California nears budget-gap deadline
Lawmakers in the state have until today to close the $24 billion budget deficit. Tess Vigeland speaks with Evan Halper, Sacramento bureau chief for the Los Angeles Times, about the state's fiscal problems.
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Tess Vigeland: Here in California we endure endless jokes and sight gags about our state cracking off and falling into the Pacific. Well, money-wise, it could happen if our politicians can't find a solution to a budget impasse before the clock strikes midnight.
The state is facing a $24 billion shortfall. Governor Arnold Schwarzenegger says he will not agree to the most recent package of tax increases and spending cuts proposed by Democratic lawmakers. Without some sort of legislation, California's piggy bank will empty.
Joining us now from the state capital in Sacramento is reporter Evan Halper of the Los Angeles Times. Thanks for taking the time to chat with us.
EVAN HALPER: Thanks for having me, Tess.
VIGELAND: Just remind us very briefly. How on earth did we get to this point?
HALPER: Well, tax revenues have dropped off precipitously. And California is a state that is overly reliant on income taxes. As soon as things drop off, as they have over the last several months, the state certainly winds up in a budget crisis, as it continually has over the last many years.
VIGELAND: Well, the talk now is that if there is not a solution that by Thursday we could be looking at IOUs going out to everyone that the state normally pays. What will those actually look like? Is that going to be a piece of paper that people get in the mail?
HALPER: Yeah, if you're used to getting a check from the state, instead you'll get this kinda registered warrant, this IOU. There will be a panel that will decide what interest rate the state will pay on these IOUs, and the banks will probably make their decision on whether it's worth their while to honor the IOUs based on what interest they can get out of it.
VIGELAND: So it sounds like there is still a little confusion over these IOUs, but is there anything that says, for example, who would get paid back first if those are issued?
HALPER: There are some payments that we have to make. They can't be IOUs, as long as there is money in the state Treasury. Like payments to schools are legally guaranteed, payments to repay debt. As far as paying back the IOUs that the state does send out, I believe the controller has some discretion on who gets paid back first once there is money.
VIGELAND: So there is still money, then?
HALPER: There is money to do some things, there's just not enough money to do everything that state government normally does. And some of those are pretty big things, there's not going to be money, for example, to pay these welfare cash grants to the elderly, blind, and disabled. There's not going to be enough money to make payments to students receiving some financial aid. There's not enough money to make payments to many local governments.
VIGELAND: So what does that look like? Do we have any notion of what a bankrupt state looks like? Who might feel that the most?
HALPER: You know, the experts will tell you the state can't go bankrupt legally, but in sort of practice, that's kinda where we are heading. And we've been there in 1992 and before that back in the Great Depression, and what it looks like is a mess. If you're a vendor, trying to do business with the state, and you're just getting these IOUs, you're not getting paid, and then people wind up having to lay off staff. We talked to people when this almost happened last time around who, for example, have contracts with the state to bring low-income dialysis patients to their appointments. And they were having to shut down their businesses because they weren't going check to check, and they couldn't pay their employees.
VIGELAND: Do you think average Californians really have any notion of how bad this is and could get. I mean, you look at, for example, the local television news, and I think it was maybe the fourth or fifth story last night.
HALPER: I think Californians have been told the sky is falling so many times since right before the recall that they've grown numb to it, and it just looks to them like sort of more yelling in Sacramento and the sky has not fallen yet, so they tune it out.
VIGELAND: All right, I guess we'll see what happens after midnight tonight. Evan Halper is the Sacramento bureau chief for the L.A. Times. Thanks so much, and good luck tonight.
HALPER: OK, thank you, Tess.
Comments
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From CA, 07/01/2009
this is the worst i have ever seen in 51 years.more people are losing jobs and homes than ever before. know any seems like the woman are the only ones working thank god. the great state cant pass a good budget (on time) than raise 42 billon in taxes. than have the stupidity for a special election.and still another 24 billion shortfall. are you now getting the true picture. fact private sector firing a 3rd of their workforce yet the goverment is expanding.yet they still think taxes is the answer. let me ask do you still have room for more tax burden. as for me still looking for a job as my family is tredding water. i believe goverment needs to let go of a 3rd of their worforce and tread water as us intill things get better. more taxes and spending will not work because we are at this time not working. thank you
From Oakland, CA, 06/30/2009
Hmmm... I don't know about that analysis - where problem is blamed on dependence by Calif on income tax... uhmmm... California has more wealthy people (think movie stars, movie stars' MDs, movie moguls, and tech moguls) per square inch (I'm talking people who make over $100k a yr and yes, that's wealthy compared to most of us who make under $40k / yr) than any other state. I'd say that was a spin/skewed idea of why California is going broke. California, where I was born and still live, because of the governor's refusal to tax the wealthy adequately. While the mention of healthcare as being such a huge contributor to the looming bankruptcy is correct to me as well, the omission of the governor's veto'ing TWICE the healthcare bill that California's very own LAO had projected would have saved the state billiions in the subsequent 10 years was shameful. If you're looking for a reason why California is in the toilet right now, look at the inexperienced fool Californians elected for a governor. One hopes that history does not every have to repeat itself at the ballot box in the future. If you are a Californian, please do your homework this time. At least get someone who knows the difference between a budget and a legal brief.
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