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October 2008
Monthly Newsletter
Yesterday, Governor Schwarzenegger appeared at the 2008 Women's Conference in Long Beach, in a panel discussion with Warren Buffet, moderated by MSNBC's Chris Matthews. It was a timely discussion because of the volatile and uncertain state of California's economy and our national economy. Unemployment remains high, too many home foreclosures are still occurring, and stability has not yet been restored to our financial markets. The Governor is working to make sure California weathers the storm.
Earlier this week, the Governor sent a
letter to the Congressional leadership expressing his support for a second federal economic stimulus package, and said that it should include aid to states through a temporary increase in the federal Medicaid matching rate, another extension of unemployment insurance benefits and an increase in infrastructure spending for "ready to go" projects.
For his part in California, the Governor is looking to work with legislative leaders on a state-specific economic stimulus package. He has been working with the leaders to find responsible ways to confront our difficult economy, our budget deficit, and our immediate cash flow needs. Last week, he met with the four legislative leaders, as well as incoming Senate Pro Tem Darrell Steinberg, Treasurer Bill Lockyer, and the Department of Finance. He is scheduling another meeting to occur within the next few days, and economic stimulus will be part of that discussion.
There has been some positive news. California routinely attains a short-term loan from Wall Street to bridge the gap between when the state pays a lot of its bills (the beginning of the fiscal year) and when we bring in the bulk of our revenues (April, May and June). This year, as last, we needed about $7 billion. Last week, the Treasurer's Office offered Californians the opportunity to buy state bonds, and they responded. $5 billion in bonds were sold, $3.9 billion of which were bought by an unprecedented number of individual buyers. That's much more than was sold in a similar offering last year and its due in part to the Governor's salesmanship. He recorded a radio ad for the Buy California Bonds campaign and used his
weekly radio address to advocate for them.
Selling these notes is the first step to addressing the state's fiscal needs. The second is dealing with the budget deficit, which we already know exists after just the first three months of the fiscal year. The budget is already out of balance. The Department of Finance reported that revenues from our three largest sources were $923 million down for the month of September. The Department of Finance estimates that could mean a $3 billion hit to our General Fund revenues by year's end - though we are still working to determine the size of our budget problem as best as can be predicted.
What does that mean? It means the Governor and legislators will have to make more difficult cuts on top of what they have already done this year and/or find new revenues. That's why the Governor has convened a series of Big 5 meetings, so that all leaders are working together and able to take action immediately when it's necessary. Moreover, at yesterday's Women's Conference, the Governor said he would soon be calling a special session of the Legislature to deal with the deficit.
