California begins fiscal year with no budget
Thursday, July 1, 2010
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(07-01) 04:00 PDT Sacramento - --
California begins its fiscal year today with no budget in place and with lawmakers and the governor far from agreement on a spending plan to dissolve the state's $19 billion deficit.
The lack of a budget costs the state $52 million a day, according to the Department of Finance, and if an agreement is not reached by the end of July, the state's financial situation would worsen. The state would probably have to issue IOUs, halt infrastructure projects and slash state worker pay.
State Treasurer Bill Lockyer warned Wednesday that the consequences of not passing a budget in the near term could ultimately cost the state billions of dollars, adding that the final plan must pass muster with financial institutions that are closely monitoring California's situation.
"It's absolutely critical that the governor and the Legislature quickly adopt a budget that's free of hope-and-a-prayer math and legal clouds," Lockyer said. "Every day without a credible plan brings us closer to the deterioration of the state's credit rating and the humiliation of IOUs."
Budgets in past years have relied on billions in assumptions that never came true, including cuts that were blocked by courts. A piece of the current plan to erase the deficit is an assumption that the state will receive $1.8 billion from the federal government to help pay for the state's Medicaid program, known as Medi-Cal.
Negotiations on the budget have moved behind closed doors at the Capitol. Late Wednesday, state Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker John Pérez met with Schwarzenegger and told reporters they are "on the same page" and ready to step up the pace of negotiations.
Democrats have been pushing different plans: Senate Democrats want to raise taxes, make cuts and shift some state responsibilities to the local level; the Assembly Democrats' plan relies largely on a complicated borrowing scheme that includes placing a tax on oil extraction in the state.
Steinberg said he believes the negotiations can be finished "relatively quickly," but both he and Pérez said they would be steadfast on their priorities.
"We're very clear in terms of our principles, that we're going to fight to protect public education and the safety net. We're Democrats. That's where we stand tall together," Steinberg said.
The negotiations involve only a handful of lawmakers. So despite the lack of a budget plan, Pérez said most Assembly members will be allowed to return to their districts for a monthlong break that begins Friday, but they could be called back to the Capitol if negotiations progress to the point where a vote is required. Steinberg is expected to announce today whether Senate members will stay in Sacramento or be allowed to depart.
Impacts of the impasse probably would begin at the end of July, as the governor is preparing to instruct state Controller John Chiang to pay state employees the federal minimum wage of $7.25 for July if a budget is not in place sometime this month. Administration officials say the law requires that pay cut, although Chiang has challenged the move in court.
Hallye Jordan, spokeswoman for Chiang, said the move "doesn't help the budget and would only make the deficit bigger" because the state would face more lawsuits, she said.
Beyond worker pay, California's cash flow would reach a crisis point after August, and Chiang has warned that he will have to act weeks in advance to ensure that there is enough cash on hand to pay the bills, which would mean delaying payments or issuing IOUs.
Republicans at the Capitol conducted a public countdown for the past 100 days leading up to the start of the fiscal year and said they won't vote for any proposals that include raising taxes. They largely back the governor's May budget plan.
On the Assembly side, minority leader Martin Garrick, R-Carlsbad (San Diego County), said he has had only one meeting with Pérez so far.
"The parties that should be joining us in a reasonable and responsible budget have refused to sit at the table with us," Garrick said.
Source: Department of Finance
California begins its fiscal year today with no budget in place and with lawmakers and the governor far from agreement on a spending plan to dissolve the state's $19 billion deficit.
The lack of a budget costs the state $52 million a day, according to the Department of Finance, and if an agreement is not reached by the end of July, the state's financial situation would worsen. The state would probably have to issue IOUs, halt infrastructure projects and slash state worker pay.
State Treasurer Bill Lockyer warned Wednesday that the consequences of not passing a budget in the near term could ultimately cost the state billions of dollars, adding that the final plan must pass muster with financial institutions that are closely monitoring California's situation.
"It's absolutely critical that the governor and the Legislature quickly adopt a budget that's free of hope-and-a-prayer math and legal clouds," Lockyer said. "Every day without a credible plan brings us closer to the deterioration of the state's credit rating and the humiliation of IOUs."
Budgets in past years have relied on billions in assumptions that never came true, including cuts that were blocked by courts. A piece of the current plan to erase the deficit is an assumption that the state will receive $1.8 billion from the federal government to help pay for the state's Medicaid program, known as Medi-Cal.
Plea for money
Congress has stalled on providing that money to California and other states, and Schwarzenegger joined governors from across the country on Wednesday in pleading for the money.Negotiations on the budget have moved behind closed doors at the Capitol. Late Wednesday, state Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker John Pérez met with Schwarzenegger and told reporters they are "on the same page" and ready to step up the pace of negotiations.
Democrats have been pushing different plans: Senate Democrats want to raise taxes, make cuts and shift some state responsibilities to the local level; the Assembly Democrats' plan relies largely on a complicated borrowing scheme that includes placing a tax on oil extraction in the state.
Steinberg said he believes the negotiations can be finished "relatively quickly," but both he and Pérez said they would be steadfast on their priorities.
"We're very clear in terms of our principles, that we're going to fight to protect public education and the safety net. We're Democrats. That's where we stand tall together," Steinberg said.
The negotiations involve only a handful of lawmakers. So despite the lack of a budget plan, Pérez said most Assembly members will be allowed to return to their districts for a monthlong break that begins Friday, but they could be called back to the Capitol if negotiations progress to the point where a vote is required. Steinberg is expected to announce today whether Senate members will stay in Sacramento or be allowed to depart.
Impacts of the impasse probably would begin at the end of July, as the governor is preparing to instruct state Controller John Chiang to pay state employees the federal minimum wage of $7.25 for July if a budget is not in place sometime this month. Administration officials say the law requires that pay cut, although Chiang has challenged the move in court.
Hallye Jordan, spokeswoman for Chiang, said the move "doesn't help the budget and would only make the deficit bigger" because the state would face more lawsuits, she said.
Beyond worker pay, California's cash flow would reach a crisis point after August, and Chiang has warned that he will have to act weeks in advance to ensure that there is enough cash on hand to pay the bills, which would mean delaying payments or issuing IOUs.
Unpaid bills
After today, Chiang is legally restricted from paying some of the state's bills, totaling about $1.1 billion this month, without a budget. Those include the salaries of elected officials and their appointed staffs, payments to vendors for services provided after today, and some payments to school districts, community colleges and local governments.Republicans at the Capitol conducted a public countdown for the past 100 days leading up to the start of the fiscal year and said they won't vote for any proposals that include raising taxes. They largely back the governor's May budget plan.
On the Assembly side, minority leader Martin Garrick, R-Carlsbad (San Diego County), said he has had only one meeting with Pérez so far.
"The parties that should be joining us in a reasonable and responsible budget have refused to sit at the table with us," Garrick said.
Cost of inaction
The new fiscal year begins today. Each day California lawmakers fail to pass a new budget, the state spends $52 million more than it would have if it had a balanced spending plan.Source: Department of Finance
E-mail Wyatt Buchanan at wbuchanan@sfchronicle.com.
This article appeared on page A - 1 of the San Francisco Chronicle
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/07/01/MNTI1E7EIC.DTL#ixzz0sTs71pyu
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