State staggers into new fiscal year with no solution on the horizon (women and children hardest hit)

Sacramento -- California, operating entirely on borrowed cash, stumbled into a new fiscal year today soaked in red ink and with no rescue plan in sight as lawmakers and the governor missed the deadline to enact a new budget.

Without a budget, the state is unable legally to make $1.5 billion in payments this month to schools, community colleges, trial courts and vendors who supply the state with everything from pencils to cafeteria food.

And with Wall Street warning that the state will not be allowed to borrow any more money in August, when California would run out of cash, medical facilities might be cut off then again.

Just three years ago, the state was flush with a $9 billion budget surplus. Republicans say the majority Democrats burned through that surplus by going on a spending spree, even when it was clear by 2001 that the state's economic boom -- fueled by in large part by dot-com earnings -- was over. Waste and inefficiency now permeate every aspect of state government, the GOP contends.

Speaking about the dot-com bonanza, veteran lawmaker Sen. John Vasconcellos, D-Santa Clara, said: "Everyone got caught up in it. We did too. We didn't put enough aside in a rainy-day fund. That's not evil. We spent a lot of money on education." (Translation: We went on a spending spree withtaxpayer's money. Now the taxpayers have to cough up even more to pay for our extravagance. Shortsighted idiocy!)

In a related article:

In one of his first official acts as new chief of the cash-strapped Oakland public schools, Randy Ward has turned off 500 district cell phones used by employees and others who were chatting their way to $750,000 a year.

From the driver who delivers the milk to nearly all 100 principals, so many district employees were issued cell phones under the prior administration that when Ward asked for a list, just 200 phones could be matched up with individuals.

The rest were floating out there somewhere -- but still getting plenty of use.

"We'd get some bills that were $200 and $300 a month, and when we called the number associated with the phone, a stranger would answer and refuse to identify themselves," said Harold Lowe, director of purchasing for the district.

Addtional info from an LA Times article:

But in early May, the state Supreme Court changed the ground rules governing who gets paid and who doesn't in the absence of a budget. The court, in a unanimous decision, agreed with attorneys for the Howard Jarvis Taxpayers Assn. that there are limits to what the controller can pay without the specific spending authority contained in a budget bill or the state Constitution.

For instance, the state last month borrowed $11 billion to repay last year's short-term debt and cover cash needs during July and August. The new loan will cost taxpayers more than $210 million in interest and credit enhancement fees paid to seven banks and investment houses. The state's credit rating is so poor that it paid almost $85 million to the banks to use their credit rating instead.

If the state's rating drops two more notches to junk bond status, the cost of that loan will automatically increase by $55 million. And if California cannot repay the money when it is due next June, the interest rate on that borrowing will jump more than sixfold to a minimum of 7% a year.

Looming is the question of how the state will borrow $10.7 billion to cover the budget deficit in the fiscal year that just ended. Davis and Democratic legislators want to raise the state sales tax by a half-cent on the dollar. Republican leaders have refused to vote for any tax increase.

If approved as written, the temporary sales tax increase would be entirely devoted to paying off the deficit and would remain in effect until the deficit bonds are repaid in five years.

Since Hollywood is full of very rich liberals who care about "the children" and every liberal agenda, why don't the politicians find some new big taxes for those people to pay? Let them put their money where their mouths are.

Hardy Ho! Thats a good idea. I mean, those rich folks DID get a tax cut right? If I understand them correctly, they did not want this cut, so make good use of it - bail your state out!

Are you listening Babs?, Susan?, Tom?...hey..where did they go?. ...

Thanks for posting this!

calgov2002:

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