With California on the verge of another dubious record in the Great Budget Debacle of 2008, it would seem prudent for state officials to be preparing for a worst-case scenario.
Trouble is, no one seems to know what that might be.
"I don't think that we can predict the impact of not having a budget in place in the near future," said Hallye Jordan, spokeswoman for state Controller John Chiang. "We know what the pain has been."
Saturday will mark the latest into a fiscal year (which started July 1) that the state has ever gone without a budget. On Monday, lawmakers surpassed their Aug. 31 record for the latest the Legislature had ever approved a budget.
And there is no discernible end in sight. There has been talk in the Capitol about a "half-a-loaf" compromise. The idea is to pass a bill that would allow the controller to make payments to programs he cannot now pay without a budget.
Those include community colleges, some elementary and high school programs, programs that provide medical services to the needy, social service providers and recipients, and private companies that peddle goods and services to state agencies.
Should legislators and Schwarzenegger fail to reach a deal by the end of this month, Chiang has said those groups will be shorted $7.6 billion in state payments.
That's on top of the total of $4.25 billion they were stiffed in July and August.
Thursday, Assembly GOP leader Mike Villines renewed a call for an emergency bill to free up money for Medi-Cal patients, programs for the developmentally disabled and 24-hour care services.
"We should all be able to agree that Californians should not have to suffer because we can't agree on the budget," Villines said.
But the governor, who has said he's ready to spend Thanksgiving without a budget, has made it clear he's not in the mood for half a loaf.
"This is the year," he said in Placerville on Wednesday. "The people of California have to finally say, 'Look, you have done this now for decades. You have borrowed, you have increased taxes, you have promised us to fix the system once and for all, and you didn't.
"The legislators should this time fix the problem."
Decision on borrowing is ahead
While lawmakers and the governor exchange punches, it's business as usual for most state and local programs.
Local governments and some medical providers are still being paid. Elementary and high schools are still getting most of their state money.
So are state employees – at least for now. In late July, the governor decreed that to help the state pay its bills, he was cutting the pay of about 180,000 state workers to the federal minimum wage of $6.55 an hour ($11.38 for bosses) until a budget is in place.
But Chiang declined to comply, contending that the state has enough cash to cover its $2.7 billion-a-month payroll.
The clash of constitutional officers is before a federal court but almost certainly won't be resolved before monthly paychecks are printed in mid-September. In the meantime, officials say that a worst-case scenario in which state government shuts down isn't likely.
For one thing, tax revenues were higher than anticipated in July, giving officials a little more breathing room. Revenue figures for August should be known early next week.
And there's always borrowing.
Even in normal years, the state periodically borrows money through Revenue Anticipation Notes (or RANs), because when tax revenues come in doesn't always match when bills come due.
But RANs have to be repaid in the same budget year in which they're issued, and there has to be a state budget in place to make the note holders – banks and other large financial institutions – comfortable that the notes will be paid in a timely fashion.
When there's no budget, the state must fall back on Revenue Anticipation Warrants (RAWs). These cost considerably more than RANs. Not only do they carry higher interest rates, but lenders also charge "credit enhancement fees" for taking on riskier debt.
Call Steve Wiegand, Bee Capitol Bureau, (916) 321-1076.
