State Budget

The California state budget crisis and impasse has triggered a repeat of the issuing of a form of IOUs rather than cash to certain state providers. As a previous post noted, the legislature – by retiming tax withholding – was able to bring in enough cash to stave off the need for IOUs over the past few weeks. But now that temporary remedy is running its course and the state – rather than literally running out of cash – is beginning to ration resources. The “registered warrant” form of IOUs – shown in the picture – is still not slated…

The picture on the left is from happier times in 2006 when a state budget was being signed. But there is no evidence that we are going to see anything like that in the next few days. The Sacramento Bee today has a brief summary of Democratic vs. Republican current positions on the budget at:http://media.sacbee.com/smedia/2010/08/14/23/7W15BUDGETA3.source.prod_affiliate.4.pdf Exactly where the governor is on all this is unclear. Of late, the governor has been talking about needing various reforms – not necessarily related to the immediate budget – as part of the deal. One of these is public pension reform. The governor has…

You may be wondering why last summer at this time the state was issuing IOUs and this summer it isn’t – despite a budget crisis. Note first that last summer a budget was in place. One had been enacted in February 2009 and, despite voter rejection of various budget-related propositions in May 2009, there was authorization to spend. This time we have no budget so some payments are not being made – which saves cash. The state controller has just issued his report for July 2010. The state has on hand roughly $6 billion in “unused borrowable resources” compared to…

Legislative Democrats produced their own budget proposals yesterday, although Republicans and the governor have said they are not acceptable. There is an oil severance tax, done in a complicated way in an attempt to avoid the 2/3 vote requirement for taxes (from Prop 13 of 1978). It appears to be legally dubious. There is an increase in the state income tax and the vehicle license fee with a cut in the sales tax. The net at the state level is a tax increase which would require a 2/3 vote. It has a carrot for Republicans because the state income tax…

The latest and last cash report for the fiscal year 2009-10 that ended June 30 has been released by the state controller. You can find it at: http://www.sco.ca.gov/Files-ARD/CASH/fy0910_june.pdf To cut to the chase, revenues were around $87 billion and disbursements were around $87 billion. (I have excluded inflows of non-revenues which are mainly grabs from various funds and reserves outside the general fund.) So a rough balance was achieved. Now, it is true that the revenues included the outcomes of tax increases that are scheduled to expire in the future. And it is true that gimmicks such as moving the…