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The State Of The State Is, Well, You Know

by: David Dayen

Thu Jan 15, 2009 at 08:08:40 AM PST

(KQED here in the Bay Area will be airing live coverage at 10, as well as an hour of "pre-game" coverage on their Forum program at 9.  You can listen live here.  The California Channel will be covering it live as well. - promoted by Brian Leubitz)

Arnold Schwarzenegger delivers the State of the State Address at 10am this morning.  Typically he has done this speech to coincide with the evening news.  This year he's trying to hide it.

I don't blame him.  As David Greenwald discusses, people pretty much know the State of the State already.

As Governor Schwarzenegger prepares to report on the State of the State tomorrow, California's families today declared that "the State of the People" is increasingly grim with a record number of Californians having lost their jobs and health care and their homes. California educators, students, health care workers, seniors and people with disabilities said more state budget cuts are exactly the wrong prescription after they've suffered the consequences of more than $16 billion in state budget cuts to critical services over the last 3 years.

"California families are here to report what you won't hear from the Governor tomorrow: budget cuts over the last three years have deeply wounded our families' health and well-being, diminished our children's opportunity for the future, and damaged our economy." said Evan LeVang, Director, Independent Living Resource Center of Northern California.

Californians who have personally been affected by budget cuts detailed the severe consequences that the cuts, including $10 billion in cuts already this year, have had on California families who have already been hit hard by the nation's economic meltdown.

"Before our elected leaders slash another dollar from our hospitals, they should think about what health care would be worth to them if their husband, their daughter, or their father needed care. Because every patient that comes to our hospital is someone's parent, spouse, or child," said Beverly Griffith, an environmental services worker and SEIU member at Summit Medical Center in Oakland. "While longer hours and staff shortages caused by budget cuts have been rough on hospital workers, they've been unbearable for our patients."

And of course, this is bound to get worse.  It's important to split the two major problems into their discrete parts - we have a budget crisis AND a cash crisis.  Even if the budget hole is at least partially filled (and with any luck, we'll be able to access some federal stimulus money, either through direct payments or tax revenues on increased economic activity, by February), the cash crisis would persist, and we could see IOUs even after a budget deal because of the inability for California to go to the bond markets and borrow.  And the converse is also true.  In sum, it's a different problem which needs a different solution.  The LAO is obscure here, but I believe "restricted funds" refers to Prop. 98 money:

The Legislature's budget analyst, Mac Taylor, says that schools, colleges and bondholders will have first call on the state's money if its cash flow crisis hits home in a few weeks.

But Taylor says in a report on the looming cash flow crisis that even if the Legislature fails to reach agreement on closing the state's budget deficit, the cash crisis could be relieved with some emergency legislation to allow more internal borrowing of restricted funds.

Gov. Arnold Schwarzenegger and legislative leaders have been conducting closed-door negotiations this week on both the budget and the cash crisis, which are related but separate issues. Controller John Chiang has said that the state will be forced to curtail state disbursements sometime in February unless there's rapid action on the budget and/or cash flow-related legislation [...]

The administration has asked the Legislature to approve measures that would free up about $2 billion in restricted funds that could be borrowed by the state general fund and thus stave off the cash crunch. It's also said that rapid action on the budget would allow the state to defer more than $1 billion in payments to schools that otherwise would have to be made.

As a budget solution would at least have some impact on loosening the bond markets, this could be the intent of Schwarzenegger's delay - so he can raid dedicated funds for schools and health care.  It's important for us to start figuring out Arnold's gambit.  When I talked to State Senator Fran Pavley at one of the election meetings last weekend, she said "It's hard to negotiate with someone if you don't know what they want."  My next several posts here will seek to figure that out.

Anyway, you're not going to hear it at 10am, I gather.

David Dayen :: The State Of The State Is, Well, You Know
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Raise the tax on gasoline (0.00 / 0)
Raise the tax on gasoline $1.00 per gallon.
(1) balances the state budget
(2) reduces the amount of imported oil
(3) reduces the greenhouse gases emitted
(4) when less oil is imported, the price per barrel drops

All it takes is courage.  

From Sen. Huff's press release (0.00 / 0)
Sacramento - Senator Bob Huff (R - Diamond Bar) released the following statement after hearing Governor Schwarzenegger's 2009 State of the State address which was delivered to a joint session of the Senate and Assembly earlier today.

"I applaud the Governor's petition to the legislature to produce a sound and balanced budget before addressing the many other issues that plague California," stated Senator Huff. "Vital infrastructure projects have already been brought to a halt, and people up and down the state are concerned about whether or not they will be paid. California's finances must be brought under control or the consequences will be devastating."

Senator Huff continued, "2008 was a tough year. A weakened economy, a decline in the housing market, and a lack of the Legislature's will to rein in government spending has wreaked havoc on the hardworking taxpayers of California. As we look to 2009, I am encouraged that the Governor's top priority will be to restore the foundation of our state's fiscal house, for we are hamstrung by a budget crisis that dwarfs all other issues."

"I remain committed to working with the Governor and my colleagues across the aisle to produce a fiscally responsible budget. We must strive to keep more money in the pockets of hard-working Californians and enact real budget reforms to keep this boom/bust cycle from happening again," said Senator Huff.

Yet another Hoover.  Most certainly if I had a few hundred dollars more each year, I'd go out and start contributing to failing building projects.

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