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Posted on 02/01/2003 12:54:12 PM PST by John Jorsett
SACRAMENTO -- With each passing day, California slips millions of dollars further away from a solution to its financial crisis, a reality that puts increased pressure on its limited cash accounts and makes it ever harder to convince Wall Street the state is creditworthy.
The Legislature has yet to pass a package of midyear spending cuts. And when it does -- possibly in the coming week -- it is expected to be closer to $3 billion than the $13 billion Davis had sought.
Meanwhile, the state is on track to be more than $6 billion in debt by the end of the fiscal year in June. Add that to the uncertainties of the coming year, and California's highly touted crisis pushes toward the $34 billion mark.
There's enough bad news that state Treasurer Phil Angelides told The Record on Friday he "wouldn't be surprised" if bond traders downgrade California's credit rating for a second time.
"I'd be surprised if most states don't get downgraded," he said.
Despite the bad financial news, the treasurer said Wall Street will come through with the money California will need to pay its bills.
"The good news is California never has and never will default on its bonds," Angelides said. "That's just a fact. I think one of our goals will be to remind the rating agencies of that."
But rating agencies are also aware of the difficulties the state has had closing its budget gap.
On Monday, the Senate will take up an Assembly plan to raise $4 billion by nearly tripling the annual tax motorists pay when they register their vehicles. But the governor has all but threatened to veto it.
Davis wants big spending cuts, but they're not coming.
Clearly unhappy with the pace of activity so far, Davis said the Legislature's "modest beginning" will likely "affect the attitudes of rating agencies" that will decide how much the state must pay when it borrows money to pay its bills later this year.
"The failure to take actions I propose will increase the amount of money we have to borrow and will accelerate the day when we have to borrow," he said.
Borrowing is very much on politicians' minds as the state prepares to send a delegation to Wall Street on Thursday. They know that whatever policy choices they make, the real key to making it through the next few years is the ability to get affordable credit. California likely will borrow its way through the crisis.
Angelides will head Thursday to New York, along with Controller Steve Westly and the administration's finance chief, Steve Peace.
Other than California's size and track record of repaying debts, there's little good news to present.
For example, a fight between the Davis administration and local governments over $1.3 billion in spending cuts may have turned out a victory for cities and counties, but to bankers it may look like the state is losing $8.4 million a day -- the amount Davis had hoped to recoup.
Davis had expected to stop sending that money to local governments beginning this month, said Anita Gore, a spokeswoman for the governor's finance department, the agency that crafts the state's spending plan.
"We had assumed that as of Feb. 1, there would be no more backfill," Gore said. "We'll start feeling an erosion in the savings there right now."
So even as the state seems increasingly dependent on the good will of Wall Street, the government's actions aren't exactly what bankers want to see.
"A tax hike or more substantial spending cuts would reassure the agencies of California's ability to service its debt," said Norm Ryan, managing director of public finance for Los Angeles-based Wedbush Morgan, the largest independent securities firm on the West Coast. "I'm sure the treasurer wished he had better news to give."
Angelides took a partisan approach to assessing blame Friday, saying Republican refusal to embrace tax increases hurt California's chances to maintain good credit ratings.
"They see a Republican caucus here saying 'no way, no how, we won't cooperate,' and frankly, that's not going to help," he said. "We have no Republican cooperation on the budget, and the rating agencies see that."
State Sen. Jim Brulte, R-Rancho Cucamonga, dismissed that.
"Mr. Angelides' comments may help him in the Democratic primary for governor, but they are inaccurate, and Wall Street knows it," said Brulte, the Legislature's top Republican.
Brulte is unapologetic in his opposition to taxes, saying they would only further dampen consumer spending -- the one relatively strong spot in an overall weak economy.
He said it's Democrats who have been dragging their feet, waiting until last week to schedule votes on a budget problem Brulte and the GOP have been warning about for years.
"The overwhelming majority of Senate Republicans have opposed the last three Davis budgets, which have brought this state to near bankruptcy," he said. "It was a Republican governor that left Gov. Davis a multibillion surplus. And it's been turned into the largest deficit of any state in American history."
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Holy rat alert!!!!
The solution is the same in California as it is in Minnesota as it is anywhere else. Stop spending like drunken sailors in a far off liberty port. Eliminate large portions of that drunken sailor activity that went into motion in the 1990's. Stop giving away something for nothing day after day after day. Stop thinking you can repeal the laws of human nature as they apply to economics. Learn to say no when using other people's money.
I guess the sum of this is to stop being Democrats and RINO's.
Borrowing is very much on politicians' minds as the state prepares to send a delegation to Wall Street on Thursday. They know that whatever policy choices they make, the real key to making it through the next few years is the ability to get affordable credit. California likely will borrow its way through the crisis.
Angelides will head Thursday to New York, along with Controller Steve Westly and the administration's finance chief, Steve Peace.
Other than California's size and track record of repaying debts, there's little good news to present.
I am sure that Wall Street is going to look at Mr. Peace, his background and ask him lots of questions as to his commitment to pay back borrowed funds even if it means getting everyone he knows voted out of office. These guys going back to NY are going to be walking into the lion's den. When they get back they will have a much better undrestanding of the problems that Davis and the legislature have placed them and the state in. It will be interesting to see if there is any coverage of the meeting.
If there is coverage of the meeting, it will probably be of a rating agency downgrade that discussed the poor responses provide by the California delegation. If that happens, watch out as the Dem's try to spin that.
They will of course, try to spin it, and the California media will help!
It is going to get very interesting!
Inquiring minds want to know.....
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