More furloughs, but no budget

JULY 29, 2010

By KATY GRIMES

Faced with a $19.1 billion state deficit and no acceptable budget in the works, Gov. Arnold Schwarzenegger reinstated furloughs for state workers on Wednesday. In an executive order declaring a fiscal emergency, the governor called for state employees to take three unpaid days off a month, beginning Aug. 1.

The order came after the governor said last week that he will not sign a budget before he leaves office next January unless he gets the reforms he wants. “And if I don’t get all of the things that we need in order to be fiscally responsible and to make the changes, the tax reforms, the budget reforms and the pension reforms, I will not sign a budget and it could actually drag out until the next governor gets into office,” said the governor.

Schwarzenegger spokesman Aaron McLear, on Wednesday said that the governor has stated this same position repeatedly, throughout the budget talks.

When asked what no budget might mean to the state, Sen. Denise Moreno Ducheny, D-San Diego, replied, “Very bad. It means we can’t borrow.”

Ducheny, chairwoman of the Senate Budget and Fiscal Review Committee, told CalWatchdog that the governor’s latest statement about the budget is the “most irresponsible thing he’s ever said,” and “shows his attitude toward the state.”

When asked how long the budget stalemate could go on, Ducheny said that she remembered one year in the 1990’s when the budget had not been signed as late as October.

But, as a “concession to Republicans,” Ducheny said, “We’ve been exploring tax reform, to get talks going again.”

“Democrats have been at a place to close the budget, but the governor’s unwillingness shows his lack of concern for the state,” said Ducheny. “Democrats do not have tax increases in the budget,” Ducheny stated. “We are only extending the taxes people already pay, and stopping the upcoming corporate tax breaks.” “A one-year delay is not going to hurt anyone,” she added.

McLear said he “disagreed” with the tax language Ducheny used and said, “No one including the governor wants to make cuts. The Democrats’ attempt to eliminate tax incentives for employers are nothing more than tax increases.”

“We’ve done our end of the budget” McLear said. “We got our budget done on time.”

“But Democrats just want the governor to sign a budget with tax increases,” said McLear. “The people said no to tax increases by a 3 to 1 margin on the ballot in May 2009. Democrats will be taking money from small businesses, not just big corporations, who then can’t hire people. Raising taxes instead of encouraging business to hire people is what the governor said he will not let happen.”

“Democrats have tried to explore alternatives and are hoping Republicans could support tax reforms,” said Ducheny. “The budget the Senate laid out in May is the right one.”

If a budget is not approved, Ducheny said that interest will continue to accrue on the debt owed to the state’s unpaid vendors and on the money that the state borrows.

But no one seems willing to discuss insolvency. When asked what would happen to the state if a budget is not approved until another governor is sworn in, no one would address the ultimate “what if scenario.”

The Department of Finance spokesman H.D. Palmer is the one person in the administration who can answer that question, but is out on vacation right now, and his press office referred all calls to the governor’s spokesman. When asked the question, McLear said, “I would have to check with the Department of Finance for that answer.”

But the costs to the state continue to grow, even if it is debated between the parties about how the debt is calculated. In his weekly radio address last weekend, Assembly Minority Leader Martin Garrick said, “If you take our $19.1 billion dollar deficit and divide it by 365 days, you’ll find that the state spends $52.3 million dollars more than it receives in tax revenues for every day the budget is late. The math is quite simple, and highlights a serious overspending problem in state government. But legislative Democrats reject this notion.”

Ducheny disagreed with Garrick’s calculations and said the $52.3 million is a “fake number.” “Republicans count anticipated savings, and then use what would be saved in the total amount that the state is losing,” Ducheny said. Calling it an “erosion of savings,” Ducheny added that “there are consequences with being late.”

However, Ducheny said the biggest problem with no budget, are the massive costs being shifted to counties: “The $4 billion cost shift of CalWorks to already strapped counties are cuts to real people. …  “And now with the minimum wage and furloughs today, the governor shows that he governs by press releases and not with programs.”

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