The Itchy (Budget) Trigger
And now, the latest developments from the "Clear as Mud" files… everyone who's anyone around the state Capitol wants to know whether California's share of the federal economic stimulus package is large enough to allow some of the less-than-loved budget decisions to be rescinded.
But finding an absolute answer to that question… well, that's what has landed us in the muddy water.
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DC Optimism, Wall Street Pessimism
As the festivities wrap up back east and California's top officials wing their way westward, it seems that they bring with them some of that Obamoptimism, even as some new Wall Street angst arrives first.
First, the angst. The credit rating agency Moody's Investor Services has placed tens of billions in outstanding state bonds on its watchlist, a move that signals the possibility of a downgrade in the state's creditworthiness. That includes not only general obligation bonds, but also the revenue anticipation notes (RANs) that were sold last fall to help bridge the state's cash flow problems. And yes, it could impact the state's need for additional short-term cash flow loans in the coming months.
Those cash flow problem seem particulary troubling to the agency's analysts. "We will be acutely focused on liquidity," says the Moody's report.
"This is more evidence of how urgently our state needs its legislators to act to resolve our fiscal emergency," said gubernatorial budget director Mike Genest in a written statement. "Holders of California bonds should not be penalized by a downgrade which diminishes the resale value of the bonds, just because agreement has not yet been reached."
Meantime, Democratic legislative leaders say they're confident that some federal assistance is on its way in the near future. In a conference call with reporters this morning, Assembly Speaker Karen Bass and Senate President pro Tem Darrell Steinberg said meetings with the state's congressional delegation during the inaugural festitivities were positive.
They said exact dollar amounts weren't a focus of the talks, though a $10 billion figure for the state continues to be out there and the leaders said it's a reasonable guess. Bass and Steinberg said the most likely help would come in funding for low-income health care services, education (including higher education programs), and public works/infrastructure projects.
And they think California's needs will be hard for either Congress or President Barack Obama to ignore. "There is great concern that if California gets deeper into trouble," said Steinberg, "the country will get deeper into trouble."
Legislative leaders and Governor Schwarzenegger are expected to reconvene to talk about the budget crisis tomorrow here in Sacramento.
Arnold Deficit Clock Now At $14.8 Billion
Arnold The Showman is back.
With Monday's joint legislative meeting on the state's fiscal crisis seemingly failing to thaw the frozen partisan fight on budget solutions, Governor Schwarzenegger today unveiled a ticking budget deficit clock and announced the current year shortfall has now grown to $14.8 billion.
That's up $3.6 billion since his estimate of $11.2 billion was released about six weeks ago. And the clock he unveiled in classic Schwarzeneggerian style today (and which will sit outside his Capitol office) is ticking away at $470 every second.
The governor called the Legislature's performance in dealing with the fiscal crisis "shameful," and pledged to stay in Sacramento as long as it takes to strike a deal. "I will do anything to move the agenda forward," he told reporters this morning.
Advisers say Schwarzenegger has summoned legislative leaders for a Big Five meeting tomorrow, and plans to give them a new… and worse… estimate for the deficit facing California between now and July 2010; current estimates have put that problem at $28 billion.
The new projection, according to gubernatorial budget director Mike Genest, accounts for both missing revenues and higher-than-expected state expenses. That's a departure from the November projection, which we were told was just the revenue side of the equation.
One lingering question of late around the Capitol has been whether Schwarzenegger can, or will, reach out to rank-and-file legislators to solve the problem, rather than relying on Big Five leadership meetings which have clearly produced zilch in results. You may remember the guv once said he doesn't particularly like Big Five meetings.
I asked him whether it's time to change his approach, and he said he would. You can hear that below.
Also worth noting from today's news conference — the not-so-subtle dig that Schwarzenegger took at his fellow Republicans. When asked by a reporter about GOP demands that Democrats approve a set of business friendly proposals before taxes are even discussed, the GOP governor said such proposals have never been presented in leadership negotiations.
"None of those things were discussed," he said. And then he went even further: "It's always very vague, and nothing specific." And if anyone still missed the point, Schwarzenegger kept going: "I have felt many times that Republicans did not come [to meetings] prepared, and Republicans have not been specific of what they need."
The Senate began its micro examination of fiscal issues this morning, by convening the first budget subcommittee hearing, but it's clear the governor wants to up the ante. And in his ongoing struggle to balance the carrot with the stick when it comes to the Legislature, there was nary a whiff of the orange vegetable to be found this morning.
[update: Unsurprisingly, Republicans don't seem impressed. The official written statement from Senate GOP Leader Dave Cogdill reads, in part: "Bullying the Legislature to adopt tax hikes won't make the ticking clock the governor unveiled today go away, in fact it will only make our budget problems worse. Raising taxes doesn't solve the underlying problem of California's budget, which is the state spends more than it takes in."
About the Blogger
John Myers is Sacramento Bureau Chief for KQED's The California Report, heard on public radio stations around the state. More about John...
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