Monday, July 6, 2009

Governor Making Children Pay the Price

It didn’t take long for Wall Street to react to our governor deliberately using our fiscal crisis to try to force a “reform” agenda completely unrelated to our cash crisis or our budget deficit.

Today, California’s fiscal outlook darkened with news that our credit rating – already the lowest credit rating of any state - just got lowered to BBB because we have started to issue IOUs. Now, the state will have to pay even higher rates of interest for any debt. Surely, this rate hike will not help our deficit.

The worst part about this terrible situation is that California didn’t have to be in it. The Assembly passed legislation on a bipartisan vote to prevent IOUs from occurring. But the governor recruited Senate Republicans to withhold their support, killing the legislation for lack of 2 Republican votes.

Subsequently, we discovered that the governor was too clever by half. It turned out that his maneuver impacted Proposition 98 funding in ways he had not anticipated, potentially costing the state billions in future years. As a result, he proposed suspending Proposition 98 for the second time in his 6-year tenure.

In addition, every day we fail to close the deficit costs the state another $25 million. By my calculations, that’s $17,361.11 per minute.

On Friday, the Big 5 met in the governor’s office. After a period of time, Speaker Karen Bass stomped out of the meeting declaring, “He broke it, he should fix it.” Serious negotiations cannot proceed to resolve the deficit until the governor gets real and stops issuing demands that have nothing to do with the deficit. While he contends that he can find $2 billion in savings this fiscal year, I remain skeptical. The governor never included any of these supposed cost-saving proposals in any of his 4 May Revise budget proposals or his July Revise. And, he never submitted them during the month-long Conference Committee process where numerous cost-cutting proposals were publicly studied and debated.

Take, for example, the governor’s new in-home supportive services (IHSS) proposal. He suggests we can find billions in IHSS savings by fingerprinting elderly and disabled clients, among other things. However, the entire program costs $1.4 billion per year. In other words, the governor says we can save more than the entire program costs.

I stand with the Speaker. We cannot continue to negotiate proposals that have nothing to do with our cash flow crisis or our budget crisis. Let’s stay focused on the problem at hand.