Avalanche Of Fiscal Irresponsibility Hits California

The California budget deficit is now $11 billion, on a path to $28 billion. Given that it's no longer possible to put this crisis off, Schwarzenegger declares fiscal emergency.

With time and money running out for California, Gov. Arnold Schwarzenegger declared a fiscal emergency today and called legislators into a new special session that won't end until they agree on a way to trim the state's $11.2 billion budget deficit.

"Without immediate action, our state is headed for a fiscal disaster" in which California could run out of money to pay its bills by late February, the governor said in a news conference in Los Angeles.

He compared the growing deficit, which could reach $28 billion by 2010, to an avalanche gaining momentum, and he slammed the Legislature, Democrats and Republicans both, for not coming up with any solutions during a special session that ended Nov. 25.

The governor can declare a fiscal emergency if he determines that revenue won't meet budget estimates. Lawmakers then have 45 days to pass legislation dealing with the deficit and send it to the governor. If that Jan. 15 deadline is missed, then the Legislature has to stay in session, without considering any other bills, until an agreement is reached.

"The advantage of the fiscal emergency declaration is that it puts a clock on the negotiations," said Aaron McLear, a spokesman for Schwarzenegger. The governor called the first fiscal emergency in the state's history last January, and the Legislature reached the needed agreements before the deadline.

But the new Legislature sworn in today faces the same grievances and partisan divisions that hamstrung negotiations during the November special session, when Democrats objected to deep cuts and Republicans complained about higher taxes. And the governor is proposing the same list of budget cuts, tax increases and economic stimulus efforts that was torpedoed in that round of talks.

"Some of the personnel has changed, but not enough to make any difference in the final vote," said Jon Coupal of the Howard Jarvis Taxpayers Association, which opposes Schwarzenegger's call for a temporary 1 1/2-cent boost in the state sales tax. "The governor is from Hollywood, so he should know that some sequels aren't worth doing."

"We are right now spending money we don't have," Schwarzenegger said. "The federal government shouldn't give us a penny until we straighten out our mess and we can live within our means."

It's my civic duty to point out that Mish's California Budget Proposal made January 12,2008 is still available for consideration.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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