California Nears Meltdown as Revenues Tumble

Thursday, 11 Jun 2009 08:13 AM

Share:
A    A   |
   Email Us   |
   Print   |
   Forward Article  |
  Copy Shortlink

SAN FRANCISCO — California's government risks a financial "meltdown" within 50 days in light of its weakening May revenues unless Gov. Arnold Schwarzenegger and lawmakers quickly plug a $24.3 billion budget gap, the state's controller said Wednesday.

Underscoring the severity of California's cash crisis, Controller John Chiang, who previously warned that the state's government risks running out of cash without a budget deal, said revenues in May fell by $1.14 billon, or 17.7 percent, from a year earlier.

Additionally, the revenues of the government of the most populous U.S. state fell short of estimates in Schwarzenegger's budget plan by $827 million, Chiang said.

"Without immediate solutions from the governor and legislature, we are less than 50 days away from a meltdown of state government," Chiang said.

California's revenues have been on a dramatic slide as a result of recession, rising unemployment, and its lengthy housing downturn.

The state's revenues from personal income taxes tumbled by 39.3 percent in May from a year earlier, while revenues from corporate taxes fell by 52.1 percent and revenues from sales taxes sagged by 7.6 percent, according to a report Chiang's office released.

"A truly balanced budget is the only responsible way out of the worst cash crisis since the Great Depression," Chiang, a Democrat, said.

DUELING BUDGET CONCEPTS

Schwarzenegger, a Republican, has proposed filling the state's budget gap with deep spending cuts, borrowing from local governments and by scrapping some state programs, including its welfare program.

Democrats who control the legislature are crafting a rival budget plan that includes spending cuts and saves programs Schwarzenegger has proposed eliminating. They instead would use reserves estimated in his budget to narrow the budget gap.

State Senate President Pro Tem Darrell Steinberg said on Tuesday he wants a budget agreement by the end of this month.

California's new fiscal year begins on July 1. The sooner the state has a budget the better poised it will be to raise short-term cash to fund its operations by selling revenue anticipation notes, or RANs, on the municipal debt market.

If pressed, California could sell revenue anticipation warrants, or RAWs, an idea floated by Schwarzenegger when he unveiled his budget plan last month. But he quickly shelved it amid opposition from lawmakers.

"No one wants to issue RAWs for our cash-flow borrowing," said Tom Dresslar, a spokesman for State Treasurer Bill Lockyer. "Everyone would prefer to issue RANs for the obvious reason: It costs less."

Lockyer, a Democrat, supports a budget with the reserve Schwarzenegger has proposed. That would increase confidence among investors that California has cash to pay the $7 billion to $9 billion in short-term debt notes that Lockyer's office assumes the state will need to sell, Dresslar said.

© Thomson Reuters 2009 All rights reserved

-

Share:
   Email Us   |
   Print   |
   Forward Article  |
  Copy Shortlink
Around the Web
Join the Newsmax Community
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

Report: Obama Blocking Vital Aid to Ukraine Forces

Tuesday, 15 Apr 2014 23:34 PM

The Obama administration is withholding essential non-lethal military equipment from Ukrainian security forces, accordin . . .

Bloomberg Organizes New Gun-Control Group, Will Spend $50 Million

Wednesday, 16 Apr 2014 06:16 AM

Former New York City Mayor Michael Bloomberg is willing to spend $50 million this year to foster a grassroots movement t . . .

Stumbling S&P 500 Reaching Worst Stretch of U.S. Election Cycle

Wednesday, 16 Apr 2014 06:30 AM

The political calendar is working against investors.Already hit by concerns valuations are too high just as the Federal  . . .

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved