Thursday, February 4, 2010

Power Plays and Smelly Cheese

The Assembly Budget Committee met yesterday to discuss California’s cash crisis and deficit. State Controller John Chiang testified that we face a cash crunch for a three week period in March and April. He said any solutions we come up with must be “credible and sustainable.”

What’s the governor’s proposal to address California’s cash crisis? Sadly, it’s just another power play. He seeks unprecedented unilateral authority for the Department of Finance to delay almost all state payments at any time during the next two fiscal years. This would include payments to K-12 schools, community colleges, UCs and CSU, trial courts, Medi-Cal providers, all state vendors, tax refunds, and SSI and CalGrant payments. Such broad, unfettered authority would wreak havoc throughout our state because no one would know when or if they could expect payment.

This is part of a continuing pattern of the Administration’s failure to address California’s problems. Despite the State Controller’s numerous warnings that the state lacks a proper cash cushion and may run out of cash, the Administration has no plan to deal with this crisis.

Once again, the governor has punted to the Legislature. If previous patterns hold true, the governor will soon begin whining to the press that the Legislature is failing to act on his proposal to address the cash crisis. Never mind that his proposal is like Swiss cheese—smelly and full of holes.

The Committee expressed bi-partisan frustration with the administration for failing to make a legitimate proposal to assure that the state pays its bills. One member called this proposal “outrageous;” another called it “breathtaking.” I call it irresponsible and insufficient. It utterly fails the Controller’s test of “credible and sustainable.” I told the Department of Finance to return with a real cash management plan.

Last year, California’s cash shortage stopped 5,400 bond-funded projects, putting many people out of work. It also delayed $2.2 billion worth of tax refunds and resulted in the issuance of 450,000 IOUs. We can and must avoid the same problem this year.

Next week we will begin detailed subcommittee hearings and the Legislature will act before the special session deadline of February 22. We will be working with the Controller, the Legislative Analyst's Office, and the Department of Finance to develop a serious plan that avoids a cash problem. Once we have that immediate problem behind us, we will focus on enacting a fair, timely, and credible budget for FY 2010-2011.