Budget/Fiscal

In a letter from the Department of Personnel Administration Director Debbie Endsley, Controller Chiang is told, “Today is July 1,2010, and there is no state budget. Regrettably, we must take the steps outlined in the attached pay letter to adjust wages and salaries during this budget impasse. The six Bargaining Units with tentative agreements are not included because we are seeking and expect the Legislature to approve a continuous appropriation for these six units. We anticipate passage of a continuous appropriation for these bargaining units before the end of the month.”

The city of Davis managed to survive first through the collection of a half-cent sales tax that produced around three million per year in revenue and also because property tax revenue was increasing at a very robust rate during the last decade.  However once the real estate market flatlined in Davis and busted in the rest of the state, revenues could no longer keep pace with increases in employee salaries.

According to the Department of Finance, state spending per $100 of personal income is at its lowest level in nearly 40 years.  Under the Governor’s May Revision, General Fund spending, adjusted for inflation would at the lowest per capita level since 1993-94.  And as a percentage of personal income, state spending in 09/10 is at its lowest level in more than a decade.

The suit calls for the courts to get rid of the current financing system and to direct the governor and Legislature to create one that is sound, stable and sufficient.  They argued it prevents six million students from receiving the education that they are entitled to under the state’s constitution.

The problem is the solution is elusive at best.  Recently the word came down that neither Governor Arnold Schwarzenneger nor Republican candidate for Governor Meg Whitman will back an initiative that would have reduced pension payments and extend retirement ages for new state and local government hires.  Would have is the operative word because the initiative has been suspended in part because they were counting on major funding from Ms. Whitman.

Overall the numbers look like this: California’s state retirement systems have promised current and retired workers around $3.35 trillion in pension, health care, and other post-employment befits as of 2008 but have $2.35 trillion on hand to pay for them.  Strictly looking at the retirement system, there were $454 billion in pension and benefits on the book in 2008, $59 billion was unfunded liability, that means that the fund had the assets to cover 87 percent of its obligations.

To give this discussion a Davis flavor, Lenny Goldberg from the California Tax Reform Association is a Davis resident.  Last week he had an interesting article in the Capitol Weekly that followed the CTRA’s proposals for finding $20 billion in tax revenues that can help us balance the budget without further cuts to schools and other programs.

Earlier this week, the Assembly approved legislation by Assemblymember Julia Brownley (D-Santa Monica).  This legislation would lift the cap on the number of charter schools in California, at the same time revamping the state’s academic standards and target federal funding to those schools most in trouble.

Garnering less attention are the fee increases and policy shifts affecting the California State University system.  On Tuesday, the California Faculty Association, who represents faculty members of the CSU system, issued a “white paper” chronicling the restructuring of the CSU system that will fundamentally change its mission.

There were massive student strikes at UCLA where the UC regents held their meeting and at UC Berkeley where many of Northern California Students Coalesced.

A report was released earlier this week by the Death Penalty Information Center.  It concludes that states are wasting hundreds of millions of dollars on the death penalty, draining state budgets during times of economic crisis when money could be used more effectively on other programs.

But another study done by UC Berkeley’s Center for Labor Research and Education released on Thursday found that:

They wrote:

While the Governor argued that he was forced to do by the Assembly which removed some of the money from the budget they passed including taking local money that goes for infrastructure and also removing offshore oil leases as a solution, Democrats such as Assemblymember John Perez (D-Los Angeles) immediately cried foul.

During the budget agreement cities threatened lawsuits against the state if the state followed through with a suspension of Proposition 1A which was passed by the voters to prevent the state from raiding monies that are designated for cities and counties.  While the cities and counties were able to get a devastating take away from transportation funds, the state prevailed in taking monies from redevelopment and also Prop 1A.  Cities and counties are now in the position where they will have to decide whether or not to sue the state.

Taking the brunt of the blow once again is education which has now had over 17 billion dollars in cuts in the last two budget deals.  That represents nearly one-third of the funding for education which is also the single largest line item on the budget.

Late last night it was announced that talks had stalled and word leaked out that the point of difference was what to do about education, specifically Proposition 98.  Education has already suffered cuts of well over $10 billion and that number could increase even more if the legislature agrees with the Governor to suspend it.

Ten days have passed since that point, the state is out of cash, had the Governor simply taken the partial solution, at least we would be solvent at this point and would have enough cash to pay our bills.  Instead people are not being paid with IOUs.  The average person probably has not felt this yet, but that will be coming.  The Governor is now talking about a fourth furlough day or another 5% paycut for state employees (which is functionally the same thing) and state employees are talking strike.

The California Debt and Investment Advisory Commission consists of the State Treasurer, the Governor or the Director of Finance, the State Controller, two local government finance officials, two Assembly Members, and two Senators.