November 19, 2003
| TO: | Cla Members/ Systems/ Network Contacts |
| FROM: | Mike Dillon, Lobbyist Christina Dillon, Lobbyist |
| RE: | News From The Capitol |
I. GOVERNOR SCHWARZENEGGER ROLLS UP SLEEVES, GETS TO WORK
Following a dignified, understated swearing-in ceremony yesterday, Governor Arnold Schwarzenegger attended three luncheon events, during what was considered to be a modest day of celebration for the new Governor. His first luncheon was spent in the Capitol rotunda with members of the legislature and congressional delegates. Legislative leaders Assembly Republican Leader Dave Cox, Assembly Speaker Herb Wesson, and Senate Republican Leader Jim Brulte offered toasts at the luncheon to the newly sworn-in Schwarzenegger. The brief event was followed by a private luncheon for the family and close friends of the Governor at the Sutter Club, a private membership club located adjacent to the Capitol. Lastly, we attended the Governor's third luncheon event, which was hosted by the Chamber of Commerce, and featured the Governor asking the crowd to consider operating under the philosophy, "What have I done to help someone today?" He pledged to work with the business community, and help to undo some of the burdens placed on private and small businesses. We were intrigued to see several Senate Democrats in attendance at the event, perhaps indicating their willingness to work cooperatively with the new Governor.
As the Governor's first order of business yesterday, he signed Executive Order Number One to repeal the "car tax" or vehicle license fee, honoring a promise he made to voters during his campaign. The Order states in part: "Whereas, raising the car tax should only be a measure of last resort to relieve the General Fund of the responsibility for payments to local government when absolutely necessary due to dire economic and budgetary conditions; Whereas, due consideration of the priority and importance of the obligation to the General Fund to offset the vehicle license fee will avoid the unnecessary taxation of Californians, restrict unnecessary government spending and help restore California to fiscal integrity and accountability, the offset to the vehicle license fee should be restored, and the offset should be funded through an appropriation from the General Fund." The order instructs the Department of Motor Vehicles to refund to taxpayers all overpayments of vehicle license fees paid since June 20, 20003 and reinstate the General Fund offset to the vehicle license fee "as soon as administratively feasible."
In a second Executive Order, the Governor has also suspended "all proposed state regulations and calling for the review of all regulations adopted, amended or repealed in the last five years. Under the Executive Order, all proposed regulations will be suspended for 180 days pending a thorough review. In addition, each agency will also conduct a 90-day review of all regulations adopted, amended or repealed in the last five years to determine if they are necessary, clear, consistent and are not unnecessarily burdensome or cause undue harm to California's economy. All findings will be submitted to the Governor's Legal Affairs Secretary."
II. GOVERNOR HOLDS PRESS CONFERENCE - UNVEILS MAJOR "DEBT RECOVERY BOND" PROPOSAL
At 11 a.m. this morning, Governor Schwarzenegger appeared before the press at Sacramento's Memorial Auditorium, as the standard press room at the Capitol was unable to accommodate the hundreds of reporters in town for the week's events. At the Governor's press conference, he unveiled plans for a major "debt recovery bond," in the amount of "up to $15 billion," to offset the projected, lingering budget deficit and potential local government backfill of the VLF. In addition, Governor Schwarzenegger is proposing a constitutional spending limit, major workers compensation reform, and sunshine of state government activity, and seeks to obtain approval of these issues by the legislature by December 5th, in order to place them on the March 2004 ballot for the consideration by the voters.
When asked by a member of the press corps if he will be proposing any Mid-Year Cuts, the Governor responded that he would like to look first at proposals by the Republicans and Democrats, and will be working with his Director of Finance to identify areas of savings. He noted that the first area of savings will be his own salary, which he is declining and is forfeiting to the General Fund. (The Governor makes $175,000 annually.) When another reporter asked the Governor how he is going to be able to convince the voters to approve a $15 billion bond to retire the state's massive debt, he responded that the alternative is severe reductions in programs and, "I don't want to make deep cuts like that. It takes too much away from the people." He added, "The voters will be told, 'This is the crisis we are in; you decide which way we go.'"
III. GOVERNOR CALLS SPECIAL SESSION - SENATE LEADER RESPONDS
In response to the Governor's announcement that he was calling for a Special Session of the Legislature to convene today, to work on issues such as the budget deficit, an overhaul of the workers compensation system, and repeal of the immigrant drivers license law, SB 60-Cedillo, Senate President pro Tem John Burton held a press conference this afternoon and announced that the Senate would be convening at 4 p.m. today to organize the House. He added that the Senate Rules Committee would meet tomorrow and appoint members to the various Special Session conference committees on the specific subject matters above. Senator Burton noted that the only bill that he knows will be introduced immediately is a measure to overhaul last year's hurried attempt to reform the workers compensation system, and replace it with a more comprehensive reform measure, targeting $11 billion in savings.
Senator Burton said that he would meet with members of his caucus this afternoon after a 2:45 p.m. meeting with the new Governor, but would not have the full compliment of his members there as "some are out of the country and will not be back until next week." When asked about the tight timeframe with which the legislature will have to work in order to comply with a December 5th deadline for placing initiatives on the March ballot, Senator Burton noted that it was "not impossible... but somewhat improbable." He added that the legislature has not seen the particulars of the Governor's plans, and would encourage the Governor to "get it to us as soon as possible."
Lastly, regarding the Executive Order yesterday to eliminate the VLF and authorize refund checks, Senator Burton cautioned that there is no money in state reserves to backfill local government for the loss and no money available to issue refund checks to California drivers. When one reporter asked Senator Burton what he might like to request of the new Governor, the Senator joked, "A $10 billion tax increase, and I'm prepared to negotiate." He added with sincerity, "No one is looking to make his job more difficult," and pledged to continue working with the Governor and his staff in the weeks to come.
IV. LAO PROJECTS BLEAK FISCAL OUTLOOK 2003-04 THROUGH 2008-09
Last week the Legislative Analyst's Office released their updated projections of the state's General Fund, which reflects a year-end shortfall of $10.2 billion next year (2004-05) absent corrective action. The deficit will increase to $14 billion in view of the Governor's action yesterday to roll back the VLF rate. The problem, according to the Analyst, is that the 2003-04 Budget solution "involved borrowing, deferrals, and other one-time actions" which did nothing to address the "$10 billion budget hole" for this coming year. Unless actions are taken to bring expenditures in line with revenues, the $10 billion and growing structural problem will continue through 2008-09. The Analyst suggests putting "everything on the table" in order to get the Budget back into balance on an ongoing basis, including spending reductions, fund shifts, revenue augmentations, and improved tax collections. While the Analyst's report came out last week, prior to the Governor's announcement today of his intended $15 billion borrowing plan, the LAO cautions against "additional borrowing" as "we believe that additional use of this tool should be limited given the future costs it imposes and its failure to address the Budget's underlying problems."