Thread: Analyst: California Budget Deal Full of Tricks

Analyst: California Budget Deal Full of Tricks

Tuesday, July 28, 2009 9:10 AM

SACRAMENTO, Calif. -- A bond analyst was skeptical Monday about California's revised budget, saying it was filled with accounting tricks that would do little to improve the state's poor credit rating.

In addition, lenders may not be satisfied with California's latest spending plan, which combines $15 billion in cuts to education, prisons, parks and other aspects of state government with accounting maneuvers and borrowing to close a $26 billion deficit.

The state already has the lowest credit rating in the nation, except for the commonwealth of Puerto Rico, said Matt Fabian, a bond analyst at Municipal Market Advisors, based in Concord, Mass.

"The budget is probably the best they could do given this time. but nobody believes it is a balanced budget," Fabian said.

Schwarzenegger is expected to sign California's revised $88 billion budget Tuesday then brief the state treasurer and controller, creditors and analysts on how the latest spending plan will impact day-to-day cash flow.

The governor and lawmakers are hoping their latest plan provides the assurance lenders need for the state to take out loans and stop issuing IOUs to thousands of vendors.

The state treasurer and controller are waiting for a financial update from the Schwarzenegger administration. Once they receive the report, they said it will take them several days to determine the state's borrowing needs and whether California can stop issuing IOUs.

California has come to rely on taking out billions of dollars in short-term loans from commercial lenders to cover payments in the first half of each fiscal year until tax revenue comes in the spring.

This year, the state ran into a cash shortage, forcing Sacramento to issue IOUs instead of checks and prompting the state's downgraded credit rating, which Fitch Ratings placed at BBB. Most states have a AAA or AA rating.

Even as lawmakers passed the plan last week, they warned that deeper cuts might still be necessary amid an accelerating slide in tax revenue.

Fabian agreed, saying the plan largely pushed the state's problems into the future.

"You have accounting tricks like moving employee salaries out a day, deferral of school aid and withholding acceleration increases by 10 percent," he said of some of the tactics. "All of these are just borrowing money out of the future."

Acceleration increases involve raising income tax collections by increasing withholding by 10 percent. Taxpayers will get to reclaim the money during tax season. The strategy amounts to an interest-free loan for the state.

Schwarzenegger is expected to use his line-item veto power to make additional cuts before signing the spending plan. Some of those cuts could target welfare and social service programs.

Last week the Assembly rejected two controversial measures that would have brought another $1.1 billion to the state. One would have taken transportation funding from local governments, while the other authorized additional oil drilling off the Santa Barbara coast.

The governor's spokesman, Aaron McLear, said Schwarzenegger was not expected to cut the full $1.1 billion when he signs the budget. But he said additional cuts were necessary to provide a cash cushion for the state in case of emergencies such as earthquakes and wild fires.

"We will always be in a position to aggressively respond to disasters," McLear said.

McLear declined to specify where the governor will cut, except to say he was reviewing his options.

With much of state spending mandated by federal and constitutional requirements, social service advocates fear Schwarzenegger could go after money counties receive to administer social service benefits.

Likely targets include CalWORKS and Medi-Cal, which respectively provide welfare-to-work assistance and health insurance for poor families.

Counties are also at risk of losing funding to provide foster care and in-home supportive services for seniors and the disabled.

"I'm really worried he's going to make harsher cuts to county administrative services," said Mike Herald, a lobbyist for the Western Center on Law and Poverty, a Los Angeles-based advocacy group for the poor.

Advocates view the move as a double-punch since the Schwarzenegger administration has been reducing direct benefits in a time of an unprecedented revenue drop.

California's economy has been hit by the housing market slump and high unemployment, and the latest deficit-closing efforts come just five months after lawmakers and the governor ended months of negotiations to close a previous $42 billion deficit.

Under the latest budget approved by the Legislature, the state will impose tougher sanctions on CalWORKS recipients who don't meet work requirements. California also lowered Medi-Cal reimbursement rates for health care providers and eliminated optional benefits such as dental and eye care for adult recipients in previous rounds of budget cuts.

"Given the skyrocketing demand for vital human services caused by the recession, I can't imagine that the governor would cut any more from the most vulnerable people in the state," said Frank Mecca, executive director of the County Welfare Directors Association of California.

http://moneynews.newsmax.com/markets/ca ... 40794.html

Arnold don't expect the rest of America to pick up the slack when you insist on giving illegals health care, education, welfare and social services.

You can rest assured like Mexichussets, the only ones facing benefits cuts will be US citizens and legal residents. Illegal aliens will be able to walk into any facility, use a stolen identity as they always have and receive anything they want.

Originally Posted by retiredairforce

You can rest assured like Mexichussets, the only ones facing benefits cuts will be US citizens and legal residents. Illegal aliens will be able to walk into any facility, use a stolen identity as they always have and receive anything they want.

DITTO RAF!

E-Verify, 287g Program, SAVE ID, Anchor Baby Laws, enforcement of Immigration Law, stop visa for two years, make it a felony hiring illegal aliens, and Deport all illegal aliens

Never will happen emonkey. The Heller amendment is dead for health care. Napolitano and Obama legalized identity theft by rewarding illegal aliens with work permits who use stolen identities to obtain jobs and benefits when employers are busted for hiring illegal aliens during the absolute sham of enforcement. This so called government of, by and for illegal aliens including identity thieves, MS-13, sex offenders, murderers, drug cartel members and other illegal alien criminals has told us to go to hell and stick it where there is perpetual darkness.

Originally Posted by NoBueno

Originally Posted by retiredairforce

You can rest assured like Mexichussets, the only ones facing benefits cuts will be US citizens and legal residents. Illegal aliens will be able to walk into any facility, use a stolen identity as they always have and receive anything they want.

DITTO RAF!

I got another infuriating letter in the mail from Arnie stating that he wants the border secure, but that he defends in "immahgrants" because they pick our lettuce.

Screw him.