Calif. Senate fails to break budget deadlock

The California Senate shut down at midnight Tuesday after failing to approve a stopgap plan to stave off the need for IOUs and ease the state's $24.3 billion budget deficit. State Controller John Chiang has said he will have to issue about $3 billion worth of IOUs this month to state contractors, college students and taxpayers owed refunds unless there is a budget-balancing agreement. Counties will not get paid for social programs they administer.

Kings County officials said the state's IOUs will affect the county's health and services areas, specifically the CalWORKS temporary assistance for the indigent, social services administration, mental health and alcohol and other drugs programs.

The estimated impact for behavioral health programs in all counties in July alone is $276 million, said Assistant County Administrative Officer Deb West, citing figures from the California State Association of Counties.

"We do anticipate further deferral in August as well," West said.

County officials have already anticipated two-months deferral of payment from the state for the human services agency, and the county has been ready to cover the cost through its reserves for cash-flow purposes.

The impact for the department is estimated to be $3.5 million for July and August, said Human Services Agency Director Peggy Montgomery.

"It's a big impact," Montgomery said. "It will take all of our reserves. Hopefully we'll get our money back in September. If it goes any further than that, that's a huge concern."

The county administration is still trying to figure out how much the overall impact will be for the county and how long, West said.

"At this point, they are saying July and August, but they are no closer to having this budget resolved. So the concern is how long it will really be. That's the bottom line."

Frustration was palpable, as West pointed out that the state's failure to adopt its budget Tuesday night has already impacted schools with the loss of additional $3 billion. "It's almost beyond comprehension," she said.

California will not run out of cash immediately. While spending obligations will begin outpacing revenue without a balanced budget in place, the IOUs will delay a cash crisis until September. At that point, the state will be in jeopardy of running out of cash unless lawmakers figure out a way to pass a balanced budget.

Hanford City Manager Gary Misenheimer said the city will not be impacted by the IOUs, which only affect money taken directly out of the state general fund.

"The money we get from the county comes from sales tax and gas tax," Misenheimer said. "Neither of those are being affected by the IOU process, just general fund monies, so I don't think our operations are going to be impacted at all."

Hanford California Highway Patrol spokesman Jerry Pierce said Gov. Arnold Schwarzenegger could be signing an executive order today which would put state employees, such as his administrative staff, on 15 percent, three-day furloughs.

"We're a small office already and without these people in here taking care of their jobs, we'll have to pull people from their regular duties to fill the gaps," Pierce said. "Potentially, that could lead to less officers out on patrol, but we're going to try not to let that happen."

Pierce said the Hanford CHP received their state check in the mail this month, but it is unclear if they will be getting an IOU for the month of August.

"We've had budget woes before, but nothing quite this serious before," he said.

Frustration over the size of the budget shortfall and the inability to find common ground was evident on the Senate floor in Sacramento late Tuesday.

As midnight approached, Senate President Pro Tem Darrell Steinberg, D-Sacramento, accused Republicans of holding the state hostage by not voting to accept the $3.3 billion in immediate savings that would avoid IOUs.

"This is craziness. There's no excuse for it," the Senate leader said.

Voting along party lines, the Senate rejected three bills designed to save $5 billion, including $3.3 billion in education funding cuts that had to be enacted by Tuesday. The new fiscal year started today.

The measures fell two votes short of the two-thirds majorities needed to send them to the governor's desk, but Schwarzenegger said he would not sign any bill short of a complete solution to the deficit.

That stand brought a rebuke from Steinberg, D-Sacramento.

"What an irresponsible position to take when our problems are already as severe as they are," he said in asking his colleagues to support the stopgap bills. "Don't be a party to that."

Failure to approve the cost-saving measures will add to the state's deficit, perhaps by as much as $7 billion, because of the state's complicated school-financing system.

At least two Republican votes were needed to put together the two-thirds majorities required to approve the three bills, which passed the Assembly last week with bipartisan support. The Senate's 25 Democrats supported the bills, but 14 of the 15 Republicans voted no.

Sentinel staff writers Joe Johnson and Eiji Yamashita contributed to this report.

(July 1, 2009)