," said Tony Quinn, a longtime political analyst and onetime head of the Assembly Republican Caucus.

"It's pretty negative history, I'll tell you that," said Michael Zarcone, president and chief executive of Subacute Saratoga Children's Hospital, where 36 children breathe on ventilators and which hasn't received Medi-Cal reimbursement for weeks because of the state's finances. Zarcone is now searching for a loan to make his next employee payroll Wednesday.

The various budget proposals - which bounce from the hands of Democrats eager to raise taxes to Republicans who forcefully oppose them, then to Gov. Arnold Schwarzenegger, who tries to please both sides - are nowhere near being adopted.

A series of complex issues make state budgets difficult to pass for several reasons, including the two-thirds majority voting requirement.

The standoff has had a minimal effect on politicians, who face no penalties for the 63-day record budget delay, and the public, which largely continues to enjoy uninterrupted programs and services.

"Californians will start to pay attention to all of this when it begins to hurt them," said Sherry Bebitch Jeffe, a senior scholar at the School of Policy, Planning and Development at the University of Southern California.

That point may come later this month.

State Controller John Chiang warned Friday that he will be unable to write checks worth billions of dollars by the end of September.

College students who rely on state aid for books, tuition and room and board will be shut out of more than $120 million. Community colleges will be owed $1.4 billion. Hospitals, nursing homes, rural health-care clinics and regional developmental services centers will be out more than $4.7 billion in Medi-Cal payments.

The end of the legislative session, Aug. 31, is the last day to get bills to the governor, including, until now, the budget. Beginning Sept. 1, many lawmakers hang their policy hats in Sacramento and don their political hats in their home districts, where they campaign for re-election or walk precincts for their party's colleagues before the November elections.

But over the weekend, Assembly and Senate leaders announced they were essentially extending the session for the purpose of working on the budget.

The Assembly will meet at noon Wednesday and the Senate will gather daily, which means most if not all Republican senators will miss out on the GOP convention in Minnesota.

Schwarzenegger, who would have been one of the convention's most celebrated speakers, confirmed in a statement Sunday he will skip the event entirely because a budget is not in place.

Normally during September, he's busy deciding which of a few thousand bills to sign or veto. But in an attempt to pressure legislative leaders into agreeing on the budget, the governor has pledged to reject all measures as long as the state is without a spending plan for the fiscal year that began July 1.

Assemblyman Jim Beall, D-San Jose, who landed in Sacramento nearly two years ago and has about 20 bills waiting their fate before the governor, said he never experienced this kind of budget delay as a San Jose city councilman or Santa Clara County supervisor.

"It's very frustrating," he said, "to see this happen."

California enters uncharted territory with no budget

Some say the stalemate could last into next year, leaving the incoming Legislature to solve the problem. That will leave those dependent on state funds without the money to operate.

By Evan Halper | Los Angeles Times Staff Writer

September 1, 2008 — SACRAMENTO — As the Legislature lurched to its close Sunday with no budget in place, California toppled its own record for fiscal dysfunction.

Never in recent memory has August ended without a spending plan, so the state is now thrust into uncharted territory.

Gov. Arnold Schwarzenegger's administration has been busily preparing a blueprint for keeping the state afloat through the fall.

The governor told Fresno Bee editors last week that he would wait until winter to sign spending bills into law, if necessary, to get what he considers a decent budget.

That means one with a mechanism to limit future spending, with temporary taxes to help wipe out the state's $15.2 billion in red ink and without the multibillion-dollar borrowing from local government and transportation accounts that some lawmakers appear to favor.

Others in the Capitol say the stalemate may indeed last into next year, leaving the incoming class of legislators, many of whom will be rookies elected in November, to solve the problem.

Meanwhile, hospitals, community colleges, day-care centers and other facilities dependent on state funds go without the money they need to operate.

"There is no victory for anybody when we . . . come into Monday and have no budget," said Mike Villines of Clovis, leader of the Assembly's Republicans. "I don't think Californians are sympathetic."

With the deadline for legislative business passed, lawmakers can no longer work on regular lawmaking. But they will still be tethered to Sacramento as they wait for their leaders to strike a budget deal.

The past record for state budget delay was set in 2002, when Gray Davis was governor and the Legislature did not pass a spending plan until Aug. 31 -- the final day of its session.

At the core of that impasse was a dispute over taxes. The same is true now, 63 days into the current fiscal year.

The governor's office held a meeting last week with two former state finance directors and former Senate Republican Leader Jim Brulte, seeking advice on how to make it to November or beyond without a budget.

The group, according to some participants, discussed the state's options for getting cash once it runs out in a month or so; whether the governor has the authority to release emergency funds to health clinics and other programs; and how California will be able to repay arrears on state services once a spending plan is finally in place.

In the case of some large education and health expenditures, the state cannot make cuts retroactively. So some reductions that lawmakers hope to make to save money would apply only to the portion of the year when a budget is in place.

Administration officials say the costs of delaying such reductions, together with the costs of securing short-term loans to keep the state solvent, could add as much as $1 billion to the budget shortfall if the impasse drags through the fall.

Meanwhile, the arguments continue.

Republicans unveiled a plan Saturday that would rely on borrowing against the lottery and on deep program cuts. A vote on their proposal is expected soon, though it has no support from Democrats.

"There is no doubt in my mind that the silent majority does not want taxes," Villines said.

Democrats and the governor say closing the budget gap without new levies would cripple state services. Republicans blocked the latest proposal that included them -- along with the spending restraints promoted by the governor -- in the state Senate on Friday.

"We compromised more than we thought prudent," said Senate President Pro Tem Don Perata (D-Oakland). "We are done."

According to people involved in confidential budget talks, Democrats in the Assembly have been looking for ways to raise taxes without Republican votes. California requires a two-thirds majority to pass a budget or raise levies; in the existing Legislature, that means two GOP votes in the Senate and six in the Assembly.

Assembly staffers have been scurrying to find loopholes that might permit a tax hike on a simple majority vote, said those involved in the negotiations. One proposal would have the effect of increasing sales taxes by eliminating a tax cut put in place several years ago.

Legislative lawyers have suggested the plan could be approved without Republican votes. But it would almost certainly wind up in court. Anti-tax activists hold the two-thirds vote requirement sacred.

As the standoff continued, some Californians had already begun paying the price.

Earlier in the summer, checks stopped going to thousands of healthcare clinics, nursing homes, child care facilities and other providers of government services.

The longer the delay, the more dire their situation.

By the end of September, according to state Controller John Chiang, $12 billion in payments will not have been made.

"We had to suspend our payroll for the last week of August to all our staff and providers," said Amparo Ortiz, administrator of Casa Healthcare, which provides care for developmentally disabled children.

The state already has missed $250,000 in payments to her, and she is borrowing from friends and relatives. Her staffers earn the state minimum wage of $8 an hour and do not have savings to fall back on.

"What are we to do? Where do we turn?" Ortiz asked. "If we take out loans, the interest rates will kill us, not to mention all the late charges we are going to receive for our mortgages we don't pay on time."

Times staff writers Patrick McGreevy and Michael Rothfeld contributed to this report.

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