Many of the pressures that can push California’s leaders toward a budget accord are absent this summer as the state lurches into yet another budget year without a spending plan.
The lack of acute suffering from the budget stalemate may help explain why talks between Gov. Arnold Schwarzenegger and top lawmakers show no signs of agreement on how to tackle California’s $19.1-billion deficit.
Cash-strapped health clinics that are typically threatened with closure under such circumstances tend to lead a cascade of woeful headlines generated by Sacramento’s inaction. But this year, for the first time, they will be paid even without a state budget.
The disgrace of issuing IOUs, as California did last summer, is only a far-off possibility this year.
And although the governor has tried to ramp up pressure by ordering that state workers’ pay be slashed, the controller, who prints the paychecks, has so far resisted that directive.
“There’s very little pressure,” said Dick Ackerman of Irvine, a former Republican leader in the state Senate who negotiated several state budgets until he was forced out by term limits in 2008. “If … things really didn’t get paid, I think you’d get a much quicker budget.”
Some payments are not being made: certain funds for community colleges, student grants, a small portion of school money, some local government funds and vendors who do business with the state.
But the state has accustomed itself to tardy budgets. A series of court rulings over the years have ensured that most services continue uninterrupted; roughly 95% of the California’s July bills will still be paid on time despite the lack of a spending plan.
That is one reason Senate President Pro Tem Darrell Steinberg (D-Sacramento) has said for weeks that it is more important to “get it right” than to get a budget done on time. The four legislative leaders, two Democrats and two Republicans, discussed the budget together Thursday for the first time — two weeks after the constitutional deadline for passing a spending plan.
“I’m very concerned,” said Assemblyman Roger Niello (R-Fair Oaks), a former vice chairman of the budget panel. “We are less far along in the process than we have been in prior years.”
The depth of the deficit — about a fifth of general fund — makes the decisions facing state leaders all the harder. Schwarzenegger has proposed dismantling parts of the social safety net, including welfare and day care for 142,000 low-income children. Such cuts are anathema to the Democrats who control the Legislature, and they have countered with tax-hike proposals that Republicans, some of whose votes are needed to pass a budget, equally despise.
Schwarzenegger ordered most state workers’ pay cut to $7.25 an hour, the federal minimum wage, on Thursday, the first day of the new budget year. An appeals court Friday affirmed his authority to do so.
But Controller John Chiang argued that an outdated computer system would make such a task risky and said he would ask the courts how quickly he must comply. Employees would receive full back pay after a budget is signed.
“I believe [Schwarzenegger] is trying to jam the legislators to act,” Chiang said in an interview.
Assembly Speaker John A. Perez (D-Los Angeles) accused Schwarzenegger of “deliberately causing real suffering in an attempt to force the Legislature to pass his … budget.”
Meanwhile, health clinics that serve the poor and are normally among the earliest hit by budget delays, will continue to receive money because of provisions in the federal stimulus act. That means there will be fewer reports of closing medical wards to goad Sacramento into action.
Even groups that go unpaid, such as community colleges, have adjusted — at a price.
“It’s frustrating that we were able to predict this situation a couple months ago,” said Scott Lay, president of the Community College League of California. He said most campuses have prepared borrowing plans to bridge the impasse; the interest payments will siphon funds from classrooms.
IOUs remain a threat, but the latest figures from the controller’s office predict no cash shortfall until the fall. The state issued IOUs on July 2 last year. Lawmakers pushed back such a day of reckoning early this year by allowing the controller to defer $4.7 billion in bill payments during the expected summer stalemate.
One of the biggest effects of an overdue budget is putting California’s already battered credit rating at risk of another downgrade from Wall Street, which could push up interest rates on loans the state needs.
State Treasurer Bill Lockyer has warned that could cost California billions.
“That warning never seems to carry much weight in the Capitol,” said Lockyer spokesman Tom Dresslar, “much less out there with the public.”