California 2009 impact of budget woes
From Sunshine Review
The state of California is facing an approximately $42 billion dollar deficit and has been said to be in a "state of crisis."
Below are some of the impacts that the state's budget crisis:
- Main article: State budget crisis, 2009-2010
- In early July 2009, Fitch Ratings cut cut its rating on California's long-term bonds to "BBB," two levels above "junk status." Fitch Ratings cited the state's current budget and revenue crisis. According to Fitch, California is ranked the lowest-rated state general obligation credit.[1]
- The Pooled Money Investment Board (controlled by two Democrats and one Republican) had stopped about 5,600 public works projects funded by bonds because of the state's cash crunch. On January 16, officials agreed to pay $650 million of unpaid bills on these construction projects, a month after slowing down or delaying the projects themselves. The government also decided to let 276 projects resume.[2] ,[3]
- State Controller John Chiang said on January 16 that if a solution to the budget crisis is not passed by the Legislature and signed by the Governor by February 1st, he will begin delaying payments to several programs including tax refunds, student aid, social services and mental health programs. This would amount to $3.7 billion in delayed payments in order to buy the government a few more weeks of cash flow.[4],[5],[6],[7]
- Schwarzenegger has asked the federal government to "...waive or greatly streamline National Environmental Protection Act (NEPA) requirements consistent with our statutory proposals to modify the California Environment Quality Act (CEQA) for transportation projects".[8]
- Tax refund checks to individuals and businesses that overpaid their 2008 taxes are being put on hold.[9]
- Moody's Investor Service, a national credit-rating agency, said it may downgrade California's credit rating. Moody's has already downgraded two of California's outstanding bond debts: $8.7 billion in bonds sold in previous years to help solve earlier budget deficits and $5 billion in short-term loans that the state took out last fall. California is already tied with Louisiana for the lowest credit rating among the 50 states.[10],[11]
- Schwarzenegger has imposed two-day-a-month furloughs on the state's 238,000 government workers beginning in February. This plan will save the state $1.3 billion. State employee unions immediately filed a lawsuit against the furloughs. On January 29, a Sacramento Superior Court judge said it was okay for Schwarzenegger to go ahead with the plan. Meanwhile, the state government is still hiring; the State Personnel Board’s website lists 2,975 current vacancies with 1,172 job openings posted in the last two weeks of January.[12],[13]
- 250,000 homes in California were repossessed by lenders in 2008 and the pace is accelerating. As homes goes into foreclosure and then are sold by the bank at, typically, a much lower price than its previous property tax assessed value, the assessed valuations of homes will decrease, often steeply. That means that in years to come, the property taxes owed on homes with declining values will be greatly reduced. This will have an impact on the budgets of school districts.[14],[15]
- 238,000 state employees must take unpaid furlough on the first and third Fridays of each month. According to the LA Times, this "clears the way for the biggest rollback of the state payroll in decades."[16]
- The crisis increases California's likelihood of receiving a significant portion of any federal economic stimulus. "All told, Congressional estimates show that California’s two-year take from the House version of the bill, which was approved on Wednesday, could top $32 billion, or nearly $1,000 a resident. The State Finance Department puts the number even higher, at $37 billion."[17] Assuming the state receives this amount of money, California is where "the federal stimulus will be put to its sternest test. The infrastructure and energy projects, high-tech job creation, rural outreach and low-income benefits included in the proposal make the state a proving ground where nearly all the plan’s potential benefits, and pitfalls, converge."[18]
[edit] References
- ↑ Reuters,"UPDATE 4-Fitch cuts cash-strapped California's debt rating," July 6, 2009
- ↑ Los Angeles Times, "How to fix the California budget", December 26, 2008
- ↑ San Francisco Chronicle, "State to pay up on construction projects", January 17, 2009
- ↑ California Chronicle, "California Facing a Financial State of Emergency", January 16, 2009
- ↑ Wall Street Journal, "California Moves Closer to Delaying Tax Refunds, Other Payments", January 16, 2009
- ↑ Associated Press, Calif. considers 30-day delay on state tax refunds, January 17, 2009
- ↑ Wall Street Journal, "California to Delay $4 Billion in Payments", January 31, 2009
- ↑ Business Green, "Struggling Schwarzenegger eyes enviro rule roll back", January 20, 2009
- ↑ Reuters, "California delaying tax refunds amidst cash crisis", January 16, 2009
- ↑ San Francisco Chronicle, "State warned of possible credit downgrade", January 22, 2009
- ↑ Wall Street Journal, "California to Delay $4 Billion in Payments", January 31, 2009
- ↑ Associated Press, "Governors seek concessions from public workers", January 24, 2009
- ↑ Los Angeles Times, "Reducing California state payroll a daunting task", January 31, 2009
- ↑ San Francisco Chronicle, "Property tax revenue plummets with home values", January 25, 2009
- ↑ Mercury News, "Palo Alto state senator discusses drastic school budget cuts with local educators", January 24, 2009
- ↑ Los Angeles Times, "California is told to furlough employees," January 30, 2009
- ↑ New York Times, "A State With a Wish List for Stimulus Spending," February 1, 2009
- ↑ New York Times, "A State With a Wish List for Stimulus Spending," February 1, 2009
- ↑ New York Times, "California, Almost Broke, Nears Brink," February 16, 2009
- ↑ Wall Street Journal, "California Vies to Close Budget Gap Amid Dire Conditions," February 17, 2009
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