If Governor Schwarzenegger Had Taken Yes for an Answer - No IOUs

Today Governor Schwarzenegger becomes only the second governor since the Depression to have IOUs issued on his watch. Today he has abdicated his fiscal responsibilities and effectively turns California's finances over to Treasurer Bill Lockyer and Controller John Chiang.

Small businesses, students, seniors, and taxpayers will all start receiving IOUS. This shameful day didn't have to arrive. In fact, Governor Schwarzenegger had several opportunities to prevent it.

On June 12 Governor Schwarzenegger unilaterally blocked the Controller's authority to secure short-term loans to avoid the cash crisis. He said, "let them have a taste of what it is like when the state comes to a shutdown -- grinding halt."

On June 25 after the governor called Senate Republicans to his office for private meetings, $4 billion in immediate cash solutions that had been passed on an overwhelming bipartisan majority in the Assembly were killed in the Senate.

Most recently, the governor vetoed a comprehensive package of budget solutions supported by majorities in both houses of the legislature that would have resolved the $19.5 billion deficit, left a $4.0 billion reserve, avoided the cash crisis and prevented IOUs.

The focus of Assembly Democrats throughout this process has been to find a responsible approach that solves the deficit without eliminating the safety net or eviscerating schools. That meant rejecting the governor's outlandish proposals to take health care away from 950,000 kids, to make 587,000 poor families homeless by eliminating CalWORKs, and to push 400,000 seniors into nursing homes by effectively eliminating IHSS.

During weeks of budget hearings we heard from too many people who were going to lose access to medicine, access to college, access to the basic necessities of food and shelter for us to accept the governor's plan. However, we did the right thing and dug down to make deep cuts in programs and services we care about -- cuts on top of the $27 billion that has been slashed from state services since 2003. But by using a scalpel instead of a chainsaw, we were able to take the Governor's plan and come up with solutions that reflect 93% of his proposals somewhat and 45% of his proposals entirely. We ultimately sent him a package of bills that solved the entire deficit without raising taxes. He vetoed those bills.

Instead, Governor Schwarzenegger decided he wanted to use the state's cash crisis to leverage last minutes demands unrelated to the budget -- demands described in the press as "proposals he has struggled to advance in the past."

None of the governor's last ditch proposals had been publicly vetted, and it would have been an abdication of our responsibility if we were to sign off on these extraneous demands without a thorough review of their impact on the people of California. Do we believe California needs a wide range of policy and governmental reforms? Absolutely. Were we, as duly elected agents of the people of California, going to be extorted into buying a pig in a poke? No.

We did offer, as a sign of good faith, to begin work immediately on reforms regarding restructuring Medi-Cal and eliminating fraud in the IHSS program. We also committed to working with the governor on other reform legislation for him to sign. But the governor wouldn't take "yes" for an answer. So California businesses, taxpayers and students will be receiving IOUs simply because Governor Schwarzenegger thought it was more important to immediately force last minute changes such as reducing future employee pensions, fingerprinting elderly and disabled Californians who receive services, and denying kids food stamps if their families can't access a computer to sign them up for the program.

Of course, this fight is not over yet. We must move to clean up the fiscal mess caused by the national recession and made $7 billion worse by the governor's actions. We will continue fighting to prevent the elimination of the state's safety net -- especially in these tough times -- and to block partisan attempts to punish public schools.

We will also continue to say "yes" to the cuts we need, and "yes" to responsible reforms. But the problem won't be solved until Governor Schwarzenegger picks up his cue and finally decides to say "yes" back.

Comments

[SoberLook]

Wherever there is an instrument with an expected payout, there will be a market. SecondMarket are getting in on the game. If SecondMarket can accumulate a portfolio of IOUs, they can auction it off to investors for a quick return. They specialize in auctioning off illiquid assets, but in this case will need significant volume to make IOU auction worth while. The discount may only be a few percent, so the fees for SecondMarket will be tight. They usually take a 5-10% commission on their auctions. The yield on discounted IOUs could be 10-15% (annualized).

But it remains to be seen if the state will have the resources to pay on the IOUs.

http://www.SoberLook.com

[MunnyFarmOrg]

Left Wing or Right Wing is irrelevant! Just solve the problem!

Ellen Brown does a great job explaining how California can create it's own State owned bank just like North Dakota did in 1919, and take advantage of the banking system to create all the credit needed to pay its bills and boost the economy very quickly!

http://www.huffingtonpost.com/ellen-brown/but-governor-you-can-crea_b_207806.html

Her personal website WEB OF DEBT explains the method in detail, and many other goodies.

How long can the State Government and Governator claim ignorance?

[nee]

Ms. Bass - Say YES to cuts and using OUR money wisely and NO to increasing the tax burder of our all ready overtaxed citizens!

[milo9]

Karen, I believe that the Republicans are the main "hitch in the giddy-up". Which makes it more upsetting when I read in the LAT, Arnold present common sense ideas to cut waste. I have first hand knowledge that the home care program, he talks about is in drastic need of reform. Although the reforms wouldn't balance the budget by themselves, why would you allow him the ammunition to justify his uncompromising push to cut programs and refusal to increase taxes on oil companies and his rich cronies. It seems that the Dems could carry the day if they hewed more closely to good governance.

[callettec]

i am a rediepient o f in home suppported services and i do not agree with putting resiepients in care facilitiesor instutions that cost has been proven ten times the cost and , riverside county does not have the room for these patients.my mother has worked in convelescence and assisted living centers and each one has one bed per site for medical or medicare patients and if they fixed that there still isn't enough places so for those that want this, think at your future situation or soomeone you love or know would you want them with no caregiver or a place to go while waiting for a spot in a facility . i for one would not go to a facilities it would make my several disabilities worse my home caregiver encourages me to keep moving so the pain is not so bad and that i dont get worse. you cant get that personal care in a facility i am 42 year old female ,and that would devastate me and i would give up all hope. think of that when you think of this program we are not all 90 years old.some of us are young and under senior age. would you really like so many to loose hope you may be there some day think with your heart and help those that need you the most.

[Joseph A. Palermo - Huffpost Blogger]

http://www.huffingtonpost.com/joseph-a-palermo/arnold-schwarzenegger-and_b_223658.html

[JailNeoconVicts]

There are three things needed to fix this state:

Repeal Prop. 13's business property component to properly increase revenues.
Repeal term limits, so that legislators aren't all hapless amateurs and know how to do their jobs.
Finally: rewrite the constitution to forbid any more "propositions," which have hacked this state to pieces via mob rule.

[lurban]

What about the IOUs becoming the equivalent of checkbook money?

I know this is illegal, but the posting by Representative Bass calls the issuing of the California IOUs "shameful." What is really shameful is the chronic hiding from people the truth about money. Those IOUs could be money as legitimately as Federal Reserve notes and their eloctronic equivalent. The Fed has a (fraudulently) legitimated monopoly on the magical device called "MONEY." Break this monopoly and California would enjoy INSTANT PROSPERITY. Money is NOT REAL, folks. Shake off the yoke. The yoke's on US the productive wage & debt slaves.

[milo9]

The Referendom process should be reformed to only allow volunteers collect signatures. The way it's structured now, petition signatures are collected by the employees of the the rich and ultimately serve their interests.

[nee]

There's really only ONE thing we need to do to balance the budget. Spend LESS than we take in! We are #1 in the nation in highest income and sales tax and we are #6 in overall taxes. We don't need to take IN more money we need to give OUT less!

[peacegurl48]

Fact Check for OC Postman:

State employees, unlike Federal ees, are not exempt from Social Security so I pay in $310.31/month. We contribute to our PERS and the State matches it; our benefits are in lieu of raises. By the way it has taken me 38 years to earn a whopping $5333/month. I have a BA from UCLA and a Masters but I remained a public servant because I enjoy customer service and for the benefits as a single mother. Wanting what the State contracted with me 38 years ago is not whining and it is sad that another working person would dismiss me that way. i don't even mind the 15% pay cut if it means my coworkers will keep their jobs.


My sister is a Community College teacher in Los Angeles and she pays into Social Security as well as $600/mo to STRS retirement as a LAUSD teacher.

So yes, after almost 40 years of paying into Social Security, I do want mine but I also want my daughter (who pays in as a county employee) and her generation to get theirs!
Those in control have successfully demonized the average person and pitted us against each other...if we were united perhaps we wouldn't continue to get screwed. Be angry at the tax breaks and tax exemptions that the rich enjoy not at someone who has given a lifetime of service to the people of California.

[TheIvoryPoacher]

Why not retire and ensure yourself that $5333/month income - which in this environment, is not bad at all.

[econ1]

In the mid 1980's CA spent about $1,000 per resident. By the mid 2000's the spending had gone up over 3.5x, far exceeding inflation and population increases.

We are now in a recession and the government solution is to take more of the citizen's money.

Hundreds of private companies have cut jobs and wages, and yet the SEIU held a rally with signs saying "no give back". It is incredible that they think they are so above the citizens of the state that the citizens should suffer even more so the union members don't have to give anything back.

With life expectancy rising into the 80"s it is untenable to have people retiring at 60. It is effectively doubling their wages.

CA pays twice the national average per person in prison, a simple solution is to contract to other states to take on our prisoners...but the legislature doesn't take that simple cost saving step. There will be no evaluation of savings if the government feels entitled to ever more money.

We don't have a tax revenue problem, we have a serious spending problem.

[dynwitch]

You have both.

[CherokeeGirl]

fingerpointing, casting blame.

We probably need to take a closer look at each of our State Reps like we are with congress.

Some bad apples may be obstructing (ya think?)

Personally, I think our state taxes are slightly too low, because I always get a couple hundred back.

[LeftRight]

Additionally, Karen, the state of California has a responsibility, just like the federal government, to raise taxes on those most able to pay them!!

[nee]

LeftRight - Our government ALSO has the RESPONSIBILITY to spend LESS than they TAKE in!

[Altruth]

The people of California are getting a taste of what it would have been like for all of us if President Obama didn't take the action he did with the Stimulus and the bailouts to stop us from going over the financial cliff, however, the President is getting a lot of grief from ungrateful citizens. Maybe President Obama should have taken a page from California Governor S. and let us go over the cliff and maybe some people wouldn’t be so ready to cuss the Doctor after feeling better.

Governor S. knows exactly what he is doing. He realizes that Prop 13 is a joke and it needs to be repealed. The people of California want a free ride and it isn't happening and the Governor is putting the screws to them, I love it!

[JailNeoconVicts]

I'm glad you love that poor children, poor elderly and others are almost certainly going to fall sick and die because of these cuts. I'm just tickled pink that you love that state parks will be closed or sold off, that understaffed jails will lead to criminals being released, and that basic human services for those least able to fend for themselves will be destroyed.

Yes, you're just a wonderful human being, aren't you.

[Altruth]

"JailNeoconVicts", GET OFF YOUR HIGH HORSE, you obviously haven't read my posts to make a statement like that.

The people of California are doing this to themselves, they had several chances to vote to restore their financial standing and they chose not to, they would have to pay the price now! There are consequences to our actions. All California have to do is repeal prop 13 and allow the government to raise the revenue to run the government. You have a problem with that or is everything in your world free!

I am for healthcare reform with a Public Health Care option, but you know what, I am willing to pay higher taxes for it!

[Egghead]

I hope people are paying attention. The Democrats tried over and over to come up with some kind of solution, and the Governator would have none of it. Now, don't cave. This is pure bullying. In fact, it's hostage-taking. The third furlough day doesn't save money, it's just a punishment and a scare tactic. Democrats need to stand up and say HEY, we are the majority, why are we allowing ourselves to be pushed around?

[LeftRight]

Because according to the rules in the California state Senate, they CAN be bullied, since it requires a 2/3 majority to pass any revenue bills (in other words, to increase taxes)

[Egghead]

Believe me, I know that.

[phinney]

big bad governor, it's all HIS fault.

we are not either of your sheep.

you also bear a responsibility for a great portion of this mess, perhaps a greater portion than the gov, the legislature is controlled by the unions, i mean the dems, after all.

[kimk3]

Finally, it's good to hear you calling out Arnold the Barbarian for what he is -- a cold, calculating Republican idealogue. Tax the people who have the money and have not been paying their share since Reagan. Fix the commercial property tax issue -- they are paying rates from 30 years ago. I understand you had the oil extraction tax in the bill -- good -- don't take it out! We need a strong message about how terrible Arnold is. What did he promise the Repubs anyway in that closed door meeting? That he would protect them from looking as bad as he does? We need to let everyone here know that it's Arnold the Barbarian. Maybe now the people who are getting IOUs will finally be angry enough to call him out, and out, and out. Keep the budget and fight for what's right. Get on every radio and tv station you can and tell the people what he's doing.

[peacegurl48]

This Governor is a selfish ideologue who cares nothing for the people he was elected (not by me!) to serve. He is despicable and totally lacking in empathy. I would love to see him impeached or recalled.
He is making California unlivable for regular people. He's a Billionaire so it's all good for him.