SACRAMENTO -- State Controller John Chiang, citing improved revenue and less spending, said his deadline for getting an expensive short-term loan if there is no state budget is being pushed back several weeks.
The controller said the improved cash flow bolsters his contention that Gov. Arnold Schwarzenegger's order last week to lay off 10,000 temporary and part-time state workers and cut pay for 180,000 others was not needed.
The governor and legislative leaders, who acknowledge that they need a deadline to make tough budget decisions, have been warning for weeks that the state could "run out of cash" if there is no budget by August.
That scenario was always, at best, an overstatement. The state needs a routine short-term loan, at last estimate $8 billion, to maintain cash as tax revenue arrives in spurts during the fsical year that began July 1.
The state has obtained short-term loans in 19 of the last 20 years. The issue this year is that if there is no budget the the state will have to get a more expensive loan, adding $100 million or more to borrowing costs.
Chiang had previously estimated that his office would have to commit to the more expensive loan by next week if there is no budget. Chiang said today that "this news delays our need to borrow by several weeks."
The Schwarzenegger administration was skeptical when Chiang told a legislative committee Monday that the state would have a $4.2 billion cash cushion next month. The controller's new estimate is expected to be even higher.
That's well above the $2.5 billion regarded as a minimum cash cushion and more than double the administration estimate of $1.8 billion. Chiang is scheduled to release details of his estimate later this week.
Legislators are deadlocked on closing a $15.2 billion gap in a general fund of over $100 billion. Democrats are pushing a $9.7 billion tax package. Republicans oppose a tax increase and want budget cuts and future spending controls.
The deadline for placing the governor's proposal for Lottery-backed bonds or new budget controls on the November ballot is Aug. 16, Secretary of State Debra Bowen said in a letter last month.
Legislators think the deadline could be stretched to the following week. Democratic legislators would like to attend the Democratic National Convention that begins Aug. 25 in Denver.
The Legislature is scheduled to adjourn for the year on Aug. 31. In a record deadlock six years ago, a new budget was not signed until Sept. 5.
Chiang is refusing to comply with the governor's order to cut the pay of most state workers to the federal minimum wage, $6.55 an hour, because there is no budget. The next paycheck for most state workers is not due until the end of the month.
Schwarzenegger said the layoffs and pay cuts are needed to avoid a "full-blown cash crisis" and to comply with a five-year-old state Supreme Court decision, previously ignored.
The controller contends that the governor is misinterpreting the court decision and that a 25-year-old payroll system makes the complicated pay cut unworkable. The governor is expected to sue the controller to enforce his order.
Source: http://weblog.signonsandiego.com