Schwarzenegger calls back legislators for emergency budget session
With California's revenue plummeting, the governor says lawmakers will reconvene next week. They will discuss solutions to the foreclosure crisis and an economic stimulus package.
By Evan Halper | LA Times Staff Writer
October 28, 2008 -- Reporting from Sacramento -- Gov. Arnold Schwarzenegger has set Nov. 5 -- the day after next week's election -- as the start of an emergency legislative session to address the state budget deficit, which has swelled by several billion dollars in recent weeks as the stock market has continued its tumble and the economy has soured.
Schwarzenegger said this year's deficit will be "much more" than the $3 billion that state officials projected two weeks ago. Capitol budget analysts say preliminary data indicate the problem will probably grow to at least $10 billion.
With the announcement of the Governor’s plan to reconvene the lege on November fifth and his intention to cut the education budget, the a State without a budget/a government without a clue 4LAKIDS BLOG ON THE STATE BUDGET MESS is back online after barely a month’s hiatus.
The governor and legislative leaders made the announcement to reporters in the hallway outside Schwarzenegger's office, where they had been meeting in private to discuss the fiscal crisis. They said that in the coming days they also will form a commission to study ways to restructure the state tax code to make revenue more stable
Schwarzenegger's move comes a month after lawmakers passed the current budget and adjourned until December, when the next class of lawmakers is scheduled to begin work. But the governor said state revenues are dropping so fast that he and legislative leaders decided to call a lame-duck session.
"The situation is far more severe than it was when we were negotiating the budget" over the summer, Schwarzenegger said.
At that time, experts had warned that the spending plan lawmakers were drafting was optimistic.
"They ignored the obvious," said Christopher Thornberg, principal at Beacon Economics. "They refused to recognize we were heading into this painful recession. It wasn't rocket science."
The state's problems are being compounded by the stock market bust. State revenues are expected to suffer substantially as a result of the carnage on Wall Street.
Relative to other states, California gets a disproportionate share of its revenue from the personal income taxes of the wealthy. The richest 1% of Californians pay half of all the personal income taxes the state collects each year.
"A lot of those folks receive much of their income from capital gains," said H.D. Palmer, deputy director of external affairs for the state Department of Finance.
When the stock market falters and capital gains fall off, state income plummets. This month the Standard and Poor's 500 Index has dropped 24%.
The state also relies heavily on sales taxes. Economists are predicting that those receipts will also take a dive as consumers tighten their belts.
The governor said he opted to bring sitting lawmakers back to town rather than wait for the new class because "they have dealt with the problem throughout the year." Some analysts have suggested that the governor stands a better chance of pushing through a temporary tax hike -- something he tried but failed to do during the summer -- with the current crop of lawmakers, because several are termed out of office and will not be part of a newly elected Legislature.
Republican leaders say their caucuses will continue to block any tax increase as they did in summer. They handed the governor a letter Monday calling for tax cuts.
The legislators proposed new tax breaks for a range of companies, including those involved in manufacturing, building new facilities in California and hiring out-of-work Californians.
"California has one of the highest tax rates on business in the nation," wrote Assembly Republican Leader Mike Villines of Clovis and Senate Republican Leader Dave Cogdill of Modesto. "With the tight credit market and worldwide economic turmoil, we must help California businesses to create, retain and expand job opportunities."
Legislators will no doubt be forced to weigh steep program cuts as part of the special session. The estimated shortfall already has grown so large -- $10 billion is nearly 10% of the general fund -- that even the sales tax hike the governor proposed earlier in the year would erase only a fraction of it.
In their special session, lawmakers will also consider proposals to deal with the state's foreclosure crisis, and an economic stimulus package designed to create more jobs in the state. One way to do that, legislative leaders and the governor said, would be to speed up allocation of public-works bond money already approved by voters. They are also seeking billions of dollars in relief from Washington, D.C., some of which could take the form of extended unemployment benefits for Californians out of work.
The top-to-bottom review of the state's tax code was initially proposed by Assembly Speaker Karen Bass (D-Los Angeles).
"California's tax structure was set up at the beginning of the last century," Bass said. "We know it needs to be modernized."
Several previous attempts to overhaul the tax code have been rejected. Experts say lawmakers easily find taxes to cut but can rarely agree on how to replace the lost revenue.
Special Session on California State Budget: Governor Will Call Session Nov 5th
• Budget Deficit Grows As Revenues Drop
• Spending On Programs Impacting People With Disabilities, Mental Health Needs, Seniors And Children Vulnerable For Major Permanent Cuts
By Marty D. Omoto in The California Progress Report
28 October 2008 -- Governor Arnold Schwarzenegger will call a special session of the Legislature next week, likely on November 5th (Wednesday) to address the State’s growing budget deficit that has reportedly swelled to over $3 billion and growing. The Governor is expected any day to issue an official order calling the special session.
It is not certain what proposals the Governor will make to the Legislature to address the worsening State budget situation, though many advocates fear major spending cuts to programs impacting children and adults with disabilities, mental health needs, seniors, low income children, and families, organizations, facilities and workers who provide supports and services.
Also vulnerable is spending on public education in general that could impact special education.
Senate and Assembly Republican leaders were adamant this past year against any tax increases during bad economic times – and they remain opposed to any such increases to bridge a growing budget shortfall. That would mean any proposal by the Governor or the Democrats, in order to win the needed Republican votes to pass any proposal during the special session, would have to focus on permanent cuts and ways to improve revenues without taxes
The news comes just weeks after the Governor signed the long delayed State budget on September 23rd, after a three month stand-off and comes less than 11 weeks before the Governor must present his proposed budget for 2009-2010 on January 10th.
The Governor used his line item veto power to cut hundreds of millions of dollars of spending impacting a wide range of programs and services impacting seniors, on top of cuts the Legislature approved.
The Governor and legislative leaders met yesterday and several times earlier this month to consider next steps in addressing the financial crisis impacting California, including the worsening budget situation.
* Only the Governor has authority under the State Constitution to call a special session of the Legislature for certain specific reasons. The Legislature must meet - but they are not required by the State Constitution to act. The Governor will likely present the Legislature with proposals to address the growing budget deficit.
* Governor also has authority under the State Constitution to declare - as he did last January - a "fiscal (budget) emergency" that requires the Legislature to respond within 45 days. It is not likely he will do so at this point however, given the time frames.
* Under a “fiscal emergency” called by the Governor, if the Legislature fails to send a bill or bills addressing the emergency to him within 45 days, the State Constitution doesn't give much authority to force them to act - especially at this point in the year. If the Legislature does not act (meaning does not send a bill or bills addressing the fiscal emergency) then it cannot pass other bills or adjourn in recess. The Legislature has no bills to act on or pass during the fall and really will not have any to act on regular session bills until February next year.
* The Legislature finished its work on regular bills as of August 30th, and came back into session in September because of the State Budget.
* Except for this year, the Legislature has never before met beyond its August 30th adjournment date during the second year of the Legislative session. The Legislature must send any bill to the Governor on or before November 15th.
* New members of the Legislature will be elected November 1th though they will not take office until December
* Current legislators who are termed out of office, including Senate President Pro Tem Don Perata (Democrat - Oakland), or who are retiring for other reasons, serve until November 30th.
* New members elected in November take office the first week of December and will be sworn in at the State Capitol in brief sessions on Monday December 1.
* Governor’s call for a special session of the current Legislature means that they must meet and complete work before November 30th - the final day on the job for termed out or retiring legislators (the would have to present a bill to him on or before November 15th however, based on one read of the State Constitution.
* The Governor could call another special session in December sometime after the new Legislature is sworn in, though many observers feel the financial and budget crisis may need to be addressed much sooner than that.
Omoto is Director/Organizer of the California Disability Community Action Network
The California Disability Community Action Network, is a non-partisan link to thousands of Californians with developmental and other disabilities, people with traumatic brain injuries, the Blind, the Deaf, their families, community organizations and providers, direct care, homecare and other workers, and other advocates to provide information on state (and eventually federal), local public policy issues.