Weekly Wrap: California Faces July 1 Deadline

 

In California, epicenter of the fiscal earthquake shaking state governments across the country, Gov. Arnold Schwarzenegger is once again engaging in political brinksmanship to try to prod his Legislature to resolve a $24 billion gap between spending and revenues. If lawmakers fail to act before the July 1 start of a new budget year, Schwarzenegger says he will not go along with a short-term loan to keep the state afloat.

During a meeting with the Los Angeles Times editorial board, Schwarzenegger vowed instead to let government operations come to a "grinding halt." In what the newspaper said was a clear reference to labor unions that oppose budget cuts he's proposing, the Republican governor said: "Do they want to protect the workers that provide the services, or do they want to protect the people that get those services? The choice is up to them." Schwarzenegger's plan to close the state's budget gap would eliminate government health coverage for low- to moderate-income children, scrap the state's welfare-to-work program, release thousands of prisoners early, cut state employees pay by 5 percent and shutter 220 state parks.

California and other states can't expect relief from the economic shockwaves anytime soon. Even if the national recession ends this year as many predict, state budgets are expected to be in the red for at least the next two budget years, with gaps topping $230 billion as tax collections of sales, personal and corporate income lag, two new reports show. The National Conference of State Legislatures , the National Association of State Budget Officers and the National Governors Association agreed it will be at least FY 2012 before the situation improves.

Education, one of the largest budget items in every state, will be hard hit despite more than $100 billion in federal stimulus funds meant to cushion the recession's impact. "Pretty much every school system I know is making cuts to their budget because of the economy. In some cases the stimulus money prevented cuts for some of those school systems, but in the vast majority of others, it didn't because the cuts were so massive," said John Musso, the executive director of the Association of School Business Officials International . Twenty-six states have made midyear cuts to elementary and secondary education and 31 have made cuts to higher education, according to a recent report. However, some of the cuts were rolled back after the first stimulus dollars started flowing to the 29 states that so far have applied for their education allocations.

One way many states are trying to save money is through furloughs of state employees. Michigan officials, for instance, said they will close state government offices for six days this summer to save $21.7 million. Other states are still struggling with the best way to implement furloughs. Nevada officials say they are worried employees might figure out a way to avoid the one-day-a-month unpaid furlough, such as taking off five days in a row and filing for state unemployment benefits, a practice the state banned. In Wisconsin, university officials are asking for clarity on how to take state-ordered furloughs during the academic year. They are questioning, for example, whether they will have to cancel classes for that day.

 
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