Free Republic

Lame-duck Gov. Arnold Schwarzenegger declares that the state faces a fiscal emergency after its chief budget analyst says the shortfall has grown to $25.4 billion. Reporting from Sacramento — Declaring that California faces a fiscal emergency, lame-duck Gov. Arnold Schwarzenegger said Thursday he would convene a special session of the incoming Legislature to address the state's massive budget deficit. The announcement came one day after the state's chief budget analyst said the fiscal shortfall has grown to $25.4 billion over the next year and a half — far larger than officials had estimated only days earlier. Legislative Analyst Mac Taylor...

Gov. Arnold Schwarzenegger and Democratic and Republican legislative leaders huddled for about three hours today to hammer out a long-delayed budget deal and bridge a $19 billion deficit. The only concrete result appeared to be the governor taking off the table a proposal to borrow money from the California Public Employees' Retirement System to balance the budget. The Big Five will meet again at 11:30 a.m. tomorrow. "The governor told the leaders that we're not going to do that," said Schwarzenegger spokesman Aaron McLear about the CalPERS idea. "It's just not the responsible thing to do."

Gov. Arnold Schwarzenegger today denounced Proposition 25, which would lower the legislative vote margin for state budgets from two-thirds to a simple majority, and declared that it's a back-door attempt to make it easier to raise taxes. Schwarzenegger,speaking to a business group in Goleta, responded "absolutely no" when asked about his position on the measure, placed on the ballot by Democrats and unions, and then added, "I believe this is also...a majority vote for tax increases."

SACRAMENTO -- Welfare advocates are criticizing Meg Whitman for ratcheting up her rhetoric against welfare recipients as she rails against waste, fraud and abuse in state government. In a one-minute radio ad that Whitman recently began airing, she touts her plan to create a statewide grand jury to root out waste, fraud and abuse, promising to send to jail anyone "caught robbing the taxpayers." She mentions a state Legislative Analyst's report that found that 150 staffers in the Department of Education are working on programs that it no longer administers, and $3.4 million spent by CalTrans on a single rest...

In the ongoing budget stalemate, Democrats refuse to accept devastating cuts while Republicans reject new taxes. Nobody is budging. The longer this drags out, the more likely it is that Gov. Arnold Schwarzenegger and lawmakers will resort to a well-worn playbook of accounting shifts, borrowing and asset sales to close out the rest of the budget. In the past, this has included paying state workers one day later and trying to sell the quasi-public state workers' compensation insurance fund. Such one-time budget tricks delay political backlash but contribute to California's long-term financial instability. They avoid taxes, so Republicans are happy....

For the past year, Gov. Arnold Schwarzenegger has warned that CalPERS was heading over a cliff and pawning off its financial problems on future generations. Now he wants to borrow $2 billion from the California Public Employees' Retirement System to help fix this year's state budget. The governor's plan represents an apparent about-face – and raises questions about the long-term costs. The last time the state borrowed from CalPERS, it had to pay the pension fund $400 million in interest. More borrowing would surely bring more interest expense, experts said Friday. CalPERS is obliged to "treat the loan as they...

Gov. Arnold Schwarzenegger has privately proposed borrowing $2 billion from the state's giant pension fund to help bridge California's $19 billion budget deficit. The plan would take the money as an advance against future savings from pension cuts, according to sources close to the negotiations who would not be identified because of the sensitive nature of the talks. The Republican governor is demanding that lawmakers reduce pension benefits for newly hired state workers back to pre-1999 levels as part of any budget agreement he signs. The Legislature and Gov. Gray Davis that year authorized larger pension benefits under the assumption...

In an era of term limits, Senate President Pro Tem Darrell Steinberg is now the veteran budget negotiator among the four legislative leaders. Besides the concerns of the Senate Democratic caucus he leads, Steinberg must also consider impacts on state workers who live in his district.The Sacramento Democrat spoke with three reporters on a variety of issues last week after touring a middle school and job-training facility in North Sacramento. What follows is part of the conversation on pensions and the Democratic proposal to raise income and vehicle taxes in exchange for decreasing sales taxes. >Gov. Arnold Schwarzenegger says pension...

California still faces a $19.1 billion deficit. The budget is over a month late, no negotiated compromise is in sight, and worst of all, no serious minds in Sacramento are even considering long-term solutions. What we usually get instead are short-term gimmicks, the most recent one now has been presented as part of the Democratic proposal to balance the budget. Darrell Steinberg, Democrat and Senate President Pro Tempore (leader), is suggesting a tax shift. His proposal cuts the state sales tax rate by 1.75% and raises income tax rates and car license fees to offset the sales tax reduction. This...

Two propositions on the November ballot could create a $1-billion hole in California's already beleaguered budget by undoing one of the few agreements that lawmakers and Gov. Arnold Schwarzenegger have struck this year to shrink the deficit. Tucked into both measures, written before the budget agreement, are provisions that apply retroactively to all of 2010. Opponents are now accusing the special interests behind the initiatives of pressing their agendas at the expense of the state. "These two initiatives are Exhibits A and B as to why the initiative process needs to be reformed," said Senate President Pro Tem Darrell Steinberg...

SAN FRANCISCO (Reuters) – Increasing pressure on lawmakers to negotiate a state budget that closes a $19 billion shortfall, California Governor Arnold Schwarzenegger declared a state of emergency over the state's finances on Wednesday. In the declaration, Schwarzenegger ordered three furlough days per month beginning in August for thousands of state employees to preserve the state's cash to pay the state's debt obligations and for essential services. California's budget is several weeks overdue and Schwarzenegger and top lawmakers are at impasse over how to balance the state's books.

When California faced a major budget crisis in the early 1990s, thanks to what was then the worst recession since the Great Depression, a Republican governor – Pete Wilson – and the Legislature enacted a big, albeit temporary, increase in state taxes. Despite the boost in sales and income taxes, however, state revenue continued to decline as the recession deepened, touching off years of political debate over causes and effects. Those on the right contended that by increasing taxes, Wilson and the Legislature depressed economic activity, thus causing a further decline in revenue. Those on the left argued that if...

Click here to find out more! Today's question is: Why have both major candidates for California governor -- Democrat Jerry Brown and Republican Meg Whitman -- failed to endorse the governor's authority to furlough state workers? How do you build a house without a hammer? Here's the situation. The governor can't just snap his fingers and cut the size of state government to close a budget shortfall. His hands are tied. He has to honor collective bargaining, abide by a complex array of employment rules, justify his decisions in court and deliver mandated services. The governor also has to sell...

There are supposed to be two ways to close a deficit: raise taxes or cut spending. But a move is afoot in the Legislature to trim California’s budget shortfall through Sacramento's time-honored third way: making rosier revenue assumptions. The Legislative Analyst's Office gave lawmakers just such an opening. Assembly Speaker John A. Perez (D-Los Angeles) said Thursday that Republicans and Democrats alike had agreed to cut $1.4 billion from the deficit by penciling in the rosier revenue forecast by the LAO, which anticipates more tax revenue than is projected by the state Department of Finance.

On the verge of going bankrupt with an astounding $26.3 billion deficit, the nation’s most populous state is considering saving hundreds of millions of dollars annually by cutting monthly welfare payments to illegal immigrants. The savings doesn’t even include the billions of dollars that California spends annually to educate, incarcerate and medically treat the 2.7 million illegal aliens (7% of the state’s population) who live in the state that has so generously offered them sanctuary for decades. It turns out that legislators are finally realizing that illegal immigrants are draining their precious Golden State. would save a much-needed $640 million...

The Schwarzenegger administration today ordered State Controller John Chiang to reduce state worker pay for July to the federal minimum allowed by law -- $7.25 an hour for most state workers. The instructions from the Department of Personnel Administration exclude roughly 37,000 state workers in six bargaining units that recently came to tentative labor agreements with Gov. Arnold Schwarzenegger.

Before clocking a $100 billion loss in early 2009, the California Public Employees' Retirement System, known as Calpers, had the swagger of a hedge fund and the certainty of a saint. Other pension funds followed its lead, loading up on leverage, investing in unrated CDOs, shoving money into high-priced private equity deals and barreling into commodities and real estate. The question now is whether a loss of nearly 40% of its market value -- the worst loss in the system's 77-year history -- has brought Calpers sufficiently back down to earth to avoid another such debacle, and whether other chastened...

rnella Sims has seen a lot in her 34 years as a Los Angeles County court reporter, but nothing like this. Case files piling up by the thousands, phones ringing off the hook, forced midweek courthouse closings and occasional brawls as frustrated citizens queue for hours to pay parking fines. “People think we’re becoming a Third World country,” said Ms. Sims, 55. “They don’t understand.” It’s a story that’s being repeated all across California – and throughout the United States – as cash-strapped state and local governments grapple with collapsed tax revenues and swelling budget gaps. Mass layoffs, slashed health...

Budget, budget, who's got a budget? The governor has a state budget that his fellow Republicans more or less support. Assembly Democrats have a budget whose centerpiece is a complex scheme to borrow billions of dollars. And Democratic senators have a budget that's based on raising taxes and shifting some programs from the state to counties. Democrats control the 10-member, two-house conference committee that's supposed to be reconciling all three budgets into one version that would be placed before the entire Legislature. They have the votes to do it. However, the committee has been going through the budget page by...

Senate Democrats on Monday unveiled their plan to give counties greater control of state programs, potentially shedding $3 billion to $4 billion in ongoing costs to the state budget. Many of the programs are already delivered by counties but paid for through state coffers. Senate Democrats see their changes as a more appropriate "realignment" of services and costs over the next four years. Their plan would not cut taxpayer costs but rather give counties new forms of revenues to pay for the added responsibilities. The state would approve a tax on oil production, permanently extend the state's higher vehicle-license fee...