Calif. Near Financial Disaster

[1IDVET]

Hours Remain to Solve $38 Billion Shortfall

By Rene Sanchez
Washington Post Staff Writer
Monday, June 30, 2003; Page A01


LOS ANGELES -- Any day now, community colleges here may begin telling faculty members that they cannot be paid and students that summer classes are canceled.

Nursing homes are losing so much state aid that many soon may have to shut down or limit their services, a prospect that has elderly residents confused and frightened.

As many as 30,000 government workers who had been expecting pay raises in the fall are instead receiving formal notices warning that they could lose their jobs by then, because the state is broke.

This is life in California, on the brink of a fiscal disaster.

The nation's most populous state, home to one of the world's largest economies, has been staring in disbelief at the same dire predicament for months: a $38 billion deficit, the largest shortfall in its history and an extreme example of the budget woes afflicting many states. But now it has only hours left to solve the problem.

State lawmakers have until midnight to reach a compromise with Gov. Gray Davis (D) on a budget that would wipe out the enormous deficit, but the odds of that happening appear slim. And without a deal, the state will be bound by law to begin cutting off billions of dollars in payments to its agencies and its contractors in July -- and could run out of money by August.

"It looks bleak," said Perry Kenny, president of the California State Employees Association, which represents more than 100,000 government workers. "This is the biggest hole we've ever been in, and no one can seem to find a way out. We're all sweating bullets here."

For weeks, the state's budget has been hostage to an intensely partisan political war over taxes and spending that is now getting even more bitter and complicated because of a Republican-led campaign to recall Davis from office. Organizers of that movement have collected nearly 400,000 voter petitions in favor of ousting the governor, and political strategists in both parties say a recall election, which would be unprecedented, is looking ever more likely.

Davis and the Democrats who control both houses of California's legislature cannot get their way on the budget because state law requires a two-thirds majority vote for it to be approved. They need a few Republican lawmakers to support their plan, which they say must include new taxes in order to save public schools and other vital programs from ruin.

But Republicans are refusing to consider any tax increase, which they say would harm California's already weak economy, and are demanding deeper cuts in government spending.

There is no end in sight to the impasse, which California voters are watching with increasing exasperation. Polls show that public support for Davis has plummeted below 25 percent, and that two-thirds of voters are dismayed with the legislature.

Republican lawmakers say they will not budge from their stand on the budget because they are fed up with Davis's governing style.

"He and his allies have gotten the last three budgets they wanted and we're nearly bankrupt," said James L. Brulte, the Republican leader in the state Senate, who has threatened to work against the reelection of any GOP colleague who sides with Davis in the budget battle. "Somebody has to stand up and say enough is enough. That's what Republicans in California are doing."

But Democrats see other motives. Some are accusing GOP lawmakers of deliberately dragging their feet on the budget in the hope that will hurt Davis politically and strengthen the recall campaign.

"It's hard to take Republicans seriously when they say they want a real solution to this budget crisis at the same time some of them are openly backing the recall," said Roger Salazar, a political adviser to Davis. "They are putting important state programs at risk just out of pure political spite."

Democrats have retreated recently from some tax proposals but are insisting on a half-cent sales tax increase. Several dozen Democratic legislators even barnstormed Republican districts around the state last week to plead for support but got mostly hostile receptions.

Davis, who left the state this weekend to attend his mother's 80th birthday celebration in New York, is still expressing optimism that a budget deal can be reached soon, if not by tonight's constitutional deadline.

"I am doing everything I can to encourage, cajole, persuade, guilt-trip and all the things you do to try to make this happen," he told reporters last week.

California's $38 billion deficit is larger than the entire annual budget of any other state except New York. It represents about one-third of the state's annual spending.

As in many other states, the shortfall is largely the result of the national economic downturn -- which has been especially severe in Silicon Valley, an engine of California's $1.3 trillion economy. Soaring health care costs for the poor and new expenses for homeland security are other contributing factors. Republicans here also contend that Davis, who was narrowly elected to a second term in November, has spent recklessly while in office and relied on accounting gimmicks to balance the budget last year.

California, which had a $9 billion budget surplus three years ago, is constantly caught in boom-or-bust economic cycles. In the early 1990s, Republican Gov. Pete Wilson had to raise taxes and cut spending to erase a $14 billion deficit. Escaping this crisis will be far more difficult and painful.

To close the $38 billion deficit, state leaders have approved $7 billion in cuts affecting virtually every government program. They have borrowed $11 billion to keep California solvent through the summer. Earlier this month, risking the wrath of voters, they tripled the annual state tax on vehicles, a $136 increase for most motorists. But that still is not enough to balance the budget.

Now, with time to find a solution running out, state Controller Steve Westly is warning that as early as Tuesday more than a billion dollars in payments due to state agencies, medical providers and private companies that contract with California must be stopped.

"This is going to be real hurt for the state of California," he told reporters a few days ago, "and the problem gets worse every day we go without a budget."

Some public institutions already are reeling. The Los Angeles Community College District, which enrolls 130,000 students, has been forced to eliminate classes and lay off some of its faculty, and is on the verge of raising tuition by more than 50 percent because of the budget crisis. Thousands of students have dropped out because of cutbacks this year, college officials say, and more are likely to leave if additional classes are canceled.

Mark Drummond, the chancellor of the district, said that its network of colleges has enough money to operate until August, but would not be able to pay its vendors or its faculty if the state is still engulfed in deficits by then.

"We could have to turn off the lights and tell everybody to go home," Drummond said.

Nursing homes are suffering the same plight. Some already have stopped receiving all the payments they had been expecting from the state and are cutting back services to their residents and turning away new patients. If more cuts are approved, or if the budget gridlock doesn't end soon, dozens of homes could go bankrupt and close.

Betsy Hite, spokeswoman for the California Association of Health Facilities, said many elderly residents are baffled and despondent over the looming hardships.

"They see what's going on in the newspapers and on TV," she said. "Their perspective is, why are they doing this to us? What did we do?

"If I were a betting person, I wouldn't bet we're going to be fine," Hite added. "The gap is just too huge."

[HARDCORE]

"Ah, the good life in the "GOLDEN STATE!"

VERITAS

[reconeil]

Except for the schooling bit (naturally only for legal residents of The USA of course), I think California's shortfall and needed reduction of California's Public Sector IS GREAT.

Besides, whom in The Private Sector and receiving much lower salaries, automatically expect: "Raises in the fall" like the; "30,000 Government (high paid) Workers" alluded to. None.
Nothing is guaranteed for The Taxpayer and/or "We The (Schnooks)" of The Private Sector. Not even super-duper retirements and/or super-duper buy-outs at age 55,...that: "We The (Schnooks)" ARE ALSO FORCED PAYING FOR.

Neil

[1IDVET]

By TOM CHORNEAU
The Associated Press
Tuesday, July 1, 2003; 9:15 AM


SACRAMENTO, Calif. - For the third consecutive year, California began the new fiscal year Tuesday without a state budget after lawmakers were unable to break a partisan impasse over spending and taxes.

Five other states also took their budget deliberations to the June 30 deadline without reaching a final agreement.

Lawmakers in Oregon, New Hampshire and Connecticut approved short-term spending plans allowing government to operate while debate continued. Residents in Nevada and New Jersey also began Tuesday without a new budget.

In Massachusetts, Gov. Mitt Romney signed a $22.1 billion state budget on the final day of the fiscal year, the first time in seven years a budget has been completed on time. He then immediately issued $201 million in vetoes, including a $23 million cut in additional assistance to cities and towns. North Carolina Gov. Mike Easley also signed a budget on the last day of the fiscal year Monday.

But nowhere were the stakes higher than in California.

The state faces a record $38.2 billion budget shortfall and is operating for the first time completely on borrowed money. State Controller Steve Westly says the state only has enough cash to get through mid-August, and officials say the state cannot borrow any more until a new budget is passed.

Without a new budget by the deadline, the state is unable to legally make millions of dollars in on-time payments to schools, community colleges, courts, state suppliers and others.

The salaries of the governor, legislators, state appointees and about 1,000 non-civil service employees won't be paid until a budget is adopted, although most of the state's 200,000 workers will continue receiving their full pay, at least for now.

Assembly Speaker Herb Wesson, D-Culver City, apologized late Monday to California taxpayers for missing the deadline and promised to call a session on Wednesday to take up a Republican proposal.

Gov. Gray Davis, who spent the weekend in New York celebrating his mother's 80th birthday, expressed disappointment that the deadline would not be met.

"We still have an opportunity to find common ground. Failure to do so would be irresponsible and dangerous," Davis said. "Critical funding for hospitals, nursing homes, community colleges and small businesses is at stake."

But the likelihood of a budget agreement anytime soon appears remote. Democrats, who hold big majorities in both houses, need Republican support to approve a spending plan.

California is one of the few states that require a two-thirds majority to pass the budget and Republicans have more than enough votes to block passage as long as they want.

Davis has proposed a budget plan that includes a mix of service cuts, borrowing and higher taxes to bridge the gap.

Republicans say they won't support new taxes, while Democrats are unwilling to cut enough to balance the budget without new taxes.

The GOP's Assembly caucus unveiled what they called a new attempt at a compromise Monday. The proposal, which is only a revision of a plan they first introduced in April, would bridge the budget gap by borrowing $10 billion to pay off the state's existing deficit and using deep cuts to a variety of state services to pay back the loan.

Although the authors claim the new plan softens some of the blow to education and public health, Democratic were quick to condemn the plan as "destructive."

Nevertheless, Assemblyman Minority Leader Dave Cox, R-Fair Oaks, said he intends to introduce his budget bill in the coming days. "This proposal represents a balanced solution that solves the problem," said Cox. "We believe it can achieve bipartisan support and should serve as a model for a final solution."

But Assemblyman John Laird, D-Santa Cruz, said the Republican plan provided no common ground. "I think it's a compromise from within the Republican caucus but what we're really looking at is a compromise with the Democrats and everyone else in California," said Laird.

Last year's budget was delayed a record 76 days.

Across the nation:

- State government remained open for business in New Jersey Tuesday as lawmakers worked on the budget overnight.

- Nevada Gov. Kenny Guinn moved ahead early Tuesday with a petition to the state Supreme Court aimed at forcing the legislators to act after they failed to reach a compromise on a tax plan.

- Connecticut Gov. John G. Rowland shocked leaders by issuing what he called "subpoenas" to force rank-and-file lawmakers back to the Capitol Tuesday for a 6 p.m. special session.

"We're going to stay in session every single day until we adopt a budget," Rowland said.

- Pennsylvania lawmakers, who passed a state budget in March, were still faced with deciding the state's share of local education spending as the fiscal year began Tuesday. Lawmakers were scheduled to meet into their traditional summer vacation to settle the question.

[SuperScout]

Have you noticed that Enron is not being blamed anymore for the $38 billion deficit being experienced by California? I'll admit that Enron did cook the books in the energy scam that stung the Golden State, but not to the tune of $38 Big Ones. Like an addict seeking more and more nose candy, the state legislature went on a snorting and spending frenzy, cooking its own books, and now, its own goose in the process. And just like a drunk, trying to convince a doubting spouse, "Honey, I'll cut back on my drinkin', and everythang will be OK!" And here comes the California legislature, making $7 Billion in cuts, thinking everything will be OK; sounds like somebody out there needs a refresher course in math. Or reality.

[reconeil]

Believe you nailed-it pretty-good with that: "Somebody out there needs a refresher course in math". "Or reality".

Still my favorite Texacan, this New Joisey Boy would add that ALL SUCH PHONIES and/or POLITICOS also take refresher courses in English (Spanish also). That way, they might all better understand just whom their oaths ARE ACTUALLY TAKEN TO, just whom "They" ARE ACTUALLY WORKING FOR, and just whom it is that ACTUALLY PAYS FOR "Their" grandeos salararies and grandeos benefits, which ironically and even in the worst of times just get more grandeos and grandeos.

I know that some lousy English Classes can't help California's Taxpayers out very much. But, maybe such might at least make some self/clique-serving ABOVE ALL ELSE politicos feel a little guilty?

Though, I personally say screw any guilt trips for: "Public Hirelings" and/or those working on The Dole. I (no doubt a few others also) would much rather just be permitted keeping more of MY/OUR VERY OWN MONEY. Besides, where do politicos get-off being so generous to everyone on earth with MY/OUR VERY OWN MONEY? I Know I can't speak for everyone. But, I most certainly never gave such permission for such generosity with MY/OUR VERY OWN MONEY. Did you,...SS?

Neil

[HARDCORE]

Why Neil, I am surprised at you! This money (so to speak), like everything else in existence, is only on loan to us! How dare we think that anything is (permanently) truly ours alone!! (huh-huh)

VERITAS

[1IDVET]

"Consequences, schmonsequenses, as long as I'm rich."