There are a lot of terms getting thrown around in this budget mess.  There is, of course, the fact that we will take in a lot less money than we have allocated.  That’s your traditional budget deficit.  

But there is also the issue of how much actual cash we have in our accounts.  See, every summer we generally take in less money than we need. And that is compensated during other, more flush times of the year.  Typically, the state sells “Revenue Anticipation Notes” to cover these holes. The trouble is that with the credit crisis combined with the fact that our credit is darn near junk status, it’s tough to sell those notes.  That’s where the federal backstop (read:not a bailout, wouldn’t cost the feds any money) would come in to save us a billion dollars or so.

All that becomes really, really important when you read the horrifying numbers that Controller John Chiang just released.  It is not pretty:

Chiang said the revenue projections for May — made in early May as part of the governor’s revised budget proposal — were off $827 million when the books closed on the month.

Personal income taxes were off $475 million, 23 percent below estimates. Sales taxes (off $109 million, 3.3 percent) and corporate taxes (off $84.4 million, 25.8 percent) also fell below projections.

Year over year, state general fund revenue in May was down 17.7 percent — $1.14 billion — from May 2008. One possible bright spot: Corporate tax collections were up over May 2008, but still below estimates in the governor’s May revision.

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Chiang has said the state will run out of cash in July, projecting a $2.78 billion cash deficit on July 31. (CapAlert 6/10/09)

You can read the whole report (PDF) or check it out over the flip if you are so inclined, it is very readable.  It’s almost like a magazine with some graphics. I almost expect to see an ad for an iPhone somewhere near the end of the report.

Nonetheless, read through report if you dare.  The Controller has compiled some economic statistics for the last few fiscal years, and the numbers are not good. Just in case you needed some reminding.

The state has actually been able to save here and there, so it is not clear how this report would place the total budget deficit number. However, our controller did leave us with that cash flow number, which could force the two parties to make a deal sooner rather than later.  

Controller’s June Summary –

The California Department of Finance wants to “drill baby drill” off the Golden State’s coastline, and they’re willing to undermine 70+ years of checks and balances to do it. Will we let them get away with it?

In late January, I joined California Controller John Chiang in a two-to-one vote of the California State Lands Commission (SLC) to reject what would have been the first new oil lease in California waters in more than 40 years. As chair of the SLC, I take my responsibility as a steward of the environment very seriously, and I did not think the proposal was in the best interests of the state. Beyond the inherent environmental risks posed by all new drilling projects, I did not think assurances included in the proposal to decommission oil platforms decades down the road were enforceable.

Unfortunately, the Department of Finance is unable to take “No” for an answer.  California needs your help over the flip…

They have drafted legislation that would, for the first time in our Commission’s 70 year history, bypass the SLC and permit the Department of Finance to authorize the oil lease off the Santa Barbara coast. As I explained in a blog post last month:

“Big Oil has essentially offered to California $100 million dollars to seduce the state into granting the first new oil drilling lease in California since the Santa Barbara oil spill 41 years ago, a spill that covered hundreds of miles of ocean and over 30 miles of sandy beaches with more than three million gallons of crude oil. Learning from history means not blindly repeating the mistakes of the past.”

At an open hearing of the SLC yesterday in Santa Monica, Controller Chiang and I again joined together to voice our opposition to this power grab, backing a resolution calling on the legislature to reject the Department of Finance’s proposal. I have put all discussion and testimony from yesterday’s hearing pertaining to the oil lease on YouTube, and I would encourage you to take a look. During public comment, 12 environmentalists agreed with our position — including representatives from the Sierra Club and Environmental Defense Center — while not a single individual rose in support of the Department of Finance’s end-run around the SLC.

“We cannot get away from the fact that this is the first new offshore oil lease in 40 years, and if I sound upset, it’s because I am,” said Susan Jordan, director of the California Coastal Protection Network. “I have never seen such a blatant power grab.”

“We don’t always agree with the decisions made by this body, but we recognize and support the hard work of your staff and the public process designed to enforce the protection of our precious state lands,” added Joe Geeber, California Policy Coordinator for the Surfrider Foundation.

The science is clear; drilling for new oil now exposes our coast to the potential devastation caused by an oil spill and contributes to the greenhouse gases that chill our ability to combat global warming. As I’ve said in the past, California must focus on becoming a renewable energy leader and leave the extraction of new sources of fossil fuels to the 20th century.

But you don’t have to agree with me to appreciate the larger issues at stake. To bypass the SLC and give the Department of Finance authority to approve this oil lease threatens the independence of the SLC, a commission designed to be an independent environmental watchdog. More than 35 environmental organizations are opposed to the Department of Finance’s plan, including some that were initially supportive of the oil lease proposal. To allow the Department of Finance to usurp the independent commission responsible for protecting our state lands and waters means we will lose one of the most important safeguards available to California’s natural habitats.

As Assemblymember Julia Brownley (D-Santa Monica) said in a statement submitted to the SLC:

“This proposal to override the Commission for the first time in its 70 year history is wrongheaded. It would throw our state into environmental reverse gear and would be a terrible precedent. I will urge my Assembly colleagues in the strongest possible terms to oppose this proposal.”

I am proud to have the support of Assemblymember Brownley in this struggle, but we need your help. The California legislature will be voting on this proposal soon, and it is imperative that your voices are heard. If you live in California and agree with me that new offshore oil drilling in California is unwise, or if you agree with me that maintaining an effective system of checks and balances is important in state government, please contact your state Assemblymember and Senator today and ask them to oppose the proposal. I’ve created a Facebook group highlighting the issues at stake, and I encourage you to join it. Together, we can preserve California’s fragile coast.

UPDATE: The Assembly Coastal Caucus joins the State Lands Commission in opposing the Department of Finance’s proposal.

John Garamendi is the Lieutenant Governor of California, chair of the California State Lands Commission, and a former Deputy Secretary of the U.S. Interior Department. He also sits on the Ocean Protection Council and is the founder of the Clean Seas Coalition.

Californians once took great pride in our educational system.  We built one of the greatest public education systems in the world, both K-12 and higher ed.  We passed prop 98 to protect education funding and a majority has consistenly supported school funding at higher levels. However, in the last few years, things have been slipping. The Republicans have been working to subtly undermine the grounds that Prop 98 has stood upon, and they have their sights set on bigger chunks of money in the next budget fight.

Today, educational advocates are going to testify in the budget conference committee. From janitors to teachers, aides to superintendents, the entire school team needs to be represented as we work towards protecting the future of this state.  Education is simply THE key to our economic future, if we neglect it now, we solve no long-term problems and only create more.

The hearing begins this morning at 10:30 in the Capitol, but the fight will go all the way through a deal.  And, according to State Controller John Chiang, we need to have a deal by June 15:

The cash shortage will be four times as bad as this past winter, when California stopped infrastructure projects and delayed payments to vendors and refunds to taxpayers.

State Controller John Chiang told lawmakers Friday that declining tax revenue will cause the state’s treasury to fall $2.1 billion into the red in July.

He urged lawmakers to pass a budget by the June 15 constitutional deadline. If they don’t act quickly to cut spending or raise revenue, Chiang said the deficit will hit $14.3 billion by December.(News10 (AP) 6/1/09)

As we move forward over the next two weeks, we are surely going to try to see some attempts by interest groups to get their perspectives heard.  However, given the time-sensitive nature of this, one has to wonder how much public input we are going to get.  Crisis-based budgeting only breeds more crises.

Figure	Group	Approve	Disapprove	No Opinion
Arnold	All	33	55	12
Arnold	Dems	32	56	12
Arnold	Reps	30	57	13
Arnold	Other	36	52	12
Arnold	LA	26	67	7
Arnold	SFBay	45	43	12
Leg	All	14	74	12
Leg	Dems	19	69	13
Leg	Reps	11	83	6
Leg	Other	12	71	17
Leg	CV	12	80	8
Leg	SFBay	20	66	14

Ok, shocking might not be the best word for it, perhaps “completely expected” would work better. The latest bit of data to come out from the good folks at the Field poll is approval data (PDF) on our elected officials.  And let’s just say it ain’t all that pretty. The Legislature is sitting at a sparkling 14% approval rating and the Governator is at 33%.

I included a couple of the breakouts here by region.  Interestingly, the San Francisco Bay region seems to be a bit more sympathetic to the elected officials. For both the Governor and the Legislature, approval numbers were highest by the Bay.  On the other hand, the LA area pretty much hates Arnold, and the Central Valley feels the same way about the Legislature.

I think one question that wasn’t answered here was how Californians feel about their own Legislator. Typically those numbers are far higher, after all it’s harder to hate somebody you’ve met and voted for several times than the nebulous “Legislature.” Nobody votes for the “legislature” so there is no ownership of that body by the voters. On the other hand, over 50% of the state voted to re-elect the Governator.

Also interesting, but unsurprising, was that Arnold is now officially more popular with Democrats than Republicans. Congratulations on that Arnold. Your party officially hates you.

It’s clear that the elected leaders will not be featured prominently in any commercials in the next three weeks. Well, not if the Yes campaigns want to win.  Although, if there was an ad about Prop 1C (lottery), perhaps a wonkish politician might help. I was thinking John Chiang, but I don’t know his official position on the issue, and I doubt that he would want to be associated with this stinker of a special election.

Straight to it:

• John Chiang has a cool new feature on his website that lets everybody see how much cash is coming into the state day by day.

• Does Arnold Schwarzenegger seriously have nothing better to do than bring back gigantic bear sculptures to put in front of the horseshoe? I mean, I can’t think of anything that would occupy his time. But, the Bee’s caption contest makes it kinda ok.

• A slap fight on the right, as Steve Poizner and Meg Whitman fight over which one is a more disastrous manager.  I say split the difference, chaps – you’re BOTH awful!

• This is a truly horrible story about Avenues Pregnancy Clinic in Glendale, where the fundie directors browbeat women into believing they risk eternal damnation for “living in sin.”  And they get state licensing and accrediting for that!  Awesome.

• The business interests who want to shut down LA’s Clean Trucks program have failed again, as a US District Court judge rejected the motion to halt the program.  There’s a lot of money and effort being spent fighting the law when they could just comply with it – and in the process stop thousands of kids from coughing and choking every five seconds from the smoke and soot.

• The CBP had this the other day about the legislature risking turning down federal stimulus money for low-income families.  The Legislature needs to get to work on this.

• CalChamber’s job creator list is here!!!  I can’t wait to live in a state where such job creator bills like eliminating meal breaks are law!  There actually are a couple bills in there, like flexible work schedules and the research and development credit, which aren’t too bad.

• One of the most misleading statistics you will see today: there have been gains in the number of houses sold in Sacramento for 12 straight months. Yay, right? Well, it’s good that more houses are being sold, but they are being sold at fire-sale prices after foreclosure. On the other hand, median price of those homes sold has fallen for almost the entire period, with this month being the sole exception.  The median now stands at $165,000, up $5,000 from last month, but down over $200,000 from the peak in 2005.

• Speaking of real estate, General Growth, one of the nation’s largest owners of malls and commercial property has filed for bankruptcy. It is the largest real estate bankruptcy in the history of the universe. Or well, at least the largest in US history. They run a whole slew of malls in California, from Stonestown Galleria in San Francisco to the Glendale Galleria. They are expected to remain open during the bankruptcy.

• Did you just have a busy hour? Well, the state’s fundraisers have. Since 2000, there has been an average of over $14,000 every hour raised for political campaigns.

Abel Maldonado and his toady Brandon Gesicki have been all over the news pushing the frame that Controller John Chiang is wasting a million dollars on office furniture:

The same day the governor vetoed the Democrats’ budget proposal, the Controller’s office requested $924,500,000 worth of new office furniture from this fiscal year! How is that acceptable? Here is an elected official who is in the press every day talking about cutting services, stopping checks to welfare recipients and issuing IOUs to hardworking Californians. But at the exact same time, he is requesting new office furniture. This disgusting and disingenuous behavior has to end.

This is, quite frankly, bullshit. The money was approved by then-Controller Steve Westly, Governor Arnold Schwarzenegger, and the State Legislature in December 2006 not for “furniture” but to bring the C Street office complex up to code. From a presentation the Controller’s office sent out today:

• The current workstations were out of compliance with ADA, OSHA and SAM requirements.

• Current stations were 10-20 years old (80% were 20+ years old and replacement parts are no longer

manufactured).

• DGS confirms that there was not (and is not) enough used modular furniture available.

•In 2005, wires melted and smoked in one bank of cubicles, causing evacuation of the building, raising health and safety concerns.

So the office remodel isn’t being done for vanity, but to reduce a hazard AND the risk that the state of California will face lawsuits that will rack up legal bills. And the whole plan actually saves Californians money:

Bottom Line: $3,982,000 savings from purchasing efficiencies

$1,500,000 savings from less expensive rent, in future years

How did Maldonado vote when this funding came up in summer 2007?

August 21, 2007, Senate approves C Street BCP contained in SB 77 (Budget Act for FY 07/08) [vote was] 27-12, Maldonado votes “aye”

Abel Maldonado is a dishonest and self-interested politician who only wants to cut budget deals that advance his career – even when they cost the state $5.5 million.

Two nominations here.  By the way, since it recently came up in comments, the reason we here at Calitics call the California Republican Party the “Yacht Party” can be best explained here and here.

Nominee #1: Sen. Roy Ashburn of Bakersfield, who introduced a bill that would eliminate IOUs for tax refunds.

State Sen. Roy Ashburn, R-Bakersfield, has introduced legislation requiring California’s controller to issue state income tax refunds in cash.

Controller John Chiang has announced his office will have to delay refunds for 30 days starting Feb. 1 because of the state’s cash-flow problems. He has threatened he may have to issue refunds in the form of IOUs if a budget addressing the $41 billion shortfall the state’s projected to have by mid-2010 isn’t passed.

Chiang has said refunds will resume when he’s sure there’s enough state cash on hand.

Ashburn has said tax refund money belongs to the taxpayers, not the government, and taxpayers should get it back in the form it was paid – “cold, hard cash.” California’s constantly taking in cash, he’s said.

Hey Roy, I know a bill you could pass that would get cold hard cash back in the hands of your constituents.  It’s called the budget, and without it California is out of money, and fiduciary responsibilities (sorry for the $1 word) stipulate that other priorities must be paid first.  It’s called “how government works,” and though you’re a State Senator I’m not surprised at your ignorance.

Nominee #2: Faux-moderate Abel Maldonado, angry about the Controller’s office “requesting new furniture” even though the current Controller, uh, didn’t do that.

“I don’t like the fact that hard working people in my district are getting IOUs and he’s buying millions of dollars worth of furniture,” Maldonado said in an interview. (For the record, taxpayers due refunds from the state and others missing payments aren’t getting IOUs just yet. They’re simply not receiving anything at all.) […]

Chiang’s office struck back, calling Maldonado’s accusation “pathetic.”

“Had he done any homework, the senator should have realized that the expansion project, including furniture,…began before Controller Chiang took office,” his office said.

Further, Chiang’s office argued, the controller “demanded that staff cut down the costs, and by changing financing, materials, design, and construction, reduced the overall expense of the project by more than 50 percent” – a $4 million savings.

Next for Maldonado, he’ll lambaste Arnold Schwarzenegger for Prop. 187.  Wanker.

The situation is getting desperate for counties across the state.  Yesterday, the Riverside Board of Supes voted to sue the state for the millions of dollars that are being withheld due to the, well, fact that they don’t exist. And, this being Riverside County, if they can’t get the money, they’ll also just drop the services.

Riverside County supervisors voted Tuesday to sue the state to compel it to pay billions of dollars in funding for county-run social services, payments the state began delaying this week to conserve cash.

Supervisors also voted to take legal action to relieve the county of the responsibility to provide those state-mandated services, such as welfare, assistance for disabled people and mental health services, if the state does not fund them.

“The action was taken despite grave concerns about the effect on the programs that serve the county’s most needy and vulnerable residents,” county counsel Pamela Walls said at Tuesday’s supervisors’ meeting in Riverside. “However, the county cannot bear the overwhelming costs of taking on responsibility for programs that the state is obligated to fund.” Riverside P-E 2/4/09

Of course, this is the expected outcome of denying the flow of money. Counties simply don’t have the money to continue to pay for the programs the state mandates.  While counties like San Francisco have a reasonable shot at raising taxes on a special election, it’s just not all that practical in Riverside.  Even if the Riverside Supes put some sort of revenue measure on the ballot, getting 2/3 to support it seems unlikely.

Welcome to your new state, it’s in freefall, and the safety net is gone.

UPDATE by Dave:  It gets worse.  The Board of Supervisors in Los Angeles County, which houses over 1/4 of the state’s residents and collects substantial tax revenue, is threatening to withhold it to pay for health care and social services.  This is the opposite of Riverside County’s gambit – instead of suing the state for money, they’re just threatening to keep it for themselves.  This is in reaction to the state delaying health and human services payments to the counties.  The treasuries of counties and local governments are routinely illegally raided every year as part of budget deals, but this is the first time I’ve seen the reverse.

“We’re declaring our own Boston Tea Party,” Supervisor Gloria Molina said during Tuesday’s board meeting, adding that refusing to turn over the money to state lawmakers “will make their pain more acute.”

But it may not be legal, or, for that matter, practical.

“It’s a delicious idea,” said Supervisor Zev Yaroslavsky. “It may be deliciously illegal, but I think the state’s action may also be illegal.”

Two wrongs making a right – welcome to California 2009.

Perhaps I was a bit esoteric there, but the Republicans have literally got Controller John Chiang in a box, with the money flow turning off. He cannot possibly pay tax refunds (which aren’t legally due until May 30) unless he has money to do so. Yet the Yacht Party and the corpse of Howard Jarvis still scream.

A taxpayer group blasted state Controller John Chiang’s decision to hold up income tax refunds this month, saying Monday that putting refunds into taxpayers’ hands would help stimulate the economy.

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Added Assemblyman Roger Niello, R-Fair Oaks (Sacramento County): “This is the ultimate injustice. … This is taxpayers’ money.” (SF Chron 2/3/09)

Yes, wouldn’t it be great if the state had the money to pay its bills.  Wouldn’t it be nice if we hadn’t spent it all on the stupid axeing of the “car tax” so that Arnold has his (then) band of followers in the GOP could crow of a victory over common sense.  Well, folks, the vehicle license fee chicken has come home to roost.  If you want to pay out the tax refunds so promptly, perhaps you could get back to the terrain where 60%+ of the state currently resides.  You know, the land of sanity where people want decent K12 education and are willing to pay for it.

Niello, you may get your chicks for free, but the money’s got to come from somewhere.