Governor calls special session for fiscal emergency

By CMTA Staff

Capitol Update, Jan. 11, 2008 Share this on FacebookTweet thisEmail this to a friend

On Thursday, January 10th, Governor Arnold Schwarzenegger released his much anticipated budget plan – a harsh $101 billion spending plan that cuts virtually every facet of state government in an effort to close the projected $14.5 billion budget deficit.  As promised, Schwarzenegger has proposed a 10% across-the-board cut for all state agencies, departments, boards and commissions.  

More specifically, the plan proposes some of the following:
  • Reduction in state employee positions – 7,086 over the next 18 months
  • Closing 48 state parks
  • Suspension of schools' constitutional funding guarantee under Proposition 98
  • Early release of 28,408 lower-risk prisoners from state and local facilities
  • Medi-Cal spending cuts through reduction in providers' rates
  • Sale of the remaining Economic Recovery Bonds authorized by voters in 2004 and deferment of the early debt payment on the bonds scheduled for 2008-09.
  • Executive, Legislative & Judicial spending cuts - $2.1, $26.5, and $245.6 million respectively

    In addition to laying out the details of the plan, the Governor also declared a "Fiscal Emergency" and called a special session of the Legislature to address the current year $3.3 billion budget gap.  The main significance of a special session is that proposals can be enacted much more swiftly due to a lower vote threshold for some measures and enjoy an expedited enactment timeline.

    Also, by calling a special session the Governor can tap into a new authority granted to him by a recent voter initiative.  Under the provisions of Proposition 58, the Governor may declare a fiscal emergency if he determines that the state faces substantial revenue shortfalls or expenditure increases. The Governor is then required to call a special session of the legislature and to propose legislation to address the fiscal emergency.  If the legislature does not approve and send legislation to the Governor to address the fiscal emergency within 45 days, it is prohibited from acting on any other bills or adjourning in joint recess until such legislation is passed.

    This will be the Governor’s fifth Budget since taking office in November 2003.  Plagued by the $14 billion budget deficit – not unlike the situation he faced when taking office in 2003 – he has announced his intention to revisit the idea of a Constitutional Amendment that would institute a state spending cap.  The cap would be structured so that expenditures would automatically be reduced when tax revenues increase more slowly than usual.  In more prosperous times, it would direct extra funds to a raining day account to provide stability for spending in the future.  This approach to fixing the deficit is similar to his plans in 2004 that were rejected by the Legislature and voters the following year when they were placed on the ballot for consideration.  

    And although Schwarzenegger has cited the need for fiscal restraint and cuts in the coming year(s), he continues to push healthcare reform suggesting that the state’s fiscal problems should not undercut a universal health care plan he wants voters to approve in November.  The plan, which is estimated to cost the state over $14 billion, is currently pending the Senate’s consideration.

    2008 is sure to be a year of great turmoil as the Governor and Legislature battle it out over how best to address the deficit. The Governor’s proposed budget makes significant cuts to all sectors of government in an effort to avoid raising taxes.  However, solving the $14 billion deficit may be challenging at best without raising taxes and having to hold the line on proposed cuts.

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