California's money woes continue to dominate the local news. California Controller John Chiang has issued dire warnings that the state may run out of money in two months and would then have to issue IOU's to vendors, and the the state legislature and governor's office continue their deadlock over any sort of budget fix.
California is currently facing a $14 billion deficit in the current fiscal year and a $42 billion deficit through the end of FY 2009-2010. And the state's Standard and Poor's credit rating is now tied with Louisiana's for the lowest of any of the 50 states. As a result, the state last week had to suspend the sale of bonds, placing infrastructure projects up and down California on hold.
Who's to blame? It depends on whom you ask. Democrats blame Republicans for refusing to consider any tax increases, while Republicans say Democrats are refusing to cut any spending. The Daily Bulletin today had an article quoting Republican Governor Arnold Schwarzenegger's spokeperson as fixing blame on Democrats and Republicans both:
By the afternoon, Schwarzenegger Communications Director Matt David lashed back on behalf of the governor. He said neither side has been willing to transcend party politics and special interests to make concessions.
"The Democrats want to block cuts to state government spending, and the Republicans want to block revenue increases because they have signed pledges to protect special interests," David said in a statement. "Legislators were sent to Sacramento to fix problems, but now what they're doing is making the situation worse because every day they don't act our problem gets $40 million worse."
If lawmakers fail to pass an updated budget plan, state Controller John Chiang said his office will be forced to defer billions of dollars in payments or issue IOUs to state contractors. He says the instability of the banking industry has made borrowing money to bridge the gap an uncertain possibility.
The state would not be able to pay vendors who provide everything from food for prisoners to nursing care for seniors.
"The state's dire cash position not only jeopardizes and places at risk our ability to meet our financial obligations in a timely manner, it threatens our ability to respond to natural disasters and protect our communities from crime," Chiang wrote.
The Los Angeles Times had an editorial today that argues it's high time to do away with the requirement of a two-thirds majority to pass a budget. The Times piece noted that California is one of only two states (Arkansas and Rhode Island being the others) that has such a stricture. The super-majority budget vote has been in place since 1933. At that time, the two-thirds majority was only needed if the budget was going to increase by more than 5%. In 1962, the law was extended to cover all proposed state budgets.
Some Republicans apparently see the hazards of the super-majority requirement and are arguing for change as well. The Times described two proposals for fixing the problem, one from Democratic State Assembly Speaker Karen Bass and one from Republican State Senator Mimi Walters:
Going back to majority votes for budgets, as was the case before 1933, would put California in the company of most other states, and Assembly Speaker Karen Bass (D-Los Angeles) introduced a constitutional amendment to that effect at the beginning of the current session. It adds a twist: The simple-majority requirement evaporates, and once again becomes two-thirds, for any budget bill not adopted by June 15. That's similar to Illinois, Maine and Nebraska, where, the argument goes, there's an added incentive for the majority to get its work done on time.
But California Republicans, too, recognize the problem caused by the runaway supermajority rule. Sen. Mimi Walters (R-Laguna Niguel) also has introduced a constitutional amendment. Hers would be a pre-1962, but not pre-1933, simple-majority measure. It's actually quite shrewd: Democrats, or whoever is in the majority, would be able to adopt a budget on a majority vote, but only if it represents growth of 5% or less over the previous year. The Republicans would have their spending cap, but it could be breached. That's similar to Connecticut and Hawaii, but it's worth noting that it has been years since California produced a budget with growth smaller than 5%.
However we get it done, we need some grown-up leadership in Sacramento. On the local level we're every bit as bad, spending far beyond our means without setting aside any sort of serious rainy day fund and counting on grant money to rain down from state and federal agencies to subsidize our municipal projects and services. Now that the flow's been shut off, we'll get to see how grown-up our own leaders in City Hall are.
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