State Budget Revision Seen as a Possibility

California lawmakers may need to revisit the state budget in light of the Sept. 11 terrorist attacks, Assembly Speaker Bob Hertzberg indicated Monday as he announced a task force to examine the impact of the strikes on the state’s public safety and economic well-being.

The bipartisan panel, made up of the chairs and vice chairs of eight existing legislative committees, will study the toll of the attacks on the California economy. It also will study ways to make the state safer from terrorism for everyone from business owners to government employees.

“We will not be cowed,” Hertzberg said at a Capitol news conference with legislators and law enforcement leaders. “We will not live in fear. We will respond with all the best that Californians, and Americans, have to give.”

After Republican Assemblyman Bill Leonard of San Bernardino raised the possibility, Hertzberg (D-Sherman Oaks) acknowledged that depending on the panel’s findings, lawmakers may need to revise the state’s spending plan for the year as they attempt to deal with the aftermath of the attacks.

The attacks are expected to test the state’s financial well-being in several ways. Throughout California, law enforcement agencies are stepping up security at landmarks, public buildings and other potentially vulnerable spots, a costly undertaking. Tourism, meanwhile, has suffered severe setbacks--and with it, the tax revenue from those buildings is expected to fall. In addition, the attacks have helped depress an already wobbly economy, contributing to a bleak budget picture for the coming years.

Finally, California’s fiscal condition faced other uncertainties that result from its decision early this year to purchase mass quantities of electricity to avert blackouts during the energy crisis. State Treasurer Phil Angelides warned last week that unless California moves quickly to sell a record $12.5 billion in bonds to refill state coffers, the state could face a budget deficit of up to $10 billion next year.

But on Monday, another state official, Controller Kathleen Connell, rebutted Angelides’ claims. Even if the energy bonds are not promptly sold, Connell said, the state can tap enough money through internal borrowing procedures.

“The state of California has adequate resources to continue its legislative-mandated activities throughout this fiscal year and well into the next one,” said Connell, who added that she felt inclined to respond to what she considered “unfortunate” predictions of doom and gloom.

Connell noted that the state already borrowed $5.7 billion last month. And she added that another loan could be issued if the new fiscal year begins and the general fund has still not been repaid for the about $6.2 billion spent on energy. Those loans would be secured by the promise of revenue that would be raised by the bonds once they are issued.

Connell’s view is not shared by a number of consumer groups, which called a news conference to warn of what they see as a growing threat to California’s fiscal stability.

On Monday, a coalition of two dozen groups representing everything from churches to schools and labor unions demanded in writing that state regulators at the Public Utilities Commission clear the way for the bond sale as quickly as possible. The commission has repeatedly delayed taking a series of actions that Angelides needs to float the bonds, which will be repaid by utility customers as part of their power bills.

Jean Ross, executive director of the California Budget Project, a nonprofit research and advocacy group and member of the recently formed Coalition to Pay Back the Budget, warned at a news conference that the state faces a possible $9-billion shortfall in the 2002-03 budget year if the general fund is not repaid. She added that the situation could worsen due to the state’s softening economy.

“With each passing day, the state’s fiscal position is growing ever more precarious,” she said.

Labor has a particular interest in the issue, as any widespread cutbacks in the state budget could affect state employees.

On Monday, Allen Davenport, a lobbyist for the Service Employees International Union, said his union supported the call for issuing the bonds as soon as possible: “Working people loaned the ratepayers the money . . . they need it back.”

The coalition projects that a $1.4-billion deficit in the 2002-03 fiscal year will grow to $7.6 billion if the general fund is not repaid for electricity purchases. The figure rises to $9.3 billion when a 2% reserve is included in the budget calculations.

A top priority for lawmakers on the task force will be improving their own security at the Capitol. The long-running issue was being considered even before the terrorist strikes, because a mentally disturbed man last January crashed a big rig into the historic building.

Heightened security measures have long been controversial in the state capital, with some officials resisting them in favor of public access to the state’s center of government.

But Assemblyman Dennis Cardoza (D-Merced), who chairs the joint Rules Committee in charge of Capitol security, said the time has come to install concrete barriers at key entrances, metal detectors at main doorways and perhaps even issue badges for staff and press who work in the building.

“Hopefully there will be an expedited urgency on these matters that wasn’t there even after the Capitol ramming,” Cardoza said.

The first meeting of the task force Oct. 9 in Sacramento will be closed to the public.

Its purpose will be for officials to brief lawmakers on the state of security in California after last month’s terrorism.

The first public meeting will be held in Los Angeles on Oct. 15 and will cover the economic and security issues facing the state.

The task force ultimately will make its findings and recommendations public in a report to Gov. Gray Davis.