California controller to suspend tax refunds, welfare checks, student grants

[TruthBrigade]

http://www.latimes.com/news/local/la-me-budget17-2009jan17,0,5517766,full.story

California controller to suspend tax refunds, welfare checks, student grants

John Chiang announces that his office will suspend $3.7 billion in payments owed to Californians starting Feb. 1, because with no budget in place the state lacks sufficient cash to pay its bills.

By Evan Halper and Patrick McGreevy
January 17, 2009

Reporting from Sacramento -- The state will suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1, Controller John Chiang announced Friday.

Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state's nearly $42-billion budget deficit. More than half of those payments are tax refunds.

The controller said the suspended payments could be rolled into IOUs if California still lacks sufficient cash to pay its bills come March or April.

"It pains me to pull this trigger," Chiang said at a news conference in his office. "But it is an action that is critically necessary."

The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the elderly, blind and disabled; and $13 million in grants for college students.

Even if a budget agreement is reached by the end of this month, tax refunds and other payments could remain temporarily frozen. Chiang said a budget deal may not generate cash quickly enough to resume them immediately.

Not all payments will stop Feb. 1. Most school and healthcare programs will be paid, as required by state and federal law. The state will continue to pay more than $6.6 billion in such bills.

And Los Angeles County officials said they would cover welfare payments to more than 500,000 local recipients -- for now.

But California is projected to be $346 million short of the funds it needs to pay all its bills in February. By March, the state would be so far in the red that even continuing to suspend payments would not cover the shortfall. California would be insolvent, making the issuance of IOUs likely.

State officials have already designed an IOU template, Chiang said, and have been negotiating with banks over whether taxpayers could cash or deposit them if they are issued. The state could be forced to pay as much as 5% interest on delayed tax refunds if they are not paid by the end of May, Chiang said.

The last time the state issued such IOUs -- the only time since the Great Depression -- was in 1992.

The suspension of payments is the latest radical move by officials to help keep the state from running out of cash as Gov. Arnold Schwarzenegger and the Legislature battle over how to avoid insolvency.

Schwarzenegger, who hopes to speed up public-works projects to stimulate the economy, wants tax increases, spending cuts and legislation to relax some environmental rules and allow private companies to do some government construction.

Democrats are seeking tax increases as well, but fewer spending cuts. Republican lawmakers would only pare spending and have been blocking any tax hikes.

Meanwhile, Schwarzenegger has ordered that most state workers take two days off per month without pay -- equivalent to about a 10% pay cut. The governor also ordered most state offices -- including all DMV field offices -- to close on those two days. The order is being challenged in court by labor unions.

The state has also halted payments of bond money for more than 5,300 public-works projects.

On Friday, the state Department of Finance temporarily exempted 276 of the projects from the freeze, reasoning that because they are nearly complete, it could cost the state more to shut them down than to finish them.

The exemption, through Feb. 1, will allow the continuation of school construction by the Inglewood Unified School District and the construction of a new Court of Appeal facility in Santa Ana. Work on new rail tracks at L.A.'s Union Station and road projects involving Irwindale Avenue, Martin Luther King Boulevard and Imperial Highway in Los Angeles County will also be able to continue.

Some projects were exempted because the state is under court order to do the jobs. Others would threaten public safety if left uncompleted, according to Mike Genest, Schwarzenegger's finance director.

"We're going to take the risk of allowing them to continue a little longer because we are very hopeful will have a budget by Feb. 1," Genest said.

Contractors lined up at a meeting of state finance officials to warn of the consequences of stopping the bulk of the public-works money. They said shutting down projects already underway would ultimately cost the state significantly. According to Caltrans Director Will Kempton, the state would have to pay $350 million in legal costs, claims for contract breaches and expenses for securing sites that go dormant.

"The bulk of those dollars are lost . . . to the taxpayers," Kempton said. "You can't just walk away from a construction project. You have to make sure it is buttoned up."

It is not just the state that would take a hit. Some school districts relying on state funds do not have the reserves in place to cover the payments they will owe builders if work stops.

Counties are also feeling the pinch. They process the welfare payments scheduled to be halted by the controller's office Feb. 1. The state is freezing those payments, along with millions of dollars in salaries to county workers who run the programs.

Some county officials say they don't have reserves in place to cover the state until the budget crisis is resolved.

"We simply don't have the cash," said Pat Leary, assistant administrator for Yolo County. "We are in critically bad times."

About a third of all state welfare payments go to Los Angeles County, where officials said they can shift money around to keep the payments flowing in the short term.

"The million-dollar question is how long this will last," said L.A. County Chief Executive William T Fujioka. "We cannot sustain a huge and very long hit."

evan.halper@latimes.com

patrick.mcgreevy@

latimes.com

Times staff writer Molly Hennessy-Fiske contributed to this report from Los Angeles.

[truthinaction]

The result of no discipline, trying to give everyone what they think they want and deceit. Micro or macro it never works for very long, history shows this to be true.

[TruthBrigade]

I have to admit, I'm going to enjoy watching the riots!

CA has failed it's people miserably and I am thankful I was able to get out alive when we did. 

The sad fact of the matter is that they deserve what they get.  The ignored the people for the will of foreign interests...it has passed the stage of no return.

[TruthBrigade]

Revolt brews in counties
lkalb@sacbee.com
Published Thursday, Feb. 05, 2009

Counties in California say they've had enough – and they aren't going to take it anymore.

In what amounts to a Boston Tea Party-style revolt against the state Capitol, they're threatening to withhold money.

Los Angeles is considering such an option. And Colusa County supervisors said they authorized payment delays for February.

"We didn't vote on it, because I don't think anybody wants to go to jail," Colusa County Supervisor Kim Vann said.

Closer to home, Sacramento County is planning to file a lawsuit this week against the state and Controller John Chiang for withholding millions of dollars – much of it for social service programs.

"The Legislature authorized those expenditures, and (the controller) has decided to withhold it," said Susan Peters, chairwoman of the Sacramento County Board of Supervisors. "I believe it's possible other counties will be joining in the action."

Riverside County is looking at a similar lawsuit but plans to go one step further. It authorized going to court to relieve it from having to provide state-mandated services without state funding.

Hallye Jordan, a controller spokeswoman, said Chiang "shares the frustration of counties" but was forced to act because of the failure of the Legislature and governor to address the budget deficit.

"It's an awful situation," she said. "We understand that many counties are suffering."

Regardless, a coalition of six Southern California counties is headed to Sacramento for a Feb. 12 meeting to call attention to the counties' plight, Riverside County spokeswoman Lys Mendez said.

By the time leaders from Riverside, Los Angeles, Orange, San Diego, Imperial and San Bernardino counties come together, the revolt could be at full steam.

"I think it just reflects the severity of the problem, and folks are just trying to find a way to keep (programs) going," said Jim Wiltshire, deputy director of the California State Association of Counties.

Frustration has been spreading since last week, when the state controller vowed to delay payments to counties for health and social services.

"When we hear things like, 'We're out of cash and you're going to have to borrow the money,' it doesn't make us very happy," Yolo County Supervisors' Chairman Mike McGowan said.

McGowan said the county would look for a way to fund vital services such as mental health programs, CalWORKS, food stamps and child protective services.

That would mean borrowing about $5 million to cover mandated program expenses, McGowan said.

"We've heard rumors that the (state's) deferral approach will be longer than one month," he said.

In that case, McGowan added, there are smaller counties that will "simply go out of business. They'll not be able to borrow the money."

One budget proposal calls for the state to delay $3.5 billion in payments to counties over seven months, Wiltshire said.

"Counties just don't have the cash position to operate those programs and wait for a check to come in September," he said.

The rumor that the state could extend the delayed payments to counties sent a chill through Colusa County, which qualifies as small with only 22,000 people.

If the state delays payments for a longer period, "we can stay open for three months – period," Colusa County's Vann said.

If all counties withheld funds, money denied the state would total $675 million over a year, said Wiltshire.

That amount represents court receipts that counties remit to the state, he said.

In addition to filing suit, Sacramento County officials are considering withholding money. While counties do collect property taxes for the state, county officials doubted that money would come into play.

"We need to know the ramifications before we do something rash that has consequences," Supervisor Roberta MacGlashan said.

While deferring property tax revenue money to the state might seem like a good idea, that money goes in part to fund education. The county doesn't want to hurt schools while taking a stand against the controller's actions, she added.

There also could be a cost to withholding money from the state.

Terri Sexton, associate director of the Center for State and Local Taxation at the University of California, Davis, said she's never seen anything like this grass-roots revolt.

"But, of course, the state has never been in this fiscal position," Sexton said. "At some level, it doesn't make any difference whether the counties are suing the state or whatever.

"You can't squeeze blood out of a turnip. The money doesn't exist. What does it ultimately mean? Will there be cutbacks in those services? I think that's where we're headed."

Los Angeles County started the movement Tuesday when its Board of Supervisors considered holding back money from the state in a move that screamed: Give us our money or you won't get yours.

"The deal is the county has got bills to pay," said Gerry Hertzberg, policy director for Supervisor Gloria Molina. "If the state doesn't act, how do you plan how to budget?"

Los Angeles County is expecting to miss out on as much as $105 million a month as a result of the deferred state payments.

Other counties are in similar positions, so it came as no surprise to Hertzberg that others might join the revolution.

"It's not at all surprising," Hertzberg said. "We've got obligations."

Sacramento County's MacGlashan said despite the counties' threats to withhold, she wasn't certain all would follow through.

"It's really more of a stunt," she said. "But sometimes it takes a stunt to get people's attention."

[TruthBrigade]

California Goes Broke, Halts $3.5 Billion in Payments

By Stephen C. Webster

February 03, 2009 "Raw Story" -- -California, the eighth largest economy in the world, is broke.

"People are going to be hurt starting today," said Hallye Jordan, speaking on behalf of the state Controller. "There's no money."

Since state legislators failed to meet an end of January deadline on an agreement to make up for California's $40 billion budget gap, residents won't be getting their state tax rebates, scholarships to Cal Grant college will go unpaid, vendors invoices will remain uncollected and county social services will cease.

At least, temporarily. Services and payments will resume once state legislators come to an agreement on the budget.

"This time, there are real-world consequences," said H.D. Palmer, spokesman for the California Department of Finance, in a report by KCRA in Sacramento. "Because we have not been able to get to a budget agreement, payments aren't going to be made."

"This is an issue of fairness," said Assemblyman Ted Gaines, R-Roseville, in the KCRA report. "It hurts hardworking families the most. Refunds, in fact, will stimulate the economy, and taxpayers need their money."

"Included are $515 million in payments to the state's vendors and $280 million to help people with developmental disabilities. Other public assistance agencies will be left waiting for hundreds of millions of dollars," reports CNN. "Other public assistance agencies will be left waiting for hundreds of millions of dollars."

"I see the will during the negotiations even though these are very, very tough things that we talk about, where we go into areas that we have never, ever dreamt of going into and trying to solve," said Governor Arnold Schwarzenegger. "So you will be very surprised when the whole thing is done. We're still not there yet. There is still a lot of work that needs to be done but we are moving slowly forward with this process."

"If there is no deal by Friday, state government workers will take their first furlough day," reports the San Diego Union Tribune. "Schwarzenegger has ordered state employees to take two days off a month without pay through June 2010 to save about $1.4 billion.

"'We're really hoping we can work out a compromise that helps the governor achieve the savings he wants while minimizing the disruption to state services and to the lives of the employees who provide the services,' said Jim Zamora, spokesman for the Service Employees International Union, Local 1000, which represents the state's largest employee union with 90,000 workers."

"Some 46 states face budget shortfalls, forcing them to slash funding for many services," reported CNN. "But California, the largest state in the union by population, faces a deficit that totals more than 35% of its general fund."

State lawmakers returned to the Capitol on Monday evening to continue budget negotiations.

[admin]

GOOD !!!

[TruthBrigade]

Calif. budget stalemate sets up fiscal calamity
     
http://news.yahoo.com/s/ap/20090217/ap_on_re_us/california_budget
By JUDY LIN, Associated Press Writer Judy Lin, Associated Press Writer – Tue Feb 17,

State Senator Jeff Dunham, R- Merced, lifts up a stack of paperwork concerning the stalled state budget …

SACRAMENTO, Calif. – After a frustrating holiday weekend that failed to yield the one vote needed to end California's budget stalemate, the state is poised to begin layoff proceedings Tuesday for 20,000 government workers.

In addition to the layoffs, the state also plans to halt all remaining public works projects, potentially putting thousands of construction workers out of jobs.

"We are dealing with a catastrophe of unbelievable proportions," said state Sen. Alan Lowenthal, a Democrat from Long Beach and chairman of the Senate transportation committee.

Senate leader Darrell Steinberg announced late Monday that lawmakers had failed to find the final vote in his chamber as Republicans refused to support tax increases. He called a session for Tuesday and said he would put the tax provisions of the budget proposal up for a vote, even if they would not pass.

Steinberg warned lawmakers to bring their toothbrushes, saying they would not leave until that vote was secured.

"One member," Steinberg said. "One more member to put the interest of the state ahead of ideology and ahead of any parochial concern."

Like other states, California faces plunging tax revenue that has imperiled state services. The proposal put before lawmakers this weekend was negotiated by Schwarzenegger and the four legislative leaders and appeared to have support of the required two-thirds majority in the state Assembly.

However, it was falling one Republican vote short in the Senate, a situation that had not changed throughout a weekend marked by long hours and uncertainty over the state's future.

The plan includes $15.1 billion in program cuts, $14.4 billion in temporary tax increases and $11.4 billion in borrowing. The package also would send five ballot measures to voters in a special election to be held May 19.

The stalled effort prompted Schwarzenegger to make good on an earlier promise to begin the layoff process for thousands of state workers.

The governor had delayed releasing the notices on Friday when it appeared lawmakers would pass a compromise plan to close the state's $42 billion shortfall. But with marathon weekend sessions failing to produce the necessary votes, Schwarzenegger's spokesman said the administration had no choice.

"In the absence of a budget, the governor must do everything he can to cut back on state spending," spokesman Aaron McLear said.

The notices will start going out Tuesday to 20,000 workers in corrections, health and human services and other agencies that receive money from the general fund. Administration officials are seeking to eliminate up to 10,000 jobs as part of the governor's order to cut 10 percent from the government payroll.

Despite the warnings of impending fiscal calamity, most rank-and-file Republicans have refused to agree to higher taxes. Republican lawmakers blamed Democrats for years of overspending.

"You're not going to go back to the people's pocketbooks to fuel that spending," said state Sen. Dennis Hollingsworth, R-Temecula.

During a lively floor session Monday night, state Sen. George Runner, R-Lancaster, defended his colleagues' stance against tax hikes and said his constituents were pleading with him to vote no on the budget proposal.

He accused Democrats, who hold majorities in both houses, of using the recession to drive an agenda of tax increases.

"You want this emergency," Runner said, drawing jeers from Democrats in the chamber. "Listen, you may not like to hear what we have to say, but it's what we believe."

Steinberg, the Senate president pro tem, acknowledged that tax increases were difficult for all lawmakers to swallow but said the Legislature had no choice.

"Nobody likes that idea, but remember the reason we are in this crisis is because we are in a national and international crisis," he said.

Lawmakers broke the record for longest legislative session in state history over the weekend before disbanding Sunday night. The Assembly was at one point in session for 30 hours.