The governor demanded more sacrifice today from working and needy Californians when he cut an additional $586 million while signing California’s budget revision.
A full list of these cuts is available through the Department of Finance starting on page 43 of this document. Most of these cuts were resoundingly rejected by the Conference Committee, after receiving days of input from the public.
A clear pattern emerges in looking at the governor’s list of cuts: it is harder than ever to be a kid in California. Among other things, the governor cut:
• $79.9 million from Child Welfare Services, which investigates instances of child abuse and neglect;
• $50 million from Healthy Families by throwing children off health insurance;
• $50 million from the Early Start Program, which provides disabled young children with early intervention services; and
• $2 million from the Student Aid Commission.
The pain does not stop there. $120 million was cut from county administration funds for Medi-Cal, making it harder for Californians to actually use Medi-Cal. All funding – about $52 million – for the Office of Aids Prevention and Treatment was eliminated. It provided AIDS prevention education as well as counseling services and community care to those living with AIDS. And, all funding for the Domestic Violence Program was eliminated – about $16 million. It provided comprehensive shelter-based domestic violence services to victims of domestic violence and their children.
People will suffer and die because of the cuts the governor made today. I know the governor will be okay. He will relax in his jacuzzi tonight and light up a stogie. It’s the rest of California that I’m worried about.
Tuesday, July 28, 2009
Friday, July 24, 2009
Legislature Approves Revised Budget
After a two-day marathon, the Legislature approved approximately $22.5 billion in budget solutions.
An analysis of the budget revision is available on the Assembly Budget Committee website. Two items that were part of the Big 5 budget agreement failed to pass: a $1.7 billion two-year take of local road maintenance funds and opening up our coast to offshore drilling for the first time in 40 years.
With this budget revision California will chart a new course of great, but not shared, sacrifice. Fewer teachers will teach our children. Thousands of seniors and disabled Californians will lose the care they need to live in their own homes. And, dreams of a state university education will be dashed for many Californians because it is about to become much more expensive. But, absent this budget revision, financial insolvency is days away. While these cuts are painful, the alternative is worse.
The California dream is the victim of our dysfunctional process. Californians want quality public schools, a safety net for vulnerable residents, and their coastline protected from expanded oil drilling. The tragedy is that these and other California values took a backseat to the interests of an empowered minority who shut the public out from crafting their own budget. No other budget has so clearly shown the need for budget reforms to restore the integrity of our democracy.
An analysis of the budget revision is available on the Assembly Budget Committee website. Two items that were part of the Big 5 budget agreement failed to pass: a $1.7 billion two-year take of local road maintenance funds and opening up our coast to offshore drilling for the first time in 40 years.
With this budget revision California will chart a new course of great, but not shared, sacrifice. Fewer teachers will teach our children. Thousands of seniors and disabled Californians will lose the care they need to live in their own homes. And, dreams of a state university education will be dashed for many Californians because it is about to become much more expensive. But, absent this budget revision, financial insolvency is days away. While these cuts are painful, the alternative is worse.
The California dream is the victim of our dysfunctional process. Californians want quality public schools, a safety net for vulnerable residents, and their coastline protected from expanded oil drilling. The tragedy is that these and other California values took a backseat to the interests of an empowered minority who shut the public out from crafting their own budget. No other budget has so clearly shown the need for budget reforms to restore the integrity of our democracy.
Tuesday, July 21, 2009
Budget Deal Breakdown
California will soon have a revised budget in place to put this fiscal crisis behind us and to address our ongoing cash crisis. Yesterday evening, the Big 5 announced a budget agreement on which we plan to have a vote this Thursday. A light is at the end of the tunnel.
A comprehensive analysis of the budget package is now being compiled by the Assembly Budget Committee for release tomorrow. Below is a brief summary of the $24.2 billion in solutions to close our $23.3 billion budget deficit:
• $15.5 billion in cuts;
• $3.9 billion in revenue enhancements;
• $2.1 billion in borrowing;
• $1.5 billion in funding shifts;
• $1.2 billion in deferrals; and
• $875 million in financial reserves.
About 95% of the agreement is based upon Conference Committee recommendations or proposals made in the one or more of the Governor’s May revisions, which means the deal could have been accomplished weeks ago, saving the state and Californians $25 million a day and the drama of IOUs. The major differences between this budget and the Conference Budget include approximately $2.6 billion more in cuts, $4.3 billion less in revenues, and nearly $2 billion more in borrowing.
This revised budget includes something for everyone to dislike, such as the Tranquillon Ridge off-shore drilling proposal. And almost all borrowing is from local government, meaning cash-strapped cities and counties will either be forced to cut more local services or borrow against the state’s promise to repay them in the future. Others are very concerned about the impacts of cuts to the corrections budget.
However, I am pleased to say that the budget agreement does not include the following:
• Proposition 98 will not be suspended; K-12 education will be repaid $11.2 billion when the state can afford it;
• CalWORKS will not be eliminated or decimated by extreme cuts;
• In-home supportive services (IHSS) programs are preserved for the neediest Californians;
• Healthy Families Program will not be eliminated or face eligibility reductions;
• State parks will not face sweeping and massive closures at over 200 park locations, although some of the lesser-used parks may close;
• Transportation will not face a suspension of Proposition 42;
• No new tax giveaways will be given to special interests; and
• Billions in federal funds will continue flowing into California because the Legislature rejected the governor’s proposals that failed to meet federal maintenance of effort requirements.
Legislative Counsel is in the process of drafting the appropriate language and the Legislature is expected to begin voting as early as Thursday afternoon. More details to follow tomorrow.
A comprehensive analysis of the budget package is now being compiled by the Assembly Budget Committee for release tomorrow. Below is a brief summary of the $24.2 billion in solutions to close our $23.3 billion budget deficit:
• $15.5 billion in cuts;
• $3.9 billion in revenue enhancements;
• $2.1 billion in borrowing;
• $1.5 billion in funding shifts;
• $1.2 billion in deferrals; and
• $875 million in financial reserves.
About 95% of the agreement is based upon Conference Committee recommendations or proposals made in the one or more of the Governor’s May revisions, which means the deal could have been accomplished weeks ago, saving the state and Californians $25 million a day and the drama of IOUs. The major differences between this budget and the Conference Budget include approximately $2.6 billion more in cuts, $4.3 billion less in revenues, and nearly $2 billion more in borrowing.
This revised budget includes something for everyone to dislike, such as the Tranquillon Ridge off-shore drilling proposal. And almost all borrowing is from local government, meaning cash-strapped cities and counties will either be forced to cut more local services or borrow against the state’s promise to repay them in the future. Others are very concerned about the impacts of cuts to the corrections budget.
However, I am pleased to say that the budget agreement does not include the following:
• Proposition 98 will not be suspended; K-12 education will be repaid $11.2 billion when the state can afford it;
• CalWORKS will not be eliminated or decimated by extreme cuts;
• In-home supportive services (IHSS) programs are preserved for the neediest Californians;
• Healthy Families Program will not be eliminated or face eligibility reductions;
• State parks will not face sweeping and massive closures at over 200 park locations, although some of the lesser-used parks may close;
• Transportation will not face a suspension of Proposition 42;
• No new tax giveaways will be given to special interests; and
• Billions in federal funds will continue flowing into California because the Legislature rejected the governor’s proposals that failed to meet federal maintenance of effort requirements.
Legislative Counsel is in the process of drafting the appropriate language and the Legislature is expected to begin voting as early as Thursday afternoon. More details to follow tomorrow.
Thursday, July 16, 2009
Stand Up for Education
All parents want their children to grow up to reach their potential and make their dreams come true. A quality education makes this possible.
About 90 percent of children are educated in our public schools. Californians love their schools. This is why Californians have prioritized education funding more than anything else in the budget. In 1988, voters passed Proposition 98 to lock in our state constitution protection of education funding.
Despite the voters’ strong support for education funding, the self-proclaimed “people’s governor” proposed suspending Proposition 98 earlier this month to help close California’s record deficit. Although cuts to public education are inevitable, because Proposition 98 requires that roughly 40% of our General Fund be directed to K-14 education, Democrats want to protect education as much as possible from long-term harm. Therefore, we want to make sure that in the future, as our revenues improve, we meet the requirements of Proposition 98 to repay education for earlier cuts.
A lot is at stake for California’s children. If we were to suspend Proposition 98 as proposed by the Governor, and fail to commit to repay schools in the future, our schools will lose about $11 billion per year forever. In other words if these cuts are never restored, a child born today will see about $165 billion less invested in his or her education from kindergarten through community college. Is this really the legacy we want to leave our children? In other words, it means about $11 billion a year for public education. Repayment of these funds will enhance the learning environment by keeping class sizes low, keeping quality teachers in our classrooms, and keeping updated instructional materials within school curriculum.
California ranks among the lowest states in the nation in per pupil funding. Yet, we are the 8th largest economy in the world. Failure to invest in our children’s education is failure to prepare ourselves and them to meet the challenges of a world-class economy in the 21st Century and to compete with other world-class economies who do invest in education, such as Japan and China. Failure to repay the funds as required by Proposition 98 is not only penny-wise and pound foolish, but irresponsible in the extreme. It is also deeply anti-business because state businesses depend upon a skilled local workforce and care about the availability of quality education for their employees’ children.
The Governor will no doubt contend that legislative Democrats seek to protect special interests. This is true only if one considers our children are not to be “special interests” unworthy of protection.
Nothing is more important to California’s future than its children. This is not an unreasonable request on the part of legislative Democrats. We need to make this commitment to our children a reality in this budget.
About 90 percent of children are educated in our public schools. Californians love their schools. This is why Californians have prioritized education funding more than anything else in the budget. In 1988, voters passed Proposition 98 to lock in our state constitution protection of education funding.
Despite the voters’ strong support for education funding, the self-proclaimed “people’s governor” proposed suspending Proposition 98 earlier this month to help close California’s record deficit. Although cuts to public education are inevitable, because Proposition 98 requires that roughly 40% of our General Fund be directed to K-14 education, Democrats want to protect education as much as possible from long-term harm. Therefore, we want to make sure that in the future, as our revenues improve, we meet the requirements of Proposition 98 to repay education for earlier cuts.
A lot is at stake for California’s children. If we were to suspend Proposition 98 as proposed by the Governor, and fail to commit to repay schools in the future, our schools will lose about $11 billion per year forever. In other words if these cuts are never restored, a child born today will see about $165 billion less invested in his or her education from kindergarten through community college. Is this really the legacy we want to leave our children? In other words, it means about $11 billion a year for public education. Repayment of these funds will enhance the learning environment by keeping class sizes low, keeping quality teachers in our classrooms, and keeping updated instructional materials within school curriculum.
California ranks among the lowest states in the nation in per pupil funding. Yet, we are the 8th largest economy in the world. Failure to invest in our children’s education is failure to prepare ourselves and them to meet the challenges of a world-class economy in the 21st Century and to compete with other world-class economies who do invest in education, such as Japan and China. Failure to repay the funds as required by Proposition 98 is not only penny-wise and pound foolish, but irresponsible in the extreme. It is also deeply anti-business because state businesses depend upon a skilled local workforce and care about the availability of quality education for their employees’ children.
The Governor will no doubt contend that legislative Democrats seek to protect special interests. This is true only if one considers our children are not to be “special interests” unworthy of protection.
Nothing is more important to California’s future than its children. This is not an unreasonable request on the part of legislative Democrats. We need to make this commitment to our children a reality in this budget.
Wednesday, July 15, 2009
Shock Therapy for California
As we wait for Big 5 to complete their negotiations, it's time to ponder what this budget means to the future of the state of California.
This budget, more than any other, is about what kind of future our state will have. Unfortunately for California, the governor is taking his vision straight out of the Milton Friedman playbook.
Friedman recommended a three-part policy prescription of privatization, deregulation, and cuts to social programs. He believed government should remove all rules and regulations standing in the way of business; government should sell everything private business could run at a profit (parks, health care, education, pensions, administration of social services); and government should dramatically cut social services. Economic crises - including huge public debts - have typically been the context where such policies are implemented.
Sound familiar? When this economic crisis hit California, the governor grandly proclaimed the crisis as an opportunity for “reform.” But it is the Friedman model he considers “reform.”
To close our current, record deficit, the governor’s first proposal was to eliminate CalGrants, CalWORKS, Healthy Families and 90% of IHSS. He also proposed closing over 200 state parks. He now proposes new, relaxed procurement rules, despite our state’s dismal experience in the Oracle debacle. He wants to privatize CalWORKS—even though Massachussets’ experience with Maximus was an enormously costly failure—and will use this budget to lay the groundwork. He mounts an all-out assault on state workers through furloughs, salary cuts and layoffs—which will make it easier to privatize their functions. He proposes to take money from cities and counties, ensuring their fiscal crises will deepen and local governments will be unable to provide necessary services.
Californians do not want to sell their state to the highest bidder. But the gun is to our head. The governor revoked authority necessary for the State Controller to borrow emergency cash and the state is now paying its bills with IOUs. The Legislature is hamstrung by the 2/3 vote requirement and term limits. Revenues are falling, while unemployment is rising. California’s credit rating was recently downgraded to just barely above junk bond status. The federal government has refused to provide us with loan guarantees. And, California is poised to borrow yet more from local government to balance its budget, ensuring that our fiscal crisis will deepen in coming years.
To the governor, this crisis represents an opportunity to remake California according to the Friedman model, but not according to the California dream. His proposals, after all, will deepen the economic misery for hundreds of thousands for Californians by throwing low-income women and children on the streets, forcing the elderly and disabled out of their homes into more expensive, private care, make college too expensive for most California families, turn away federal matching funds, close parks, and greatly add to the unemployment rate while depriving cities and counties of the funds they need to function.
How does this serve the interests of ordinary Californians?
This budget, more than any other, is about what kind of future our state will have. Unfortunately for California, the governor is taking his vision straight out of the Milton Friedman playbook.
Friedman recommended a three-part policy prescription of privatization, deregulation, and cuts to social programs. He believed government should remove all rules and regulations standing in the way of business; government should sell everything private business could run at a profit (parks, health care, education, pensions, administration of social services); and government should dramatically cut social services. Economic crises - including huge public debts - have typically been the context where such policies are implemented.
Sound familiar? When this economic crisis hit California, the governor grandly proclaimed the crisis as an opportunity for “reform.” But it is the Friedman model he considers “reform.”
To close our current, record deficit, the governor’s first proposal was to eliminate CalGrants, CalWORKS, Healthy Families and 90% of IHSS. He also proposed closing over 200 state parks. He now proposes new, relaxed procurement rules, despite our state’s dismal experience in the Oracle debacle. He wants to privatize CalWORKS—even though Massachussets’ experience with Maximus was an enormously costly failure—and will use this budget to lay the groundwork. He mounts an all-out assault on state workers through furloughs, salary cuts and layoffs—which will make it easier to privatize their functions. He proposes to take money from cities and counties, ensuring their fiscal crises will deepen and local governments will be unable to provide necessary services.
Californians do not want to sell their state to the highest bidder. But the gun is to our head. The governor revoked authority necessary for the State Controller to borrow emergency cash and the state is now paying its bills with IOUs. The Legislature is hamstrung by the 2/3 vote requirement and term limits. Revenues are falling, while unemployment is rising. California’s credit rating was recently downgraded to just barely above junk bond status. The federal government has refused to provide us with loan guarantees. And, California is poised to borrow yet more from local government to balance its budget, ensuring that our fiscal crisis will deepen in coming years.
To the governor, this crisis represents an opportunity to remake California according to the Friedman model, but not according to the California dream. His proposals, after all, will deepen the economic misery for hundreds of thousands for Californians by throwing low-income women and children on the streets, forcing the elderly and disabled out of their homes into more expensive, private care, make college too expensive for most California families, turn away federal matching funds, close parks, and greatly add to the unemployment rate while depriving cities and counties of the funds they need to function.
How does this serve the interests of ordinary Californians?
Tuesday, July 14, 2009
The Governor's Contradictions
The governor has been quick to say that the Legislature should work on solving the budget problem and nothing else. But, as a condition of passing a budget, the governor wants to make numerous policy changes unrelated to our budget deficit or our cash crisis.
Sounds like the governor might break his glass house with all the sticks and stones he’s been throwing.
As the Big 5 continues meeting this week to complete the details of a bipartisan budget revision agreement, let’s hope that the governor stays focused on solving the budget problem. And, let's help him keep his facts straight. Check out this video made by the Assembly Democrats about the governor’s contradictions.
Sounds like the governor might break his glass house with all the sticks and stones he’s been throwing.
As the Big 5 continues meeting this week to complete the details of a bipartisan budget revision agreement, let’s hope that the governor stays focused on solving the budget problem. And, let's help him keep his facts straight. Check out this video made by the Assembly Democrats about the governor’s contradictions.
Monday, July 13, 2009
Indentured Servants
As California weathers this budget crisis, it has been disappointing to see the governor target the men and women who devote their lives to serving their fellow citizens.
Public servants work to make California better. They are not the enemy in this budget crisis. But the governor would use this crisis to destroy the incentives for our best and brightest to consider a career path in public service.
Business managers know that employee morale is key to a productive workforce. The same goes for recruiting and retaining talent. So what is to be gained from the governor scapegoating our public servants to make them feel more like indentured servants?
All together, the Governor has proposed to reduce state employee pay by nearly 25%, eliminate two holidays, reduce health care services and increase employee premiums costs, eliminate state health care payments, increase required employee contributions for health care and pension plans, reduce retirement benefit formulas, extend service time needed for vesting in CalPERS, and to layoff 5,000 employees.
Some attack state workers for earning any benefits at all, but a decent salary and decent benefits are crucial to attracting and retaining a stable workforce. Some have argued that the state workforce should be trimmed and that these cutbacks are necessary to “trim the fat.” But studies have shown that California’s public sector is actually quite lean compared to other states. According to a 2008 study, California had the second lowest number of public employees relative to population among the states.
Yes, there is a financial imperative to reduce state spending. That means cuts for state workers may be necessary, just as cuts are necessary in the private sector, to help the state weather the current financial storm. But if pushed too far, the state stops functioning, just as any private business stops functioning without its workforce.
Schoolchildren don’t teach themselves, fires don’t put themselves out, and parks don’t manage themselves. We need dedicated, educated, and qualified people to do these jobs. If the governor continues waging his war against public servants, we face a difficult question: what caliber of individual will be willing to do these important jobs if they can’t make a decent living and are constantly scapegoated? A functional, experienced, dynamic public workforce is critical to California’s future.
Public servants work to make California better. They are not the enemy in this budget crisis. But the governor would use this crisis to destroy the incentives for our best and brightest to consider a career path in public service.
Business managers know that employee morale is key to a productive workforce. The same goes for recruiting and retaining talent. So what is to be gained from the governor scapegoating our public servants to make them feel more like indentured servants?
All together, the Governor has proposed to reduce state employee pay by nearly 25%, eliminate two holidays, reduce health care services and increase employee premiums costs, eliminate state health care payments, increase required employee contributions for health care and pension plans, reduce retirement benefit formulas, extend service time needed for vesting in CalPERS, and to layoff 5,000 employees.
Some attack state workers for earning any benefits at all, but a decent salary and decent benefits are crucial to attracting and retaining a stable workforce. Some have argued that the state workforce should be trimmed and that these cutbacks are necessary to “trim the fat.” But studies have shown that California’s public sector is actually quite lean compared to other states. According to a 2008 study, California had the second lowest number of public employees relative to population among the states.
Yes, there is a financial imperative to reduce state spending. That means cuts for state workers may be necessary, just as cuts are necessary in the private sector, to help the state weather the current financial storm. But if pushed too far, the state stops functioning, just as any private business stops functioning without its workforce.
Schoolchildren don’t teach themselves, fires don’t put themselves out, and parks don’t manage themselves. We need dedicated, educated, and qualified people to do these jobs. If the governor continues waging his war against public servants, we face a difficult question: what caliber of individual will be willing to do these important jobs if they can’t make a decent living and are constantly scapegoated? A functional, experienced, dynamic public workforce is critical to California’s future.
Friday, July 10, 2009
Governor’s Fig Leaf IHSS “Reform”
The governor claims his in-home supportive services (IHSS) “reform” proposal to combat fraud will reap 25% in program savings. While he brought forward several county District Attorneys to talk about anecdotal evidence of fraud, his assertions contradict the findings of a recent state audit of IHSS fraud overseen by his own administration. This audit released just last year, found only 1% of IHSS cases involved fraud.
This is just another sham proposal from the governor to gut the IHSS program using fraud as a fig leaf.
Contrary to the governor’s unsupported assertions, the recent audit is an unbiased analysis of fraud in IHSS and provides the best projection for any potential budget savings through reforms geared to reduce fraud.
41 counties performed a random quality assurance review of 23,823 IHSS cases. The review included intense auditing of each case to insure that state assessments are uniform and that errors are minimized. It also checked for fraud or any other inconsistencies. Of the 23,823 IHSS cases reviewed, the administration’s own audit found 1,043 cases (4.3 percent of all cases) where there was some type of red flag that warranted further investigation regarding fraud.
Nowhere did this audit find anything near 25% fraud.
IHSS is a program of in-home supportive care that was established in 1979 to replace other types of in-home care programs. Those of us who have been around a while remember the days when the elderly were forced into nursing homes because there was no other care available. These nursing homes were expensive and care was often at best indifferent and at worse abusive. The cost of nursing home care was astronomical. Similarly, the disabled were warehoused in state institutions, even though many were able to live independently with a little assistance. Decades ago, the people of this state decided the elderly and disabled should stay in their homes and enabled them to do so by adopting programs such as IHSS. Those who forget this history would doom us to repeat it.
The elderly and disabled will not simply disappear when the governor destroys IHSS. Their needs will not go away. The choices they face will be: suffer and die alone or find institutionalized care at much greater expense.
We must question the governor’s intentions when he makes these unsubstantiated claims. What is his true agenda here? For years he has tried to reduce IHSS worker pay. This year, he proposed to nearly eliminate IHSS by reducing caseloads by 90%. Now he has shifted to making unsupported assertions about rampant fraud. And at the same time the governor is making allegations about fraud, he is furloughing the very state workers charged with uncovering fraud and enforcing the rules. Nor did he bring forward these assertions at any time during the month-long process of Conference Committee hearings.
While the governor criminalizes elderly and people in wheelchairs, California’s budget crisis deepens. The Controller just released new figures showing how far state revenues have dropped below projections. In addition, a state appeals court recently held that the state’s shift of transit funds from transit agencies to balance the general fund budget was illegal. Another state court stayed the furlough to State Compensation Insurance Fund lawyers and administrative law judges pending decision in the case-in-chief. The National Parks Service threatens to take over some state parks if they are closed. Medi-Cal providers won a lawsuit in the 9th Circuit challenging the state’s 10% reduction in reimbursements last August and the court ordered the state to repay $111 million.
California burns while Schwarzenegger fiddles.
This is just another sham proposal from the governor to gut the IHSS program using fraud as a fig leaf.
Contrary to the governor’s unsupported assertions, the recent audit is an unbiased analysis of fraud in IHSS and provides the best projection for any potential budget savings through reforms geared to reduce fraud.
41 counties performed a random quality assurance review of 23,823 IHSS cases. The review included intense auditing of each case to insure that state assessments are uniform and that errors are minimized. It also checked for fraud or any other inconsistencies. Of the 23,823 IHSS cases reviewed, the administration’s own audit found 1,043 cases (4.3 percent of all cases) where there was some type of red flag that warranted further investigation regarding fraud.
Nowhere did this audit find anything near 25% fraud.
IHSS is a program of in-home supportive care that was established in 1979 to replace other types of in-home care programs. Those of us who have been around a while remember the days when the elderly were forced into nursing homes because there was no other care available. These nursing homes were expensive and care was often at best indifferent and at worse abusive. The cost of nursing home care was astronomical. Similarly, the disabled were warehoused in state institutions, even though many were able to live independently with a little assistance. Decades ago, the people of this state decided the elderly and disabled should stay in their homes and enabled them to do so by adopting programs such as IHSS. Those who forget this history would doom us to repeat it.
The elderly and disabled will not simply disappear when the governor destroys IHSS. Their needs will not go away. The choices they face will be: suffer and die alone or find institutionalized care at much greater expense.
We must question the governor’s intentions when he makes these unsubstantiated claims. What is his true agenda here? For years he has tried to reduce IHSS worker pay. This year, he proposed to nearly eliminate IHSS by reducing caseloads by 90%. Now he has shifted to making unsupported assertions about rampant fraud. And at the same time the governor is making allegations about fraud, he is furloughing the very state workers charged with uncovering fraud and enforcing the rules. Nor did he bring forward these assertions at any time during the month-long process of Conference Committee hearings.
While the governor criminalizes elderly and people in wheelchairs, California’s budget crisis deepens. The Controller just released new figures showing how far state revenues have dropped below projections. In addition, a state appeals court recently held that the state’s shift of transit funds from transit agencies to balance the general fund budget was illegal. Another state court stayed the furlough to State Compensation Insurance Fund lawyers and administrative law judges pending decision in the case-in-chief. The National Parks Service threatens to take over some state parks if they are closed. Medi-Cal providers won a lawsuit in the 9th Circuit challenging the state’s 10% reduction in reimbursements last August and the court ordered the state to repay $111 million.
California burns while Schwarzenegger fiddles.
Thursday, July 9, 2009
An Uncertain Road for IOU Recipients
For lack of a budget revision in place, our State Controller will issue more than $3 billion of IOUs this month. But after tomorrow the nation’s largest banks – including Bank of America, Citigroup, Wells Fargo and J.P. Morgan Chase – will cease accepting them as legal tender.
So, what are IOU recipients to do? That is not entirely clear.
Generally, the options are limited and mixed:
• Identify alternative banks or credit unions to cash their IOUs, which the institutions will redeem upon maturity on October 2;
• Sell their IOUs to third parties with a notarized bill of sale, which the buyers can redeem on October 2; or
• Redeem their IOUs with the State Treasurer on October 2.
Earlier this week, the Treasurer published guidelines for redeeming or selling IOUs. He also established a toll-free IOU help line at 1-888-864-2762.
But just yesterday the Securities and Exchange Commission claimed California's IOUs fall under federal securities law. Among other things, it stated “Persons acting as intermediaries between buyers and sellers of the warrants may need to register as brokers, dealers or municipal securities dealers, or as alternative trading systems or national securities exchanges.”
Clearly the recipients of IOUs and prospective buyers need to be careful on the road ahead. Let’s hope that it becomes clear for the benefit of all through this challenging time.
So, what are IOU recipients to do? That is not entirely clear.
Generally, the options are limited and mixed:
• Identify alternative banks or credit unions to cash their IOUs, which the institutions will redeem upon maturity on October 2;
• Sell their IOUs to third parties with a notarized bill of sale, which the buyers can redeem on October 2; or
• Redeem their IOUs with the State Treasurer on October 2.
Earlier this week, the Treasurer published guidelines for redeeming or selling IOUs. He also established a toll-free IOU help line at 1-888-864-2762.
But just yesterday the Securities and Exchange Commission claimed California's IOUs fall under federal securities law. Among other things, it stated “Persons acting as intermediaries between buyers and sellers of the warrants may need to register as brokers, dealers or municipal securities dealers, or as alternative trading systems or national securities exchanges.”
Clearly the recipients of IOUs and prospective buyers need to be careful on the road ahead. Let’s hope that it becomes clear for the benefit of all through this challenging time.
Wednesday, July 8, 2009
Go Be Poor Somewhere Else
As the state proceeds down the road to insolvency, the governor has 16 policy proposals on which he would condition the adoption of a budget agreement. But an Assembly Budget Committee analysis released today reveals that nearly all of his ideas have no effect on our cash crisis or budget deficit.
In yesterday’s blog we discussed the return of Oracle-style contracting as proposed by the governor. Today, let’s examine the governor’s latest CalWORKS proposal. Our Assembly Budget Committee analysis reveals that the governor’s proposal basically throws to the wolves the individuals unemployed by our recession. Symbolically, it is saying to these struggling families “go and be poor somewhere else.” Substantively, it won’t help resolve our budget problem.
The governor’s CalWORKS proposal:
• Reduces the maximum time one can be enrolled in CalWORKS from 60 to 24 months;
• Requires CalWORKs recipients to attend a face-to-face self-sufficiency interview every six months;
• Counts months in sanction status towards the lifetime limit on aid, undercutting the welfare to work character of the program;
• Cuts all aid for families receiving safety net benefits beyond the time limit unless families meet federal work participation rates;
• Cuts monthly grants to CalWORKS enrollees by six percent to $651, lower than it was 20 years ago; and
• Eliminates future COLAs for CalWORKS grants.
In one of his several May Revise budgets, the governor proposed to eliminate CalWORKS. Since the budget Conference Committee resoundingly rejected that proposal, the governor is repackaging the idea with thin veneer of “reform.” The effect of his new proposal is to reduce CalWORKS eligibility so enormously that only the most employable people can enroll. That ignores the people who need help the most at a time when more people need CalWORKS to find work or transition into a new career.
The facts show a need for CalWORKS. Unfortunately, the governor is using the power of myth to justify his draconian proposal. The worst of these myths is that CalWORKS is a drain on the budget. As pointed out in a publication by the County Welfare Directors Association of California, CalWORKs has contributed over $12 billion to the General Fund since its inception. And, CalWORKs provides an important boost to the state’s economy, generating $7.1 billion in economic output, 137,000 private and public‐sector jobs, and $130 million in sales tax revenues. Why would we ever want to stop that?
CalWORKS is a job creator; the governor’s proposal is a family-killer.
In yesterday’s blog we discussed the return of Oracle-style contracting as proposed by the governor. Today, let’s examine the governor’s latest CalWORKS proposal. Our Assembly Budget Committee analysis reveals that the governor’s proposal basically throws to the wolves the individuals unemployed by our recession. Symbolically, it is saying to these struggling families “go and be poor somewhere else.” Substantively, it won’t help resolve our budget problem.
The governor’s CalWORKS proposal:
• Reduces the maximum time one can be enrolled in CalWORKS from 60 to 24 months;
• Requires CalWORKs recipients to attend a face-to-face self-sufficiency interview every six months;
• Counts months in sanction status towards the lifetime limit on aid, undercutting the welfare to work character of the program;
• Cuts all aid for families receiving safety net benefits beyond the time limit unless families meet federal work participation rates;
• Cuts monthly grants to CalWORKS enrollees by six percent to $651, lower than it was 20 years ago; and
• Eliminates future COLAs for CalWORKS grants.
In one of his several May Revise budgets, the governor proposed to eliminate CalWORKS. Since the budget Conference Committee resoundingly rejected that proposal, the governor is repackaging the idea with thin veneer of “reform.” The effect of his new proposal is to reduce CalWORKS eligibility so enormously that only the most employable people can enroll. That ignores the people who need help the most at a time when more people need CalWORKS to find work or transition into a new career.
The facts show a need for CalWORKS. Unfortunately, the governor is using the power of myth to justify his draconian proposal. The worst of these myths is that CalWORKS is a drain on the budget. As pointed out in a publication by the County Welfare Directors Association of California, CalWORKs has contributed over $12 billion to the General Fund since its inception. And, CalWORKs provides an important boost to the state’s economy, generating $7.1 billion in economic output, 137,000 private and public‐sector jobs, and $130 million in sales tax revenues. Why would we ever want to stop that?
CalWORKS is a job creator; the governor’s proposal is a family-killer.
Tuesday, July 7, 2009
Governor's Game-playing Continues
LAST MINUTE UPDATE: The governor continues to play puerile games with the Legislature as we go about doing the people’s business. Tonight, his spokesman Aaron McLear suggested a local television station send a camera and reporter to my office to inquire about a bill I presented in Senate Agriculture which must have taken all of 30 seconds to present and pass out of committee. Doesn’t the governor's office have anything better to do, like solving the budget crisis? Join us Governor, and get back to work!
Oracle – The Sequel
The governor continues to demand adoption of last-minute policy proposals which have nothing to do with solving California’s immediate cash crisis or closing this year’s deficit. In today’s blog let’s examine another one of the Governor’s so called “reforms.”
The governor proposes to change the method by which the state procures services from outside contractors. Anyone remember the “Oracle” scandal which haunted the Davis administration? Living up to the prophetic meaning of its name, Oracle is back!
As noted in a state audit, in 2001, a firm called Logicon was hired to advise the state regarding awarding a $95 million contract for information technology services. Logicon projected $111 million in savings to the state. After providing these consulting services to the state, Logicon served as a liaison and representative for Oracle. Then, the state entered into the contract with Oracle. But, instead of saving $111 million, the state ultimately lost millions of dollars and never got the services it contracted for. The contract was finally cancelled.
The governor’s proposal undermines the integrity of competitive bidding and actually encourages self-dealing. Current state law prohibits a firm which advises the state on awarding contracts from receiving the contract itself. This long-standing rule is simply common-sense protection for taxpayers and reflects the lessons learned from the Oracle debacle. But the governor now wants to create a loophole that would allow the same firm that advises the state to also be awarded the contract! All the consulting firm would need to do is advise the state that the contract would best be awarded in multiple phases.
Sounds like a pretty sweet deal for special interests, doesn’t it? But we’ve seen this movie before and it didn’t end well for the state. Now the governor proposes to make this flawed method our state’s standard process, arguing it will save the state an unknown amount of money. Such a process will surely benefit someone, but it isn’t the people of the State of California.
The governor proposes to change the method by which the state procures services from outside contractors. Anyone remember the “Oracle” scandal which haunted the Davis administration? Living up to the prophetic meaning of its name, Oracle is back!
As noted in a state audit, in 2001, a firm called Logicon was hired to advise the state regarding awarding a $95 million contract for information technology services. Logicon projected $111 million in savings to the state. After providing these consulting services to the state, Logicon served as a liaison and representative for Oracle. Then, the state entered into the contract with Oracle. But, instead of saving $111 million, the state ultimately lost millions of dollars and never got the services it contracted for. The contract was finally cancelled.
The governor’s proposal undermines the integrity of competitive bidding and actually encourages self-dealing. Current state law prohibits a firm which advises the state on awarding contracts from receiving the contract itself. This long-standing rule is simply common-sense protection for taxpayers and reflects the lessons learned from the Oracle debacle. But the governor now wants to create a loophole that would allow the same firm that advises the state to also be awarded the contract! All the consulting firm would need to do is advise the state that the contract would best be awarded in multiple phases.
Sounds like a pretty sweet deal for special interests, doesn’t it? But we’ve seen this movie before and it didn’t end well for the state. Now the governor proposes to make this flawed method our state’s standard process, arguing it will save the state an unknown amount of money. Such a process will surely benefit someone, but it isn’t the people of the State of California.
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.
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.
Thursday, July 2, 2009
Stranger than Fiction
Our Hollywood governor has a fine appreciation for drama, suspense, and blowing things up. I just wish he had an appreciation for happy endings.
We need the governor to find common ground instead of creating new divisions by demanding last-minute policy changes unrelated to budgeting. Take the proclamation of fiscal emergency he made yesterday. It demonstrates a use of creative license we expect from a team of Hollywood script writers, but not from a responsible governor. It shows a preference for fiction over fact.
The governor’s proclamation reads:
“WHEREAS California planned to borrow up to $6 billion through Reimbursement Warrants (commonly referred to as RAWs) to address part of the budget deficit, but this short-term borrowing is no longer an available option due to the recent decision of the federal government not to provide financial assistance or loan guarantees for this emergency, short-term borrowing.” (Emphasis added.)
The truth is the governor himself unilaterally revoked the authority necessary for the Controller to issue RAWs on June 11, 2009. See the governor’s letter here.
The governor’s proclamation also reads:
“WHEREAS On June 30, 2009, the Legislature failed to take action to pass a revised budget for fiscal years 2008-09 and 2009-10 to effectively address the unprecedented statewide fiscal crisis, thereby requiring billions of dollars in additional solutions.”
The truth is the governor actively recruited Senate Republicans to vote against the 3 bill package passed nearly unanimously by the Assembly which would have provided immediate cash relief to the state’s treasury. This maneuver cost the state an additional $7 billion. Finally, Democratic legislators bypassed the Republicans and passed a package of legislation by a majority vote which made deep cuts to services and altogether would have closed the entire deficit. When we sent the governor the first two bills worth $7.9 billion in spending reductions and $4.4 billion in revenue accelerations and enforcement, the governor vetoed them even though there were no new taxes.
California needs the governor to set aside political theatrics and help us get to a balanced budget. That’s the happy ending we are all waiting for.
We need the governor to find common ground instead of creating new divisions by demanding last-minute policy changes unrelated to budgeting. Take the proclamation of fiscal emergency he made yesterday. It demonstrates a use of creative license we expect from a team of Hollywood script writers, but not from a responsible governor. It shows a preference for fiction over fact.
The governor’s proclamation reads:
“WHEREAS California planned to borrow up to $6 billion through Reimbursement Warrants (commonly referred to as RAWs) to address part of the budget deficit, but this short-term borrowing is no longer an available option due to the recent decision of the federal government not to provide financial assistance or loan guarantees for this emergency, short-term borrowing.” (Emphasis added.)
The truth is the governor himself unilaterally revoked the authority necessary for the Controller to issue RAWs on June 11, 2009. See the governor’s letter here.
The governor’s proclamation also reads:
“WHEREAS On June 30, 2009, the Legislature failed to take action to pass a revised budget for fiscal years 2008-09 and 2009-10 to effectively address the unprecedented statewide fiscal crisis, thereby requiring billions of dollars in additional solutions.”
The truth is the governor actively recruited Senate Republicans to vote against the 3 bill package passed nearly unanimously by the Assembly which would have provided immediate cash relief to the state’s treasury. This maneuver cost the state an additional $7 billion. Finally, Democratic legislators bypassed the Republicans and passed a package of legislation by a majority vote which made deep cuts to services and altogether would have closed the entire deficit. When we sent the governor the first two bills worth $7.9 billion in spending reductions and $4.4 billion in revenue accelerations and enforcement, the governor vetoed them even though there were no new taxes.
California needs the governor to set aside political theatrics and help us get to a balanced budget. That’s the happy ending we are all waiting for.
Wednesday, July 1, 2009
Setting the Record Straight
Today, the governor held a press conference that reminded me of the phrase “everyone is entitled to his own opinion but not his own facts.”
As was expected, the governor pointed the finger at the Legislature to explain why we do not have a budget revision in place today. But this criticism, among other things he said, is simply a manipulation of the facts. So, let me set the record straight. Consider these examples:
• The Legislature only had endless hearings and no negotiations – The Conference Committee had public hearings to give the public a say in the public’s budget. And, we have had negotiations. But the governor has consistently used Republican legislators to blow up the agreements we have made.
• The Legislature is protecting special interests – This is true only if one defines special interests to be children, the elderly, the disabled, college students from working families, and state park lovers. Conference Committee protected the people of California from their own governor. That is why we rejected the governor’s proposals to eliminate healthcare for a million children, to eliminate welfare to work programs while unemployment in teeters over 11%, to eliminate CalGrants, and to close 220 state parks.
• The Legislature must look at reforming state pensions, CalWORKS, and in-home care - Here we go again. Remember the multi-million dollar 2005 special election no one but the governor wanted? Every single one of the so-called “reform” initiatives written by the governor were resoundingly rejected by the voters. The governor is bringing them back and doesn’t want public scrutiny of the sweeping policy changes he wants as part of a budget agreement.
• The Legislature must solve the entire budget problem – The Legislature has solved the entire budget problem, including adopting many - but not all - of the governor's own proposals. The Conference Budget provides $23.6 billion in budget solutions that would have resolved our $19.5 billion deficit, including a $4.1 billion reserve. And, the majority vote budget provides $23.5 billion in budget solutions with a $4 billion reserve.
The governor also said that he wants to fully fund education. But the governor’s new budget proposal submitted today would suspend Proposition 98.
While the governor spins the state into chaos, California pays the price. Our fiscal condition continues to deteriorate. A court ruled that the state’s transfer of transit funds is illegal, potentially costing the state up to $3.4 billion. The National Park Service advised California that they would take over several state parks if the governor insists on closing them. And, the governor rejected his administration’s agreement with the federal receiver on state prison health care.
As we move forward, the context of our work is now shaped by three announcements made by the governor today:
• The governor signed an executive order requiring state workers to have three furlough days a month, the equivalent of a 14 percent pay cut;
• The governor called an emergency session under Proposition 58, which means the Legislature has 45 days to act on the budget; and
• The governor will not sign any legislation until the budget is passed.
Despite the governor’s antics, the Assembly passed a package of budget bills today that – with the exception of the first item – is similar to what the governor vetoed yesterday:
• AB x3 7 – Provides the State Controller with flexibility to manage IOUs so that they may be redeemed earlier than October for payment, pending the passage of a state budget revision;
• AB x3 10 – Enacts $7.9 billion in spending reductions; and
• ABx3 19 – Provides $4.4 billion in accelerated revenues and tax compliance measures.
Further information about these bills will be available here.
As was expected, the governor pointed the finger at the Legislature to explain why we do not have a budget revision in place today. But this criticism, among other things he said, is simply a manipulation of the facts. So, let me set the record straight. Consider these examples:
• The Legislature only had endless hearings and no negotiations – The Conference Committee had public hearings to give the public a say in the public’s budget. And, we have had negotiations. But the governor has consistently used Republican legislators to blow up the agreements we have made.
• The Legislature is protecting special interests – This is true only if one defines special interests to be children, the elderly, the disabled, college students from working families, and state park lovers. Conference Committee protected the people of California from their own governor. That is why we rejected the governor’s proposals to eliminate healthcare for a million children, to eliminate welfare to work programs while unemployment in teeters over 11%, to eliminate CalGrants, and to close 220 state parks.
• The Legislature must look at reforming state pensions, CalWORKS, and in-home care - Here we go again. Remember the multi-million dollar 2005 special election no one but the governor wanted? Every single one of the so-called “reform” initiatives written by the governor were resoundingly rejected by the voters. The governor is bringing them back and doesn’t want public scrutiny of the sweeping policy changes he wants as part of a budget agreement.
• The Legislature must solve the entire budget problem – The Legislature has solved the entire budget problem, including adopting many - but not all - of the governor's own proposals. The Conference Budget provides $23.6 billion in budget solutions that would have resolved our $19.5 billion deficit, including a $4.1 billion reserve. And, the majority vote budget provides $23.5 billion in budget solutions with a $4 billion reserve.
The governor also said that he wants to fully fund education. But the governor’s new budget proposal submitted today would suspend Proposition 98.
While the governor spins the state into chaos, California pays the price. Our fiscal condition continues to deteriorate. A court ruled that the state’s transfer of transit funds is illegal, potentially costing the state up to $3.4 billion. The National Park Service advised California that they would take over several state parks if the governor insists on closing them. And, the governor rejected his administration’s agreement with the federal receiver on state prison health care.
As we move forward, the context of our work is now shaped by three announcements made by the governor today:
• The governor signed an executive order requiring state workers to have three furlough days a month, the equivalent of a 14 percent pay cut;
• The governor called an emergency session under Proposition 58, which means the Legislature has 45 days to act on the budget; and
• The governor will not sign any legislation until the budget is passed.
Despite the governor’s antics, the Assembly passed a package of budget bills today that – with the exception of the first item – is similar to what the governor vetoed yesterday:
• AB x3 7 – Provides the State Controller with flexibility to manage IOUs so that they may be redeemed earlier than October for payment, pending the passage of a state budget revision;
• AB x3 10 – Enacts $7.9 billion in spending reductions; and
• ABx3 19 – Provides $4.4 billion in accelerated revenues and tax compliance measures.
Further information about these bills will be available here.
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