The Return of ‘A State without a Budget, A government without a Clue’: BIG MIDYEAR HIT FOR PROP 98 LIKELY + DEEPER CUTS TO STATE BUDGET EXPECTED + Addl Coverage + smf’s 2¢

INT. CLASSROOM – DAY smf: In budget cycles past, 4LAKids broke out the California Budget Debate from the rest of the Education mess and placed in in a separate blog: “A state without a Budget, a government without a Clue”.  4LAKids was trying to keep the recession separate from recess – and to avoid depression altogether. This past year the state got a budget early, and after an initial hiccough got a another, “final” budget; close enough to on-time to escape a tardy slip. There was no “State without a Budget, Government without a Clue.” Except, of course, it unraveled just like the Schwarzeneggerian budgets previous:  Those rose-colored glasses and fanciful projections ran afoul of reality and the towering house of cards came tumbling down like a pre-Field Act elementary school in Long Beach in 1933. The May Revise comes in December this year; pink slips and holiday cards will be in the mail. And charter schools and school districts will go into bankruptcy and/or receivership. So we’re back right back where we started – deeper in debt, mired in the shortfall, tangled in the great expectations and the Reform®; Tested, Assessed Value-addled+Data-driven to Distraction.  “Cut, cut, cut!” say the Republicans. ”Cut!” says the director. ”Places” says the A,D. “…Roll Camera.” ”…………Speed.” “………………Scene 2011, Take Three. Marker.” ”…………………………And…. ACTION!”

Big midyear hit for Prop 98 likely: LAO foresees $3.7 billion state shortfall

By John Fensterwald - Educated Guess | http://bit.ly/uwgWIX

11/17/11 • The first shoe fell with a thud Wednesday, when the Legislative Analyst’s Office predicted that a $3.7 billion state revenue shortfall this year would result in $2 billion in midyear “trigger” cuts, including $1.5 billion in Proposition 98 funding and $100 million each to the University of California and California State University.

The other shoe will drop next month when the state Dept. of Finance issues its own revenue estimates and then sets the midyear cuts based on the rosier of the two projections.

The LAO is predicting a $13 billion state deficit next year, even after $2 billion in midear cuts this year, declining gradually over five years. Click to enlarge.>>

The expected cuts, which will bite into services for the disabled as well, follow dreary revenue reports for the first four months of the fiscal year, and so should come as no shock. The repercussions were felt immediately Wednesday, with CSU trustees approving a 9 percent tuition increase for next year unless the state increases funding by at least $138 million next year. The $100 million midyear cut will put CSU that much more in a hole and wipe out the system’s reserves.

Under the budget passed last year, the shortfall also will lead to a $10 per credit community college fee increase, and will compound problems for K-12 districts, especially those that, hoping against hope, didn’t build in sufficient reserves or don’t have contingencies for negotiating additional staff furlough days this spring. Under the worst-case scenario, some of those districts, the LAO said, may run right out of cash by year-end and have to seek a state emergency loan.

The $1.5 billion in Prop 98 cuts would include the $248 million in home and school transportation payments – more than half of funding for the program – and $1.1 billion in standard revenue limit funding for districts. The latter equals a cut of $180 per student, about 3 percent of state tuition payments.

The transportation cuts, an average of $41.60 per student, will disproportionately affect rural and poor urban students, according to a breakdown by Stephen Rhoads, a lobbyist with Strategic Education Services in Sacramento. In rural Humboldt County, the cut amounts to $113 per student; in Mariposa County, $346 per student; for low-income students, the cut would average $49 per child, compared with $23 in wealthier districts. If students stop attending school regularly after bus routes are cut, districts would see a further erosion in revenue.

The Legislature made contingencies for cuts when it shifted $2 billion in sales tax revenue from Prop 98 to pay for transferring prisoners to county and local jails. Rather than immediately cut education, the Legislature assumed that the state would take in an extra $4 billion in revenue – a deal it cut with the California Teachers Association that in the end turned sour.

CTA President Dean Vogel, commenting on the LAO report, called for fixing the state’s “unfair tax structure and corporate tax breaks” in order not to shortchange education.

“It’s time to put a fair and equitable tax system in place so that our students and the most vulnerable Californians don’t have to continue to do without,” he said.

Looking ahead to a sluggish economy and an unemployment rate that will likely remain above 8 percent for another five years, the LAO assumes that the midyear cuts won’t be restored for years. Even with the midyear cuts, the LAO is predicting that the state will end this year $3 billion in the red, and the deficit will grow to $13 billion next year, and will remain above $5 billion per year through 2016-17.

If there’s good news for schools, it’s in the LAO’s projection that the funding obligation for K-12 and community colleges will rise $4 billion next year. But more than half of that will be simply part of what the state owes the schools: restoring Prop 98 to the level before the $2 billion in sales tax money was diverted and then partially repaying for the lost $2 billion this year ($400 million per year for five years).

With unemployment beginning to drop next year, per capita income will rise 4 percent, resulting in an increase of nearly $1 billion in the Prop 98 obligation. But, with the Prop 98 increase contributing to the $13 billion deficit, the LAO suggested that the Legislature would have to consider suspending Prop 98 – and how to do it.

It added two more cautionary notes: Even though an upsurge in revenue may enable the state to fund Prop 98 an average of $2.5 billion a year beyond the minimum guarantee from 2013-14 to 2016-17, it will still end up owing education $10 billion in past obligations. And it will not have begun to pay down CalSTRS’ unfunded pension liability. “Addressing the unfunded liabilities of just the teachers’ retirement fund probably will require billions of dollars of additional payments annually over the coming decades,” the report said.

 

Deeper cuts to state budget expected: Lower-than-forecast revenue means automatic reductions will likely kick in. A shorter K-12 school year could result.

By Anthony York and Nicholas Riccardi - Los Angeles Times |

http://lat.ms/vLwyTN

Students and parents rallied against education cuts outside Millikan Middle School earlier this year. (Kirk McKoy / Los Angeles Times)

November 17, 2011 - Reporting from Sacramento— Sluggish state revenue is likely to trigger a new round of spending cuts that could mean a shorter school year and millions of dollars slashed from public universities, child care programs and services for the disabled, the Legislative Analyst's Office says.

California's coffers will be $3.7 billion below what lawmakers and the governor assumed in the budget they crafted last summer, said Mac Taylor, the analyst whom legislators look to for nonpartisan financial advice. The new reductions were built into the spending plan, to kick in if state income fell short.

A final decision will be made next month, when Gov. Jerry Brown's Department of Finance releases its own forecast for the rest of the fiscal year, which ends June 30. Taylor said the projections could still change enough to ward off some of the deepest cuts. But his announcement Wednesday was the first official confirmation that reductions are likely.

The grim news prompted outrage from education officials who have already sharply pared their budgets. But it was no surprise to economists who had criticized Brown for balancing the budget by anticipating an extra $4 billion in revenue after he failed to secure Republican support for a ballot measure to raise taxes.

"Short of aliens landing on the planet with a big bucket of cash," said Christopher Thornberg, a founder of Beacon Economics, "there's no way we're going to make [Brown's] revenue projections."

If the economic picture does not improve in December, the new cuts would include a $1.4-billion reduction in public school funds that would even force state-provided student buses to be mothballed. Such severe cuts had Los Angeles schools Supt. John Deasy publicly contemplating defiance Wednesday.

"What comes to mind is we simply won't do it," he said in an interview.

At the urging of teachers unions, legislators barred districts from closing the money gap by laying off teachers. Rather, they would have to cut expenses elsewhere. The state gave them permission to trim up to a week from the school year if they agreed with their local teachers unions to do so.

Kevin Gordon, a lobbyist for several school districts, said he believes it would be almost impossible for local authorities to win permission from labor to curtail the academic year and the Legislature would have to revisit the issue.

"There will be a reshuffling of the deck entirely if it appears schools will have to shoulder the magnitude of cuts" that the Legislative Analyst's Office projects, Gordon said.

In addition to reductions in K-12 education, the University of California and California State University systems would each lose $100 million. Fees at the state's community colleges would increase by an additional $10 per unit.

Counties, already struggling to accommodate more inmates under Brown's current budget, which shifts responsibility for some offenders from the state to local governments, would lose $72 million that pays for the housing of serious juvenile offenders.

Funding for home health aides would be cut by 20%, and services for the disabled would be slashed by $100 million — on top of deep reductions already made in those programs.

That could be the last straw for Michelle Franklin, 45, of Stockton, who receives just under $800 a month from the state to care for her schizophrenic son and an elderly neighbor. If her payments drop by 20%, she said, she may have to commit her child to a state mental hospital.

"I love my son dearly and it's going to break my heart, but if they cut my hours I may have to make the decision to let my son go," Franklin said. "That's going to end up costing the state a lot more in the long run."

Administration officials and Democratic legislative leaders urged calm, holding out hope that December's forecast would be better and enable the state to dodge the automatic cuts. They stressed that the state's finances are in better shape than they have been for much of the decade-long budget crisis.

"California's budget gap is the result of a decade of poor fiscal choices and a global recession," said Brown spokesman Gil Duran. "This year, we cut the problem in half. Next year, we'll continue to make the tough choices necessary until the problem is solved."

But Taylor's analysis shows little relief in sight. It predicts that even with the new slate of cuts, the state will face a $13-billion shortfall in the next fiscal year. That gap would be so severe it would be difficult to close without going below the minimum funding that state law guarantees for K-12 education.

The good news, Taylor said, is that the annual deficit is expected to gradually dwindle into the range of $5 billion by 2016, a better long-range picture than he has seen in years.

The cuts will become official Dec. 15 if the projections don't improve, then be phased in over subsequent months. In September, Brown vetoed a bill that would have allowed the Legislature to reconfigure the cuts, saying it would be reckless to alter them. On Wednesday, Taylor said it would be "unwise" to do so.

A bevy of interest groups are trying to change them anyway.

Jean Hurst, a lobbyist with the California State Assn. of Counties, said her members would ask the administration to reconsider taking $72 million in juvenile lockup funds from them. She noted that the move would come as counties implemented Brown's "realignment" plan by keeping inmates who would have otherwise gone to prisons.

"To pull additional funds out of our base of safety services is a huge challenge," she said.

Social service advocates and unions representing home health workers vowed to sue to stop what they described as "devastating" cuts to services for the disabled. They joined labor groups and many Democrats in calling for tax hikes to be placed on the 2012 ballot to stave off more reductions.

Both university systems have said they believe they can absorb their potential cuts, though this year's austere budget led Cal State trustees to approve a 9% fee hike Wednesday.

Full coverage from google news

Most school districts may weather midyear cuts, but worry about future

San Jose Mercury News – Nov 17, 2011

California's anemic tax revenues may trigger steep budget cuts on Feb. 1, but with most school districts anticipating them, they won't set off drastic changes in the school year. That doesn't mean the cuts, estimated to be $180 per ...

Calif. budget cuts could shorten school year

San Jose Mercury News - Nov 17, 2011

SACRAMENTO, Calif.—Millions of California parents and schoolchildren face a direct hit from the state's latest financial woes—the prospect of fewer school days that would make California's school year among the ...

Fitch: Effect of California Trigger Cuts to Vary for State & Schools

MarketWatch (press release) - Nov 17, 2011

NEW YORK, Nov 17, 2011 (BUSINESS WIRE) -- Underperforming revenues will likely prompt the State of California to lower its near-term revenue outlook and implement some mid-year trigger cuts contained in its 2012 fiscal budget, a scenario that will have ...

Calif. faces $13B deficit, faces midyear cuts

BusinessWeek - Nov 17, 2011

California faces $2 billion in automatic spending cuts at the first of the year that will reduce funding for public schools, higher education and a range of state services, according to a nonpartisan fiscal analysis released Wednesday. ...

State fiscal nightmare: deep cuts on horizon

San Francisco Chronicle (press release) - Nov 16, 2011

Rich Pedroncelli / AP California faces deep midyear cuts to its universities, community colleges, social service programs and public schools - which may have their year shortened - because the state will collect billions of dollars less in revenue than ...

All 81 related articles »

Blogs

New California budget report triggers old partisan arguments

Sacramento Bee (blog) - ‎Nov 16, 2011‎

Fresh off a new Legislative Analyst's Office report that paves the way for mid-year cuts in education and social services, Democrats called for additional taxes and Republicans said lawmakers must rein in spending. The report also pegs the state's ...

BUDGET Analyst projects revenue $3.7 billion short

Press-Enterprise (blog) - ‎Nov 16, 2011‎

By PE Politics on November 16, 2011 11:25 AM California would face $2 billion in midyear cuts to schools, universities and other programs under an updated revenue analysis by the Legislature's nonpartisan fiscal analyst. State revenue is on pace to be ...

LAO Predicts Trigger Pulled On Budget Cuts

Capital Notes (blog) - ‎Nov 16, 2011‎

The annual fiscal forecast of the Legislative Analyst's Office is always interesting to budget wonks, but never so consequential to the services used by millions of Californians as it is this year. That forecast, released this morning, projects the ...

All 8 related blogs »

United States

Californians Dislike Cuts as Revenue Projected to Trail Budget

BusinessWeek - Nov 16, 2011

Nov. 17 (Bloomberg) -- Almost three-quarters of Californians say the state doesn't spend enough on higher education, according to a new survey, even as revenue forecasts raise the likelihood of more cuts to colleges ...

Sharp Decline in Revenue Is Forecast for California

New York Times - Nov 16, 2011

A report released by state budget analysts on Wednesday forecasts a sharp decline in revenue for this fiscal year, which could set off more than $2 billion in new cuts in state spending in January, including a seven-day reduction in ...

All 97 related articles from United States »

Sacramento, CA

LAO: Calif. Budget Triggers Likely, $13 Billion Deficit Next Year

Capital Public Radio News - ‎Nov 16, 2011‎

It now looks even more likely that California will have to make mid-year “trigger” cuts to the state budget, according to a new report by the state's nonpartisan legislative analyst's office. By Ben Adler This year's budget relies on an extra $4 ...

California Budget Facing Billion Dollar Deficit

KCRA Sacramento - ‎Nov 16, 2011‎

SACRAMENTO, Calif -- California's nonpartisan fiscal analyst projected the state to have a $13 billion budget shortfall over the next 18 months. That likely means Gov. Jerry Brown and state lawmakers will have to make another round of spending cuts. ...

Analyst: State Faces $13B Deficit Next Year

KCRA Sacramento - ‎Nov 16, 2011‎

California's nonpartisan budget analyst says the state is projected to face a $13 billion budget shortfall next year. By The Numbers The Legislative Analyst's Office on Wednesday released a gloomy state fiscal outlook. It says tax revenue will fall ...

All 14 related articles from Sacramento, CA »

The selection and placement of stories on this page were determined automatically by a computer program.

The time or date displayed reflects when an article was added to or updated in Google News.

STATE BUDGET BATTLE GEARING UP

Op-Ed by Thadeus Greenson/The Times-Standard [Eureka/North Coast]

Posted: 02/10/2010 01:31:30 AM PST

Anyone questioning the severity of California's budget woes needs only to look at some recently considered proposals to generate revenue for a rebuke, and a glimpse into just how dire things really are.

Recent months have seen cash-strapped California seriously consider proposals to sell naming rights to its state buildings, to legalize and tax marijuana, to keep marijuana illegal but tax it anyway, to privatize the state's prisons, to build and operate state prisons in Mexico and to sell off surplus state vehicles autographed by the governor.

The latest proposal comes from the governor, and is looking to convert overhead freeway displays -- historically used for public service announcements and to warn of road hazards -- into electronic advertising billboards.

While the proposal isn't likely to gain much traction, it further underscores the bleak reality that California is in the throes of budget problems the likes of which haven't been seen in a long, long time. It's also an indication that the state isn't taking its problems as seriously as it should, according to Ryan Emenaker, an assistant professor of political science at College of the Redwoods.

”We are in a desperate situation, and I think this is another thing in a line of us pretending that the situation isn't that dire -- that we can fix it with a gimmick,” Emenaker said. “It's the idea that we can avoid making hard choices and find the magic bullet to fix all our problems.”

But, Emenaker cautioned, there won't be any magic bullet and the only answer will be a long-term reshaping of the state's budget and tax systems.

In the short term, however, there's a budget to bring into balance.

With the state having issued $32 billion in budget cuts in the last year, most believe California has long since run out of easy answers. Now, facing a pending $20 billion deficit for the next fiscal year, and projected shortfalls of about $20 billion in each of the next five years, the budget battle is gearing up again.

”Our budget is seriously out of whack, and it's becoming worse by the day,” said state Sen. Patricia Wiggins, D-Santa Rosa, in a statement.

This week, legislative committees will continue chewing over Gov. Arnold Schwarzenegger's budget proposals, with the familiar refrains: Democrats calling to protect education and health and human services, and Republicans pledging not to raise taxes. All the while, state finance officials are warning that lawmakers must act quickly to avert another cash crisis.

To make up for a drastic drop in tax revenue and plug a $20 billion deficit, Schwarzenegger is proposing further cuts to health and human services, welfare programs, prisons, transportation and environmental programs.

He also seeks to raise money by rolling back recent corporate tax breaks, expanding oil drilling off the Santa Barbara coast to provide $140 million for state parks, and demanding more money from the federal government.

In his proposal, Schwarzenegger banked on almost $7 billion in additional federal funds -- money he claims the state is owed. But the federal budget proposal President Barack Obama recently released only includes a fraction of that amount -- about $1.5 billion.

The governor's proposal contained a contingency plan in the event that Obama didn't offer up what Schwarzenegger asked for, and it includes the elimination of some of the state's social service programs, including in-home care for frail seniors and the disabled, the Healthy Families program that provides health care for millions of children of the working poor, and CALWORKS, the state's main welfare and work-training program.

Many have their doubts about the proposed cuts, saying that they come with huge moral and fiscal ramifications.

The California Budget Project -- a nonprofit, nonpartisan organization -- warned that the proposed cuts come at a time of growing need.

A recent report released by the project indicates the state has about the same number of jobs it had 10 years ago, when the state's population had about 3.6 million fewer working-age individuals. More than 2.2 million Californians were out of work in December, and the state's jobless rate was 12.4 percent. Additionally, the report states that more than 1.5 million Californians were underemployed in December, working part time “involuntarily.”

Things are so bad, the report states, that the CALWORKS rolls increased by more than 86,000 over the last two years and the number of Californians enrolled in Medi-Cal increased by more than 450,000. Almost 1 million more Californians were receiving food stamp assistance in October 2009 than in October 2007, according to the report.

In light of all those numbers, California Budget Project Executive Director Jean Ross warns that the governor's proposed cuts could exacerbate the state's problems.

”The governor's proposed budget will batter a struggling economy and make life tougher for millions of families already struggling in the face of double-digit unemployment rates,” Ross said in a statement. “... He's proposing cuts to the Healthy Families program, which will lead to more uninsured children. He's slashing the In-Home Supportive Services Program, which will increase demand for costly nursing home care. At a time when the governor is talking about the importance of 'jobs, jobs, jobs,' he's proposing deeper cuts to the CALWORKS Program, California's highly successful welfare-to-work program.”

But, nobody disputes that something has to give, and that the bleak state of California's finances necessitate some very tough choices, in both the short and the long term.

In a presentation to the Assembly Budget Committee last week, State Controller John Chiang issued a stark warning. Not since July 2007 has California actually had cash on hand, Chiang reportedly told the committee, adding that, since then, the state's relied on external and internal borrowing from various special funds to pay its bills.

Chiang told the committee that, in the short term, the state faces a cash crunch in March. An influx of tax revenue is expected in April, but much of that will reportedly be quickly diverted into repayment of short-term loans, leaving the state cash-strapped by the July 1 start of fiscal year 2010-2011. The state encountered a similar situation last year, prompting the issuance of IOUs, widely considered a national embarrassment.

To address the short-term issue, Schwarzenegger proposed a plan to give the state Department of Finance unprecedented authority to delay almost any state payments at any time over the next two years, which critics argue would leave a host of entities, including local schools, people expecting tax refunds and CalGrant recipients on the fence, unsure of when they would receive state payments.

”Sadly, it's just another power play,” said Assemblywoman Noreen Evans, D-Santa Rosa, in a post on her budget blog. Evans is currently running for the First District state Senate seat currently held by Wiggins, who has announced she will not seek re-election in November.

Assemblyman Wesley Chesbro, D-Arcata, also took issue with the governor's plan, saying in a statement issued Friday that he finds it unacceptable to give Schwarzenegger's administration that kind of blanket authority.

”The governor has a responsibility to present his deferral proposals to the Legislature so that there can be a hearing and public testimony, followed by a vote of the membership,” Chesbro said in the statement. “The people of California have a right to learn about his proposals and participate in this process. Government must be open and accessible to the constituents it serves.”

However the state bridges the gap in the short term, Chiang warned that the way the state balances its budget for the next fiscal year will dictate what California looks like for years to come.

”Your actions can make the difference in setting this generation on the right fiscal path,” Chiang told the assembly committee, according to a report in the California Progress Report. “For too long, when people don't make tough choices, students, the aged, disabled and taxpayers all end up suffering.”

Wiggins said she and her colleagues in the Senate have been going over the governor's proposals and crafting counterproposals with a sense of urgency. But, she cautioned, the Legislature needs to find some common ground.

”Budgeting requires a balancing act, but it's darn near impossible to achieve a balance if some of the players refuse to make compromises,” she said, adding that while Democrats have conceded to tens of billions in spending cuts, Republicans refuse to budge on tax increases.

For his part, Chesbro said he knows difficult choices lie in his future.

”With our current financial situation, the Legislature will be facing tough choices. But, these choices need to make sense financially and provide real budget savings,” Chesbro said in the release, adding that he believes many of Schwarzenegger's proposals would prove more costly in the long run by pushing the elderly and disabled into nursing homes.

Emenaker said he thinks the Legislature will continue to face similarly difficult choices until the economy rebounds, because the structure of the state's budget and tax systems necessitate them. Because the state's revenue base is so dependent on sales and income tax revenues, Emenaker said the state is assured to see revenues dip in down economies. Conversely, Emenaker said demands for state services increase in a down economy, when more people find themselves in need of assistance and relying on state programs for the poor.

”We've set up a system where we always have the least amount of money coming in when we have the most amount of need,” he said. “Structural changes need to be made.”

GOVERNOR’S BUDGET PLAN LIKE WATCHING ‘GROUNDHOG DAY’

Written by  California State Association of Counties | PublicCEO.com

January 11, 2010  -- The Governor’s proposed 2010-11 state budget released today is based on unrealistic assumptions, significant risks and cost shifts to counties, according to the California State Association of Counties (CSAC).

“This plan is a retread budget, not a reform budget,” said Tony Oliveira, CSAC President and Kings County Supervisor. “Unfortunately, it’s based on a number of failed ideas taken from past years.”

The budget proposal will blow a huge hole in an already frayed safety net, said Paul McIntosh, CSAC Executive Director. “There are recommendations to cut more than $2.9 billion from social service programs. This action alone will further push families into poverty, putting them in a dire situation from which they may never recover. That’s not the California Dream.”

Elimination of these programs will, in turn, impact other areas as well, including our criminal justice system, the homeless population and counties’ general assistance roles, McIntosh said.

The proposal to rely on $6.9 billion in additional funds from the federal government has county officials very concerned. If the Governor’s attempts to secure these funds fail, critical programs will be eliminated. “The Governor is holding vital social programs – and the people they serve -- hostage,” McIntosh said.  “It’s a risky gamble to balance the health and safety of millions of Californians on a Hail Mary to the federal government.”

CSAC officials called the Governor’s proposed spending plan a “job killer.” At a time when the Governor is calling for the creation of new jobs, the budget plan could eliminate hundreds of thousands of jobs that provide vital services to the sick and disabled. Elimination of the IHSS and CalWORKs programs alone would put nearly 450,000 Californians out of work.

“Instead of the ‘jobs, jobs, jobs’ the Governor talked about in his State of the State address, it’s no jobs, no jobs, no jobs,” commented McIntosh.

The Governor’s plan will also reduce future jobs tied to transportation projects. CSAC officials are concerned that the alternative funding proposal for transportation will impact the system long term. While appreciating that the budget plan does not call for the reduction in revenues for local streets and roads, counties point out that it will eliminate the sales tax on gas, a source of future revenue growth.

“The state will be trading a revenue source that is projected to increase with one that is projected to decrease,” Oliveira said. “This budget maneuver will hinder future investment in California’s transportation system.”

“While there is little to like about this budget, California counties are strongly supportive of assuring that California gets every dollar from the federal government for delivering essential services. We look forward to working with our state and federal partners in furthering this goal,” Oliveira said.

The Governor’s proposal also includes cost shifts for counties. For example, it calls for a savings of $291.6 million by sending certain felony offenders to county jails rather than prison. Jails in many of California’s 58 counties are already overcrowded, and 32 are operating under a population cap.

“The Governor’s theme this week has been teamwork and fairness. This budget does nothing but undermine the partnership the state has with California Counties and the 38 million people we serve,” McIntosh said.

The California State Association of Counties (CSAC) is the voice of California’s 58 counties at the state and federal level. The Association’s long-term objective is to significantly improve the fiscal health of all California counties – from Alpine County with a little more than 1,200 people to Los Angeles County with more than 10 million – so they can adequately meet the demand for vital public programs and services. CSAC also places a strong emphasis on educating the public about the value and need for county programs and services.

SCHWARZENEGGER: "Dear Santa:" …with a cc: to Uncle Sam

from various newsfeeds

Schwarzenegger Seeks Obama's Help for Deficit Relief

BusinessWeek - Michael B. Marois, William Selway - ‎Dec 24, 2009‎

Dec. 24 (Bloomberg) -- California Governor Arnold Schwarzenegger, anticipating a $21 billion state budget deficit, ...

Schwarzenegger Presses US for More Aid for Needy California

New York Times - Randal C. Archibold - ‎Dec 23, 2009‎

LOS ANGELES — Gov. Arnold Schwarzenegger has taken advantage of the holiday lull before the next state budget storm to serve notice ...

Schwarzenegger to seek federal help for California budget

‎Dec 23, 2009‎ - Los Angeles Times

Two Ways to Play: California May Ask for Bailout

Minyanville.com - Terry Woo - ‎Dec 24, 2009‎

Specific details aren't out yet but California Governor Arnold Schwarzenegger may ask President Barack Obama for a bailout ...

No happy new year for California budget

‎Dec 22, 2009‎ - Reuters

Health care plan may cost too much for California

‎Dec 21, 2009‎ - abc7news.com

Broke, Schwarzenegger begs President Obama for $8 billion. Is a California ...

LA Weekly (blog) - Jill Stewart - ‎Dec 23, 2009‎

Wow, Governor Arnold Schwarzenegger just continues to flounder and flub and flim-flam his way through one of the worst ...

Healthy Families/SCHIP: U.S. QUESTIONS CA’s HEATHCARE PLAN FOR CHILDREN OF WORKING POOR

http://bit.ly/6bwjJ0

Program passed by the Legislature in September to keep 700,000 children from losing healthcare coverage may not meet regulatory guidelines, federal health officials say. Eric Bailey in the Los Angeles Times -- 12/15/09

“U.S. health officials say the plan adopted by the state during the final days of the legislative session in September and signed into law by Gov. Arnold Schwarzenegger may not meet regulatory muster.

“As a result, children's health advocates are warning that by the end of next year, hundreds of thousands of poor youngsters could lose their coverage -- even as the Obama administration continues its push for universal healthcare.”

CALIFORNIA DEBT SERVICE TO SURPASS $10 BILLION, SCHWARZENEGGER NAMES ANA MATOSANTOS FINANCE CHIEF

links from Rough & Tumble

California debt costs to surpass $10 bln-Treasurer

-- California, the largest borrower among U.S. states, may see its debt interest costs nearly double to over $10 billion in 2020, the state treasurer reported on Monday. Lisa Lambert Reuters -- 12/14/09

Schwarzenegger names new finance director

-- Matosantos, currently chief deputy, will take over the Department of Finance helm days before Schwarzenegger delivers his final budget proposal in January, expected to be a cuts-heavy plan to deal with another severe deficit. Kevin Yamamura in the Sacramento Bee Shane Goldmacher in the Los Angeles Times -- 12/14/09

LAUSD BUDGET SHORTFALL NEEDS SOLUTIONS NOT BATTLES

EASTERN GROUP PUBLICATIONS Editorial | Eastside Sun / Northeast Sun / Mexican American Sun / Bell Gardens Sun / City Terrace Comet / Commerce Comet / Montebello Comet / Monterey Park Comet / ELA Brookyln Belvedere Comet / Wyvernwood Chronicle / Vernon Sun

December 10, 2009 -- The first signs of what promises to be a war of words, shouts and picketing has taken place this week in the Los Angeles Unified School District.

The LAUSD school board has adopted a budget the District hopes will help it close a projected $1.2 billion deficit through 2012.

This budget calls for the furloughing of at least 5,000 district personnel. It appears that this time around the threats of layoffs will actually come to fruition. Last spring, LAUSD threatened to layoff as many as 8,000 teachers, but through a combination of cuts in other areas and the use of stimulus dollars, that threat never came remotely close to being acted on.

It doesn’t seem that will be the case this time around, however.

But if it is, and the District really has no plans to layoff workers, then they should not be causing so much uncertainty among District employees and even greater mistrust by the public in the school board’s budget proposals.

Clearly, however, if the budget is anywhere near the dismal financial reality being painted by the District, tough compromises will have to be worked out between the District’s unions and District negotiators. Hopefully it won’t come down to a standoff that will just disrupt our schools and not solve anything.

There comes a time when we all have to accept the inevitable and start working together to come to the least disruptive solutions. Any less, is a disservice to the teachers, students, and the District.

CITY OF L.A.’s CREDIT DOWNGRADED: L.A. credit rating takes a hit in light of grim budget outlook + L.A. Council will get briefing on finances, a day after city's credit rating is downgraded

L.A. credit rating takes a hit in light of grim budget outlook

by Phil Willon at L.A. City Hall | LA Times/LA Now!

November 24, 2009 |  6:15 pm

Los Angeles is about to pay a price for its financial woes.

The city’s credit was downgraded today by Fitch Ratings on $2.94 billion in debt, meaning that borrowing money will become more expensive for Los Angeles as it grapples with a $98-million current-year budget shortfall and faces the prospect of graver fiscal woes in the years ahead.

The financial ratings service credited Mayor Antonio Villaraigosa and the City Council for taking aggressive action to whittle down the budget gap, but added it wasn’t enough and that the ratings outlook for the city remains negative. Fitch Ratings, in a statement released today, said the “city’s economic decline, as evidenced by high unemployment, sales tax weakness, assessed value losses and high home foreclosure ... will impede financial recovery."

“It signals that we have some very difficult choices to make in the future," said Administrative Officer Miguel Santana, the city’s top budget official. “We simply cannot be spending at the rate that we have in the past."

Tomorrow, Santana is scheduled to brief the council on the downgrade, as well as the city’s financial status.

Council President Eric Garcetti said the rating downgrade shows that the city still needs to make sweeping structural changes to its $7.05-billion budget. Even after winning concessions from city unions, including pay cuts and an early retirement program, the city still faces a $98-million shortfall in the current budget year and a $408-million budget gap next year.

 

L.A. Council will get briefing on finances, a day after city's credit rating is downgraded

by Phil Willon at L.A. City Hall | LA Times/LA Now!

November 25, 2009 |  7:29 am

The Los Angeles City Council today will get what is expected to be a sober briefing on the city's financial condition, a day after L.A.'s credit rating was downgraded.

The city’s credit was downgraded  by Fitch Ratings on $2.94 billion in debt, meaning that borrowing money will become more expensive for Los Angeles as it grapples with a $98-million current-year budget shortfall and faces the prospect of graver fiscal woes in the years ahead.

The financial ratings service credited Mayor Antonio Villaraigosa and the City Council for taking aggressive action to whittle down the budget gap but added it wasn’t enough and that the ratings outlook for the city remained negative. Fitch Ratings, in a statement released today, said the “city’s economic decline, as evidenced by high unemployment, sales tax weakness, assessed value losses and high home foreclosure ... will impede financial recovery."

“It signals that we have some very difficult choices to make in the future," said Administrative Officer Miguel Santana, the city’s top budget official. “We simply cannot be spending at the rate that we have in the past."
Council President Eric Garcetti said the rating downgrade showed that the city still needed to make sweeping structural changes to its $7.05-billion budget. Even after winning concessions from city unions, including pay cuts and an early-retirement program, the city still faces a $98-million shortfall in the current budget year and a $408-million budget gap next year.

 

Photo: Mayor Antonio Villaraigosa. Credit: Los Angeles Times

RED INK IN THE GOLDEN STATE

Letters to the LA Times 11/20

Re “State facing $21-billion budget gap,” Nov. 18
While California drowns in nearly $21 billion of red ink, its educational system goes to hell and its tax base keeps shrinking as businesses flee, the morons who run this state busy themselves by regulating big-screen TVs.
As for Los Angeles County, its imbecile district attorney bathes himself in self-aggrandizement and political posturing over Roman Polanski -- a case that even the victim wants no part of -- and medical marijuana clinics while real crime festers.
Is it any wonder that the citizens have given up on the once-Golden State?
Michael Seawell
Santa Monica

::
The eighth-largest economy in the world, the once great state-nation -- California -- is being run like a banana republic.
In the words of Cicero: "O tempora! O mores!"

●●smf's Hollywood High School Latin pays off!: "Alas for the times and the manners!"

M.T.Gyepes
Pacific Palisades

::
The news doesn't get any better for education with the announcement that California is looking at a budget shortfall of more than $20 billion next year. The Los Angeles Unified School District has already cut teachers and support staff, increased class sizes and eliminated many vital programs. Now there is talk that employees are facing a pay cut as high as 12%. Still, educators will be required to increase test scores and improve student learning.
When will we realize you get what you pay for in life? If we continue to shortchange education, we will continue to shortchange our future.
Tom Iannucci
Los Angeles
The writer is assistant principal, Paul Revere Charter Middle School.

CALIFORNIA FACES A PROJECTED DEFICIT OF $21 BILLION: "Less than four months after California leaders stitched together a patchwork budget, a projected deficit of nearly $21 billion already looms over Sacramento" …and so it continues

The legislative budget analyst's projection, to be released Wednesday, threatens to send Sacramento back into gridlock and force more broad cuts to state programs.

Gov. Arnold Schwarzenegger will present his next proposed budget in January. Republicans vow to block new taxes; Democrats say they are through with cuts. (Eric Paul Zamora / Associated Press)

  Chart: Projected deficit of $21 billion

LAO REPORT 2010-11 Budget California's FISCAL OUTLOOK

By Shane Goldmacher reporting from Sacramento  | LA Times

November 18, 2009 -  Less than four months after California leaders stitched together a patchwork budget, a projected deficit of nearly $21 billion already looms over Sacramento, according to a report to be released today by the chief budget analyst.

The new figure -- the nonpartisan analyst's first projection for the coming budget -- threatens to send Sacramento back into budgetary gridlock and force more across-the-board cuts in state programs.

The grim forecast, described by people who were briefed on the report by Legislative Analyst Mac Taylor, comes courtesy of California's recession-wracked economy, unrealistic budgeting assumptions, spending cuts tied up in the courts and disappearing federal stimulus funds.

"Economic recovery will not take away the very severe budget problems for this year, next year and the year after," said Steve Levy, director of the Center for Continuing Study of the California Economy.

In fact, after two years of precipitous revenue declines, the new report projects relatively stable tax collections for the state, said those who were briefed. But that won't stop the deficit from climbing to nearly $21 billion.

Gov. Arnold Schwarzenegger, who will present his next proposed budget to Californians in January as he begins his last year in office, started sounding the alarm last week.

"I think that there will be across-the-board cuts again," he said at a San Jose news conference.

The task in 2010 could be even harder than it was this year, when record deficits and cash shortfalls drove California to issue IOUs for only the second time since the Great Depression. Lawmakers have already cut billions from education, healthcare and social services while temporarily hiking income, sales and vehicle taxes.

"I can't think of any good solutions," said Assemblywoman Noreen Evans (D-Santa Rosa), who chairs the lower house budget committee.

The current budget year accounts for $6.3 billion of the deficit, the nonpartisan analyst projects. Prisons spending will outstrip what has been budgeted by more than $1 billion, and K-12 schools were underpaid by $1 billion under the complex formula that governs education funding, the report says.

Another $14.4 billion of the deficit is for the fiscal year that begins next summer, say those briefed on the report. The governor's next budget will have to account for both years.

The state Department of Finance in August predicted a shortfall of at least $7.4 billion for fiscal 2010-11. But California's financial picture has darkened considerably since then, largely because the shaky summer budget pact relied heavily on borrowing, fiscal tricks and overly optimistic projections.

It assumed receipts of nearly $1 billion from the federal government for Medi-Cal that the analyst questions. Another $1 billion was assumed from the sale of a quasi-public workers' compensation agency that has stalled.

Next year's budget fight is expected to be as contentious as this year's. Republicans vow to block new taxes; Democrats say they are through with program cuts.

Powerful interest groups are already girding for battle.

"There is no more to cut from our schools," California Teachers Assn. President David Sanchez said Tuesday. "There is no more meat on this bone. . . . The next step is amputation."

In higher education, Chancellor Charles Reed of the Cal State University system said this month that he will plead for $884 million in funds from Sacramento next year. The University of California will ask for $913 million more for its 10-campus system, President Mark Yudof has said.

"If ever there was a time to fight for and invest in the institution best positioned to power this state from recession, now is that time," Yudof said in a statement. UC students, meanwhile, are coping with a staggering 32% fee hike.

California's finances have been so bad that the governor's finance director, Mike Genest, told a budget forum in Washington last week that back in February he had combed through the U.S. Constitution to research whether California could legally declare bankruptcy -- or revert to some kind of territorial status. (Neither was realistic, he determined.)

The state's financial problems predate the current recession and the gimmicks used to paper over the deficit, experts say. Year in and year out, state government spends roughly $10 billion more than it collects in tax revenue.

Political divisions in Sacramento, where support from both parties is necessary to pass a budget, have repeatedly stymied efforts to plug that hole. The task probably won't be easier next year as various interests try to muscle one another to the sidelines.

Some have even drafted potential ballot measures to aid themselves in the budget fight and are preparing to collect signatures in an effort to place the initiatives before voters.

Among the ideas: raising tobacco taxes, curbing public pensions, repealing corporate tax breaks passed thisyear and last, splitting the tax rules for commercial and residential property, reducing the legislative votes needed to pass a budget and strengthening the firewall around local government and transportation money.

"There's a lot of people putting chess pieces on the board right now," said Jon Coupal, president of the anti-tax Howard Jarvis Taxpayers Assn. "The question is which of those chess pieces will be moving."

___________________________

 

California's budget woes will continue for years, report says

Tax receipts have leveled off, but revenue won't bounce back until the 2014-15 budget year, according to the chief budget analyst. Near term, the state faces a nearly $21-billion deficit.

By Shane GoldmacherReporting from Sacramento | LA Times

November 19, 2009 - Despite an economy on the mend, California's budget woes will drag deep into the next decade, according to a report released Wednesday by the state's chief budget analyst.

Tax collections have leveled off after one of the most precipitous drops since the Great Depression. But revenue is not expected to fully bounce back until the 2014-15 budget year.

State government faces a nearly $21-billion deficit over the next year and half, according to the report by nonpartisan Legislative Analyst Mac Taylor. Sacramento will be forced to muddle along, he says, unable to reverse the deep cuts that officials have made to K-12, universities, healthcare and social services.

A major reason the recovery will take so long, say many experts, is California's place at the epicenter of the real estate slide and the resulting foreclosure wave. Moreover, "the mess in Sacramento is going to affect the California economy," said Jerry Nickelsburg, senior economist at UCLA Anderson Forecast, "and not in a good way."

Californians must get used to a state that offers fewer services -- and has higher taxes -- than before the real estate boom, Taylor's report suggests. But it remains to be seen how much residents will accept.

On Wednesday, at least 14 people were arrested in a raucous protest as a University of California regents panel approved a 32% student fee hike. A day earlier, the president of the California Teachers Assn. had likened further K-12 cuts to "amputation."

"We cannot afford now what we're spending," said Taylor, whom both Democrats and Republicans look to for fiscal advice. More cuts and more taxes will be necessary to balance the books, he said, calling all the options "painful choices."

Budget shortfalls have reemerged less than four months after lawmakers and Gov. Arnold Schwarzenegger struck a summer deal, which contained accounting gimmicks and rosy assumptions that have failed to pan out.

"The thing about smoke and mirrors is they are usually short-term solutions, and they come back to bite you the next year," said John Ellwood, a professor of public policy at UC Berkeley.

Schwarzenegger, who last week predicted more across-the-board budget cuts, must unveil his plan to address the projected $20.7-billion deficit in January. Taylor urged that officials begin tackling the red ink "as soon as possible."

The deficit is expected to be worse in the years beyond 2011, as temporary taxes expire and raids on local government funds must be repaid by Sacramento. Taylor projected a $21.3-billion deficit in fiscal 2011-12 and a $23-billion shortfall in fiscal 2012-13.

Even those numbers could be conservative. They assume no raises for state workers and no cost-of-living adjustments for government programs. They also assume that California will win all pending court cases in which billions of dollars in service cuts are being challenged.

Republican lawmakers have vowed to block new taxes, which many Democrats advocate to balance California's books. Assembly GOP leader Sam Blakeslee (R-San Luis Obispo) issued a statement Wednesday calling on the Democratic-dominated Legislature to instead change the state's "punitive regulatory and tax climate that is driving jobs away."

The bleak numbers have also spurred calls to Washington, D.C., for help, as much of the federal stimulus package that somewhat blunted this year's state cuts is set to expire. Jean Ross, executive director of the California Budget Project, which advocates for low-income residents, said the state "needs a second round of federal aid as we face record unemployment and continuing economic weakness."

That may be a hard sell in the nation's capital, where conservatives have questioned the success of the first package.

"California clearly has mismanaged its fiscal house," Nickelsburg said. "It seems to me it would be very difficult to convince states that have not mismanaged their own fiscal house to come to the aid of California."

Lead line in Tucson TV story about the Arizona state budget” "At least we're not as bad as California".

 

At least California's budget problems are worse

KGUN TV9

12 NOV -- How doses his grab you as a new state motto: "At least we're not as bad as California."

Don't like it?

Brace yourself: when it comes to state budget deficits, the motto fits.

A new pew center report labels our state's budget mess as second worst in the nation.

Arizona's budget is about two billion dollars in the red.

Homes are still being foreclosed, people still can't find work and the state is gasping for breath trying to find money.

Republican state representative frank antenori told us these problems were handed down by the former democratic governor.

"We had a governor who failed to realize the revenue was dropping. She continued to spend," Antenori said.

democratic state senator Linda Lopez agrees with antenori in one sense but disagrees on who's to blame.

There was no debate from either side on the pew study. Lopez and Antenori agreed that Arizona is in big trouble.

That means, more cuts are coming.

You can probably expect a tax increase too.

Antenori's plan would create a flat fee property tax.

Instead of determining the fee by a home's value.

"Some property taxpayers will see an increase in property tax. Some may see a decrease," Antenori said.

Lopez wants to help pass a one cent sales tax increase and also create a whole new tax.

So what does the governor think about all of this?

We called Jan Brewer and left a message. Our call was returned but we were told she wouldn't be available to talk to us today (Thursday)

That would still leave about $1.5 billion unaccounted for they would have to deal with when the regular session starts in January.

The Arizona legislature is expected to cut the budget deficit down by $500-million during a special session this month.

SCHWARZENEGGER WARNS OF MORE ACROSS-THE-BOARD BUDGET CUTS

Michael Rothfeld in Sacramento for the LA Times

November 10, 2009 |  2:29 pm -- Gov. Arnold Schwarzenegger today predicted a new round of budget cuts, as the state’s finances remain shaky despite large spending reductions made by the governor and lawmakers in July.

Schwarzenegger, at a news conference today and at the Fresno Bee’s editorial board Monday, estimated that the current fiscal year’s budget is $5 billion to $7 billion in the red, on top of the $7.4-billion deficit projected by his aides for the fiscal year that begins in July.

The governor said he would reveal his specific plans to deal with the problems in January. But he said that, as in the past, no program would be immune to the budget knife. A wide spectrum of programs were cut as state leaders closed a deficit exceeding $20 billion over the summer.

“I think there will be across-the-board cuts again,” Schwarzenegger told reporters today in San Jose, after signing legislation that is part of the water deal he reached last week with lawmakers. “We are not going to go and pick and choose" between programs. "I think that we always have to go and cut across the board."

Schwarzenegger downplayed the impact on state finances from the water deal’s proposed $11-billion bond issue, which will go before voters next year. He said the state would not borrow much of the money for several years, after it has paid down some of its current debt.

The governor said that though there are signs of a recovery in the housing market and strength in the green technology sector, “the economy is not coming back yet the way we want it.”

In a bit of positive news, California Controller John Chiang announced today that tax revenue for October was $285 million above projections, although for the current fiscal year it is still short by $854 million.

CALIFORNIA DEBT BINGE SHAKES UP MUNI BOND MARKET: Interest on state bonds up from 2.48% to 4% in two weeks. Rising market yields also devalue older fixed-rate muni bonds.

by Tom Petruno | Money & Co. | LA Times

November 10, 2009 |  8:48 pm -- The municipal bond market’s message to California: Enough with the borrowing already!

Over the last seven weeks the state has sold more than $21 billion of short- and long-term debt for budget-related reasons and to finance voter-approved infrastructure projects.

That flood -- in a period when muni bond yields nationwide already were rebounding after diving in summer -- has helped to boost yields more than they might otherwise have risen, some analysts assert.

"Yields are higher because California has so much paper in the market," said Matt Fabian, who tracks muni bond trends at Municipal Market Advisors in Westport, Conn.

The state has been its own worst enemy: Its borrowing costs have risen with each bond deal, which means taxpayers will bear a bigger hit to service the debt over time.

Rising market yields also have the effect of devaluing older fixed-rate muni bonds. If you own a California muni-bond mutual fund, chances are its share price has been sliding since the end of September as the  market has suffered indigestion from the supply of new bonds.

In California’s latest offering -- a sale Tuesday of nearly $1.9 billion of bonds maturing in June 2013 -- the state had to pony up for a 4% annualized tax-free yield to lure investors to the deal.

Less than two weeks ago the state paid a yield of 2.48% on a bond with a similar maturity.

Investors’ ability to squeeze 4% out of the state in this week’s deal "is an expression of saturation of the market" by California, said George Strickland, a muni bond fund manager at Thornburg Investment Management in Santa Fe, N.M.

Demand for the bonds sold Tuesday also may have suffered because the deal stemmed from one of the gimmicks concocted by the Legislature and Gov. Arnold Schwarzenegger in July to close the state’s huge budget deficit: The proceeds will repay local governments for the $2 billion in property tax revenue that the state is borrowing from them to plug the budget gap.

The bonds become part of the state’s overall debt burden, but they’re a step below so-called general obligation issues, which have an iron-clad repayment guarantee in the state Constitution.

Treasurer Bill Lockyer obviously knows that he has dumped a lot of debt on the market this autumn. He didn’t have much choice, given the budget fixes ordered by the Legislature, and given the backlog of infrastructure bonds California has to sell.

The state’s borrowing plans had been put on hold for much of this year because of the deepening budget crisis. "We had a lot of work to do to get our financing program back on track" this fall, said Tom Dresslar, Lockyer’s spokesman.

Of course, for investors with money to put to work, rising muni yields are welcome.

Ken Naehu, who manages bond investments at Bel Air Investment Advisors in L.A., believes the state’s budget woes are far from over, which Schwarzenegger acknowledged Tuesday. Still, a 4% tax-free yield on a bond maturing in less than four years was too good an opportunity to pass up, he said.

"We gave them a large order," Naehu said.

-- Tom Petruno

Field Poll: VOTERS SUPPORT REFORM …BUT WHICH ONES?

By Lisa Vorderbrueggen from POLITICAL BLOTTER: Politics in the Bay Area and Beyond

Wednesday, October 14th, 2009 at 10:32 am in constitutional reform.

New Field Poll figures released this morning at a constitutional change conference in Sacramento show voters like the idea of reforming the way they govern themselves.

But they are reluctant to make the kinds of reforms that have been discussed such as reducing the two-thirds voting threshold to pass a state budget or raise taxes, modifying or eliminating term limits and altering the California tax system.

“The rub is, what are we going to reform?” said Field Poll director Mark DiCamillo. “It’s going to be a tall order to put a package before voters that they will support.”

Kimberly Nalder with Cal-State University compared it to the person who hires a trainer but says he will not exercise or east less.  Then six months later, he complains about his trainer.

“That’s California voters,” she said. “They are confused.”

The poll was commissioned for today’s “Getting to Reform: Avenues to Constitutional Change in California,” sponsored by UC-Berkeley’s Institute of Governmental Studies, Stanford’s Bill Lane Center for the American West and California Stat’s Center for California Studies. Pollsters surveyed 1,005 registered voters between Sept. 18-Oct. 5. The margin of error was plus or minus 3.5 percent for the full sample and plus or minus 4.5 percent for subsets.

The daylong conference is being held at the Sacramento Convention Center, and I’m here all day.

The poll’s key findings:

• 51 percent believe the state needs to make fundamental changes to its constitution.
• 48 percent prefer to see a single package of reforms on the ballot rather than a piecemeal manner like the initiative process. 40 percent like the individual measure process.
• 51 percent support a reform process that uses a constitutional convention rather than a commission appointed by legislators and the governor.
• 63 percent support the appointment of a broad range of people to rewrite the constitution, including average voters, elected officials and experts.
• 60 percent would be willing to consider serving on a constitutional reform delegation.
• If California is going to reform its constitution, 59 percent prefer limiting its scope to issues of governance and exclude social issues.
• 52 percent oppose a recent state tax commission proposal to flatten the personal income tax.
• 65 percent oppose a replacement of the corporate income and sales taxes for a broader tax.
• 52 percent oppose the elimination of the two-thirds voting threshold in the Legislature to adopt a budget.  That figure goes even higher among Republicans — 69 percent.
• 69 percent reject the elimination of the Prop. 13 mandate that new taxes require a two-thirds vote. Among Republicans, that figure is 86 percent.
• 52 percent oppose splitting the tax roll, which would allow the state to increase taxes on commercial properties at a rate higher than that imposed on residential properties.
• 66 percent support the imposition of a requirement that ballot initiatives identify the source of funds for new programs.
• 56 percent would support requiring a two-thirds vote on all ballot initiatives that change the state constitution.
• 57 percent believe the state could continue to provide current levels of service without new taxes if it would strip waste, fraud and abuse from government.
• 49 percent disapprove of the idea of merging the Assembly and Senate into a single legislative body. 35 percent like the idea.

FIELD POLL: Schwarzenegger+Legislature hit new lows

from SacBee CapitolAlert

13 October -- Approval ratings of Gov. Arnold Schwarzenegger and the Legislature have hit new lows, according to the results of a Field Poll released today.

The governor's approval rating among voters dipped to 27 percent, according to a telephone survey of 1,005 registered voters conducted Sept. 18 to Oct. 5.

That marks Schwarzenegger's lowest approval ratings since he took office in 2003 (and puts him second only to Democratic Gov. Gray Davis when it comes to low job performance reviews for governors who served over the last 50 years).

Results were even more dour for the Legislature.

Just 13 percent of voters approve of the job lawmakers are doing. Job performance for both houses has been on a downward trajectory since it fell below 20 percent approval ratings for the first time last September.

The rate of voters who disapprove of the Legislature's performance -- 78 percent --is the highest recorded by The Field Poll in results dating back to 1983.

Well, they must be doing something right in the eyes of the electorate... right?

Voters surveyed by The Field Poll were keen on one thing: the governor calling the Legislature into special sessions for two front-burner issues: water and taxes.

The poll found that 73 percent of respondents favored a special session on water supply issues and 62 percent were behind bringing the Legislature back to face tax reform issues.

Here are the statistical tabulations for the Field Poll, prepared exclusively for Capitol Alert, on California voters' opinions of the governor and the State Legislature. The publicly released results of today's poll can be found here.

CALIFORNIA DEBT UNNERVES INVESTORS AS TAXES PLUNGE $2 BILLION

By William Selway and Michael B. Marois | Bloomberg.com

Oct. 12 (Bloomberg) -- A $2.1 billion drop in California tax collection is opening a hole in Governor Arnold Schwarzenegger’s budget only three months after lawmakers in the most-populous state slashed spending for the second time in a year.

General fund revenue in the state accounting for 13 percent of the U.S. gross domestic product dropped to $19.4 billion during the fiscal year’s first three months, according to figures Democratic Controller John Chiang released Oct. 9. The total for the period ended Sept. 30 trailed by $1.1 billion, or 5.3 percent, forecasts in the annual budget the Republican governor signed July 28.

“This reinforces that state’s budget problems aren’t over, and as the year goes on, we’re likely to see growing budget deficit projections,” said David Blair, an analyst with Pacific Investment Management Co. in Newport Beach, California, which invests $20 billion in municipal bonds. “This clearly is going to continue to put pressure on the Legislature and the governor.”

The latest report underscores how states including California, the largest municipal bond issuer in the U.S., are still dealing with fallout from the recession even as the economy begins its recovery. The state last week was forced to raise yields to attract buyers to a $4.1 billion debt sale, after cutting the issue from $4.5 billion.

California’s decision helped push up borrowing costs in the municipal market by the most in almost four months even as states prepare new issues of taxable Build America Bonds, whose sales already total $40.2 billion. The Treasury pays 35 percent of interest costs for the debt, part of the federal economic stimulus plan approved in February.

Losing Jobs

State governments are particularly hard hit by a continuing loss of jobs, which dampens the income- and sales-tax collections upon which they depend. From April through June, states and localities recorded a 12 percent tax revenue decline from a year earlier, the third consecutive quarterly drop, according to the U.S. Census. The national unemployment rate in September was 9.8 percent, the highest since 1983, according to the U.S. Labor Department.

In New York, Governor David Paterson on Oct. 6 ordered state agencies to cut spending amid predictions that the deficit for the year ending March 31 may grow to $3 billion, $900 million more than budget officials estimated in July. Pennsylvania, acting 101 days into the fiscal year, enacted a $27.8 billion budget on Oct. 9 that raises cigarette taxes and expands gambling to boost revenue. Ohio confronts an $844 billion gap, while Connecticut will borrow $2.25 billion over the next two years, beginning with a $1 billion debt sale in November, to balance its budget.

‘Somewhat Unique’

“California’s problems, while somewhat unique and self- inflicted, are really America’s problems,” said Bill Gross, co-chief investment officer of the world’s biggest bond fund wrote on Oct. 1. State and federal lawmakers, unable to comprehend the extent of consumer borrowing, “reflect a lack of vision to perceive that the strong growth in revenues was driven by the same excess leverage and the same delusionary asset appreciation that was bound to approach cliff’s edge.”

The state has been among the hardest hit and its Legislature, requiring a two-thirds vote to raise taxes or pass a budget, has struggled to respond swiftly as the state’s fiscal strains worsened this year. Since February, Schwarzenegger and lawmakers have slashed $32 billion from spending, cutting into funding for schools, universities and welfare programs. They also raised taxes by $12.5 billion to balance the $85 billion budget.

’ Court Decision

Chiang, the controller, said the state’s latest figures show that Schwarzenegger and the Legislature must prepare for “more difficult decisions ahead.” California was also handed a defeat on Oct. 2 by the state’s Supreme Court, which let stand a ruling that the governor and lawmakers illegally used $3.6 billion of money meant for local transportation agencies to balance the budget since 2007.

“Revenues more than $1 billion under estimates and recent adverse court rulings are dealing a major blow to a budget that is barely 10-weeks old,” Chiang said in a statement Oct. 9. “While there are encouraging signs that California’s economy is preparing for a comeback, the recession continues to drag state revenues down.”

California isn’t at immediate risk for running out of cash as it did in July, when it resorted to issuing IOUs to pay some vendors and tax refunds as lawmakers fought over how to shore up finances. Last month, it borrowed $8.8 billion by selling notes, an advance on the tax it will collect later in the budget year.

Plugging Gaps

Schwarzenegger’s administration said it’s too soon to tell whether the slide in tax receipts through September foretells a worsening trend. Should revenue continue slipping, California lawmakers may find it difficult to make up for the gaps, given how deeply they have already cut and resistance among Republicans to further tax increases.

Schwarzenegger, 62, who can’t seek re-election because of term limits, doesn’t have to present his budget for the next 12- month fiscal period until January, and he has given no indication that he is planning to call an emergency session beforehand, as he did last year.

“Clearly, the numbers are cause for concern but the issue now for us is to determine if this is a one-time event or whether it has one more long-term implications,” said H.D. Palmer, a spokesman for Schwarzenegger’s finance department.

The tax collection figures were released after the conclusion of a $4.1 billion bond sale, which was trimmed by about $400 million after investors demanded higher yields than the state was willing to pay on some of the securities. The sale came after a rally in demand for municipal bonds pushed state- and local-government borrowing costs to a 42-year low.

Watching for Deterioration

David Blair, the Pimco analyst, said the pullback was caused by the low yields California offered amid lingering investor concern that the state’s fiscal condition may deteriorate further.

“They just got a little aggressive in where they wanted to price it,” Blair said. “Most people still recognize that there’s budget deficits the state is trying to deal with this year and going forward.”

The difference between a 10-year California bond and a top- rated municipal security reached as much as 1.71 percentage points on July 1, when the California debt yielded 5.21 percent, according to Bloomberg data. The difference slipped to 1.06 percent on Sept. 11 before ending at 1.21 percent on Oct. 9.

Future Debt Sales

California plans to sell as much as $15 billion more in bonds this year and its deficits, while not projected to reach the $60 billion it dealt with in the two years that end in July, are persistent. The state will face a $7.4 billion gap in the fiscal year beginning on June 30 and about $15 billion in each of the following two fiscal periods, California Treasurer Bill Lockyer said in his annual report on the state’s debt, released ahead of the bond sale.

Tom Dresslar, a spokesman for the treasurer, said his office has alerted investors that the fiscal troubles are far from over and the latest tax data did little to alter the outlook.

“The state has been very clear that our budget problems aren’t behind us,” Dresslar said. “This shouldn’t be a big surprise to anybody.”

To contact the reporter on this story: William Selway in San Francisco at wselway@bloomberg.net; Michael B. Marois in Sacramento at mmarois@bloomberg.net

Last Updated: October 12, 2009 00:01 EDT

CALIFORNIA BUDGET IS AREADY IN THE RED 10 WEEKS AFTER PASSAGE

By William Selway and Michael B. Marois | Bloomberg.com

Oct. 10 (Bloomberg) -- California Governor Arnold Schwarzenegger will know within a month whether a $1.1 billion drop in revenue collections is part of a growing budget shortfall or an isolated event, his budget spokesman said.

Revenue in the three months ended Sept. 30 was 5.3 percent less than assumed in the $85 billion annual budget, state controller John Chiang reported yesterday. Income tax receipts led the gap, as unemployment reached 12.2 percent in August.

“The culprit here appears to be estimated quarterly personal income tax statements,” H.D. Palmer, the governor’s budget spokesman, said yesterday. “The numbers are cause for concern, but the issue now for us is to determine if this is a one-time event or whether it has more long-term implications.”

The latest figures show that California is facing resurgent fiscal strains brought on by the U.S. recession. Since February, Schwarzenegger and lawmakers have cut $32 billion from spending, raised taxes by $12.5 billion and covered $6 billion more with accounting gimmicks and borrowing. Even with those actions, state budget officials predict an additional $38 billion in deficits in the next three fiscal years combined, including $7.4 billion in the year starting July 1.

Schwarzenegger must present a budget for the coming fiscal year in January. The state’s Franchise Tax Board will deliver new data to the governor in November.

Debt Sales

The budget news comes as the most populous U.S. state prepares to sell as much as $15 billion of bonds in the next nine months to refinance debt and fund public-works projects, and as a surge in fixed-rate municipal issuance sent benchmark rates up by the most in almost four months.

California, already the largest borrower in the municipal market, may offer $4 billion of debt during the week of Oct. 26 to refinance the bonds used by Schwarzenegger to cover previous budget deficits. The budget enacted in July would allow the sale of as much as $11 billion more of general obligation bonds through the June 30 end of the fiscal year if financial markets allow, state Treasurer Bill Lockyer said. The exact sale amount hasn’t been decided.

“If the market is inhospitable, we won’t go,” Lockyer said in an interview yesterday. “We’ll just have to wait and see how the feelings are when we get ready to think about it again.”

Additional bond sales by California would follow an offering of $4.1 billion of general obligation bonds this week.

Scaled-Back Offering

The state was forced to scale back the size of the deal by almost $400 million as benchmark yields surged. The yields climbed after gains in the tax-exempt market last week pushed them to a 42-year low.

California’s sale follows a two-month rally in municipal bond prices, fueled by a record flow of money into mutual funds that outweighed lingering fiscal strains on localities, said Craig Elder at Milwaukee-based Robert W. Baird & Co.

U.S. Treasuries also fell, sending two-year notes toward their first weekly loss since the period ended Sept. 18. Federal Reserve Chairman Ben S. Bernanke said the central bank is ready to tighten monetary policy once the outlook for the economy improves.

California, a state that’s been among the hardest hit by the recession, had already issued $22 billion of debt since March, including $8.8 billion of notes that provided the state with an advance on taxes collected next year.

Even after increasing what it would pay, California still borrowed more cheaply than during previous offerings. A taxable California bond maturing in 2039 yielded 7.23 percent this week, down from a yield of 7.43 percent during a sale in April.

“Everybody thinks there’s still an appetite for California bonds,” Lockyer said. “There’s certainly a continuing need for long-term investments in schools, high-speed rail, stem-cell research centers and so on.”

To contact the reporter on this story: William Selway in San Francisco at wselway@bloomberg.net; Michael B. Marois in Sacramento at mmarois@bloomberg.net

FUNDING THE CALIFORNIA BUDGET CRISIS

By Daniel Johnson in New University on Oct. 13, 2008
September 24, 2009 | Volume 43

Following a record setting 85-day stalemate over the state budget, the financial situation for California looks nearly as downtrodden as it did two weeks ago when state officials were seemingly still in a deadlock deciding the budget. Because the budget was planned too optimistically and state revenue has been unable to meet original estimates, the deficit, which Gov. Arnold Schwarzenegger has been aiming to close, looks like it will get a lot worse before it gets better.

In fact, Schwarzenegger has been working with his brain trust to analyze the budget deficit through an emergency meeting in which they may or may not plan to decide to ask for emergency funds from the federal government. However, rather than working with his team, planning, waiting and planning to wait, Schwarzenegger, along with friends and enemies alike, needs to appreciate the timeliness of the situation, suck up his pride and reach for those emergency funds.

It could be argued that the abundance of bureaucratic red tape and the stalemate is just politics as usual. However, with the economic crisis confronting Californians on both a state and national level, it is tough to argue that California’s budget is anything but at its breaking point.
According to data collected from “The Economist,” state revenue in the form of sales tax receipts and corporate taxes have been 9 and 16 percent lower than state estimates. Furthermore, income-tax receipts, which make up the majority of state revenue, have only done marginally better.

Rather than arguing over how to allocate money, state officials should first consider whether or not they have the money at all, which can only positively be done through borrowing money from the federal government. This must be done as soon as possible for three primary reasons. First, as long as doubt drifts over the budget at the highest level, this will trickle down in budget matters concerning all levels of employment. Second, as the world’s eighth largest economy, California is positioned to be a trendsetter among the states, as far as balancing budgets is concerned. Thus, the longer the state is in the red, the longer the smaller economies that surround it will follow. Third, the national economy is in ruin and any financial assistance the federal government can offer will lessen over time.

According to one report that appeared in the Contra Costa Times, the state budget crisis affects not only politicians, but unions as well. An example cited in the report showed that teaching unions could not negotiate with school distracts because a three-year revenue projection is required to come to an agreement. Because the state budget is not concrete, these projection numbers have no solid basis, which in turn casts doubt on agreements being reached between teacher unions and school districts.

While California’s trendsetting status is impressive for a state that is currently in turmoil, it is also a responsibility. According to a recent Wall Street Journal article, the basic moneymaking system is the same in California as it is in other states, with one exception. It is on steroids. Through such factors as exporting businesses, manufacturing capabilities and professional services, California’s economy accounts for roughly 15 percent of the U.S. gross domestic product. So when waves are made on California’s financial coast, they resonate throughout the other 49 states.

Finally, while the effects of the Emergency Economic Stabilization Act of 2008 (the bailout plan) have yet to completely settle, it is tough to argue that the national economy is anything but worrisome. As long as this turmoil exists, both federal and private sources offering funds will have no choice but to become more conservative in their lending habits. Thus, if California is in need of emergency funds, it is best to aim for them while this safety net is outstretched rather than tucked away.

Daniel Johnson is a fourth-year literary journalism and film and media studies double-major. He can be reached at dcjohnso@uci.edu.