State Controller John
Chiang issued a stern warning January 22 about California's cash reserves,
telling legislative leaders and Governor Arnold Schwarzenegger they must act on
nearly $9 billion in budget cuts the governor is seeking by March, or the state
will run out of cash to pay its bills.
"Inaction
ignores the projected cash shortfall which we face in less than 70 days," Mr.
Chiang wrote.
If the cuts are
made, Mr. Chiang said, the state will have $1.3 billion on hand. If the cuts
are not made, the state will be broke by April 1, he said. The state would
climb back to cash on hand totaling $2.5 billion later in April, when tax
revenues begin flowing into the state treasury.
The controller said
the state's cash condition "is marginally better than it was one year
ago," but it is "still precarious."
Mr. Chiang is
calling for an additional $2 billion in cash-flow "solutions," such
as delaying tax refunds for several weeks. (Sources: San Jose Mercury News, January 22; Letter from Controller John Chiang,
January 22.)
In other
budget-related news:
Legislative Analyst Criticizes Governor's Ballot-Box
Budgeting Plan. The
nonpartisan legislative analyst is urging the Legislature to reject the
governor's proposed state constitutional amendment that would require
reductions in spending on state corrections, with corresponding increases in
spending for public universities. Under the governor's plan, beginning in
2014–15, the state would be required to dedicate no more than 7 percent of
state general fund spending to corrections and no less than 10 percent to
public universities.
A report from the
Legislative Analyst's Office said this ballot-box budgeting proposal is a bad
idea. The report said: "We urge the Legislature to reject this proposal
because it (1) would unwisely constrain the state's ability to allocate funding
where it is most needed each year; and (2) is unnecessary, as the state already
has the ability to shift funding among programs without this constitutional
amendment."
Stating that the
governor's plan "inappropriately pits two program areas against each other,"
the analyst concluded: "The state needs to support its university system
and its prison system. Both provide valuable services to Californians. The
administration's proposal implicitly suggests there is a linkage of crucial
budgetary significance between these two specific program areas. This is not,
however, what budgeting is about. Each year, the Legislature must make
decisions among all programs,
choosing as best as possible where the commitment of resources would be most
beneficial."
The analyst's report
also applauded the governor's desire to find ways to reduce costs in the state's
correctional system. (Source: Legislative Analyst's Office report,
January 26.)
Cal-TaxReports, February 1, 2010
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