Reporting from Sacramento -- State lawmakers moved to avoid a cash crunch Tuesday as the controller warned that California could be in the red by early March.
A lag in revenue and higher-than-expected spending mean the state needs to scrape together more than $3 billion to stay in the black and keep a comfortable cash reserve, the controller said.
A legislative committee advanced a bill that would expand the state's ability to borrow from dedicated funds to cover daily expenses, while Gov. Jerry Brown's administration planned to tap universities and take other measures to help plug the gap.
The hunt for cash came on a busy day in the Capitol that included a step to ask voters to ease the state's controversial three-strikes law. The Assembly approved a bill to authorize a ballot measure on the issue for November 2014, but the legislation faces an uncertain future in the Senate.
The proposal would ask voters whether to impose harsh prison sentences only on offenders whose third conviction is for a violent or serious crime rather than any felony, as the law now requires. The hotly debated idea passed the Assembly 41 to 34, without a single Republican vote.
Of all the states with three-strikes laws, only California applies the rules to nonviolent offenders, said Assemblyman Mike Davis (D-Los Angeles), the bill's author. He said the measure could save $15 million annually for the first 10 years.
"We can use that money to reinvest in our society," he said. "Education, No. 1. Rehabilitation of prisoners, No. 2."
"It's outrageous that Democrats used California's budget problems as an excuse to chip away at a critical measure that has lowered crime rates significantly," she said.
In other legislative matters, a bid to create a universal healthcare system in California failed, and the Senate passed a measure that would preserve $1.36 billion in redevelopment money for housing projects. The money is set to be distributed to cities and school districts when local redevelopment agencies begin dissolving Wednesday. The bill, if it passes the Assembly and is signed by the governor, would require that the funds be used for affordable housing.
But much of the action Tuesday involved California's financial situation. In a letter to lawmakers, Controller John Chiang said the state would need to start using its $2.5-billion cushion by Feb. 29. Then, unless officials borrow or delay payments, it would burn through the rest of the cash and fall $730 million in the red by March 8.
Sen. Bill Emmerson (R-Hemet) blamed the cash crunch on "the partisan budget that the governor and legislative Democrats enacted without input from Republicans."
Leading Democrats and the Brown administration said things were under control.
"We're able to manage this," said Assembly Budget Committee Chairman Bob Blumenfield (D-Woodland Hills).
Department of Finance officials said they planned to shift money within the budget and borrow $450 million from state universities. The administration can also delay reimbursement to doctors who provide healthcare through state programs, said H.D. Palmer, a spokesman for the department.
"We'll get through this without having to issue IOUs," he said, referring to a stopgap measure the state used in 2009.
The current budget, passed in June, was balanced partly with "trigger cuts" announced in December when revenue failed to meet projections. Administration officials said it's taking longer than expected to realize those savings, and some cuts have been held up by lawsuits or the federal government.
In addition, the state has been shoveling money out the door faster than expected. For example, spending on community colleges has outpaced projections by $600 million, according to the Department of Finance. Palmer predicted the pace would slow and expenditures would balance out by the end of the fiscal year.
Los Angeles Times staff writers Patrick McGreevy and Michael J. Mishak contributed to this report.