Tuesday, December 2, 2008

California’s Fiscal Emergency

The San Francisco Chronicle reports Schwarzenegger declares fiscal emergency

With time and money running out for California, Gov. Arnold Schwarzenegger declared a fiscal emergency Monday 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, for not coming up with solutions during a special session that ended Nov. 25.

"Unfortunately for California, the legislators did not seem to appreciate the severity of our crisis," Schwarzenegger said. "In an emergency like this, we have to take quick action to avoid even worse problems, even if they include decisions we don't like."

Trapped in town

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 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 Monday 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.

State's budget crisis - what happens now

Now that the governor has declared a fiscal emergency, a 2004 law requires the state to enact a balanced budget and bans most borrowing to cover deficits.

Deadline: The Legislature has until Jan. 15 to agree on a plan to close the state's $11.2 billion budget gap.

Overtime: If lawmakers don't meet the deadline, they have to stay in session, dealing only with the budget deficit, until an agreement is sent to the governor.