ALAMEDA, Calif. — Fiscal 2011 dawned on California Thursday without a state budget in place.
Without any compromise in sight over how to close a shortfall of almost $18 billion, lawmakers adjourned Thursday.
The summer recess that was to have started today is formally canceled, though the Legislature is not scheduled to meet again until Aug. 2. Lawmakers are returning to their districts, but are on call to return to the capitol if necessary, said Alicia Trost, spokeswoman for Senate President pro tempore Darrell Steinberg, D-Sacramento. “Negotiators will remain in Sacramento,” she said.
The Republican governor, Arnold Schwarzenegger, proposed making wholesale cuts to social service and welfare programs to close the gap, which includes a $7.7 billion deficit left over from fiscal 2010.
The governor’s budget proposal projects about $91.5 billion in general fund revenue in fiscal 2011.
Democratic lawmakers say there is no way they will agree with proposals like the elimination of the CalWORKs welfare program.
At least some votes from the Republican minority are needed to reach the two-thirds plateau required to adopt a budget. And GOP leaders say they are perfectly content with the spending and program cuts in the governor’s budget.
The two Democratic leaders — Steinberg and Assembly Speaker John Perez — have produced markedly different budget proposals. Perez wants to spend a bit more using one-time borrowing, while Steinberg is focused more on either temporary or permanent tax increases.
They told statehouse reporters Wednesday that they have agreed with each other on budget principles, without saying much about what that entails.
“The fact that Democrats are talking to each other is better than no progress at all, but it’s certainly no cause for celebration,” the Assembly Republican leader, Martin Garrick, said in a release Thursday.
Building a two-thirds majority to pass a budget is never easy, and California budgets are adopted late more often than they are adopted on time.
But the elected leaders in charge of the state’s bank accounts have warned that California has little breathing room to continue without bringing the budget into balance.
The state will exhaust its capacity to borrow from its own special funds sometime in July, Controller John Chiang wrote in a letter to the governor and legislative leaders in mid-June.
Without a budget in place, the controller’s office is already withholding payments that are due to vendors for services provided after July 1, as well as payments due for many school and community college district programs.
In 2009, Chiang’s office issued $2 billion of IOUs to lower-priority creditors to preserve cash for creditors with higher legal standing, such as bondholders.
Treasurer Bill Lockyer issued a statement Wednesday warning that prolonged budget gridlock is likely to damage the state’s credit rating.
“Every day without a credible plan brings us closer to deterioration of the state’s credit rating and the humiliation of IOUs,” Lockyer said. “Our taxpayers shouldn’t have to pay the higher borrowing costs that come with a ratings downgrade.”
With an A-minus from Fitch Ratings, A1 from Moody’s Investors Service and A-minus from Standard & Poor’s, California has the lowest ratings of any state.
“A lengthy delay would create other problems, too,” Lockyer said. “It could jeopardize thousands of jobs by reducing or even eliminating the time we’ll have available this year to sell bonds that finance infrastructure projects. It would make it harder and more expensive, maybe even impossible, to obtain $10 billion in short-term loans the state will need this summer to maintain adequate cash flow and protect vital services. And each day that passes without a budget deepens the fiscal hole by more than $50 million.”
