Schwarzenegger to Sign Bills Closing Deficit Next Week

California Governor Arnold Schwarzenegger said he supports the plan the Legislature approved today to erase a $26 billion deficit that pushed the most-populous U.S. state to the brink of insolvency.

The Senate and Assembly passed the package of more than two-dozen bills though a marathon 18-hour session. Schwarzenegger told reporters afterwards that he will sign the budget reduction plan within days after using his line-item veto authority to trim spending and bolster state reserves.

Passage of the plan promised to end a two-month partisan battle over how to eliminate holes that emerged in the $100 billion budget just months after spending cuts and tax increases were enacted in February. Voter refusal in May to authorize borrowing against the state lottery added $5 billion to the gap. Without a balanced budget, California paid bills with IOUs to avoid running out of cash, and the ratings on $72 billion of bonds were cut close to high-yield, high-risk junk status.

“This is not an easy budget but it’s a necessary budget,” Schwarzenegger, a Republican, said. “California has experienced an unprecedented drop in revenue, and we must learn to live within our means.”

The package cuts spending by $15 billion, including $6 billion from schools and community colleges, $3 billion from universities and $1.2 billion from prisons. It also raises $4 billion, in part by accelerating personal and corporate income- tax withholding and increasing the amount withheld by 10 percent.

Cash Strapped California Issues IOU’s

SACRAMENTO — For just the second time since the Great Depression, California began paying some of its bills with IOUs Thursday, as this year’s version of the state’s annual budget battle dragged on.

The IOUs began going out a few hours after state financial officials set a 3.75 percent interest rate on them, along with a redemption date of Oct. 2.

Several of the state’s leading banks, meanwhile, said they would accept the IOUs, formally known as registered warrants, but only until July 10. Others had not decided yet.

“Given the poor credit rating of California – the worst in the nation – banks may be hesitant to extend credit to the state,” Rod Brown, president and CEO of the California Bankers Association, said in a prepared release.

While legislative leaders and their number crunchers scurried between closed-door meetings, and Gov. Arnold Schwarzenegger held news conferences in Los Angeles and Fresno to demand quick action, the state controller’s printing presses began churning out 28,742 warrants, worth $53.3 million, which will be mailed to people awaiting tax refunds.

Read the full story at SacBee.com

California Controller to Delay Certain Payments for 30 Days

From the State Controllers Office:

As State Controller, John Chiang is responsible for ensuring the State has sufficient funds to meet its financial obligations.

With no signs of an economic recovery in sight, it is critical that the Governor and the Legislature enact a sound budget solution that provides much-needed cash by February 1. If not, the State will be $346 million in the red at the end of February, and $5.2 billion in the red in April.

In order to preserve cash for education, debt service and other payments that are deemed by the State Constitution, federal law or court rulings as having first claim to available General Fund cash, the Controller announced he will begin delaying, for 30 days, payments to all other programs that are funded out of the State’s depleted General Fund.

Those payments that will be delayed include thousands of payments to businesses for services and products they provide to the State; to assistance for more than a million aged, blind and disabled Californians that goes to pay their rent, utilities, or put food on their tables; to State agencies that use the payments to fund critical public services, ranging from public safety to health and welfare.

The delay in payments also will apply to tax refunds that millions of individuals and businesses have earned, expect and deserve. Not only will the 30-day delay in refund payments cause significant financial harm to California families, it will delay the economic stimulus expected from consumer spending. Postponing the payment of tax refunds also will ultimately cost the state tens of millions of dollars in interest payments if those payments are postponed beyond the date prescribed by law.

If the Governor and Legislature fail to provide real and adequate solutions by late February, the Controller said he will be forced to postpone those payments for another 30 days.

Below is information regarding which legally protected payments will continue to be paid, what payments will be delayed, frequently asked questions, and the text of a letter from the Controller to Legislators.

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California State Offices to Shut Down First and Third Fridays Each Month

By Kevin Yamamura 
kyamamura@sacbee.com

Published: Friday, Jan. 09, 2009

BREAKING: Schwarzenegger to Order Furloughs, Layoffs

By Dan Smith and Kevin Yamamura
smith@sacbee.com
Published: Friday, Dec. 19, 2008

Gov. Arnold Schwarzenegger’s administration is telling labor unions that it will order two-day-a-month unpaid furloughs for state employees beginning in February to help the state save cash amid its budget crisis.

Bruce Blanning, executive director of the Professional Engineers in California Government, said he received a call this morning from Department of Personnel Administration officials informing the union of the impending executive order.

DPA officials could not be reached for comment, but Schwarzenegger administration officials have said the governor was considering such an order.

The furloughs would apply to all general fund and special fund employees and amount to about a 10 percent pay cut, Blanning said. The unpaid furloughs would begin in February and continue through June 2010, he said.

In addition, Blanning said, DPA officials told him the governor would order a 10 percent elimination of jobs in the state workforce, which could result in thousands of layoffs.

Blanning, whose union represents 13,000 engineers and land surveyors at Caltrans and other agencies, said the move is imprudent.

“We’re in a time when we’re trying to get federal money to build infrastructure and create jobs,” he said. “Telling people to stay home two days a month does not seem to be a productive way to do that.”

SacBee.com