Governor Participates in May Revision Budget Roundtable Discussion
Governor Participates in May Revision Budget Roundtable Discussion
MAYOR WEISSMAN: Good morning. I'm Andy Weissman, mayor of the city of Culver City, and on behalf of my colleagues on the city council I'd like to welcome all of you here this morning. California is in the throes of an unprecedented financial crisis. Critical decisions are confronting cities and counties across the state. The days of easy budget fixes are long gone; only hard and unpopular choices remain. Finding ways to get through these challenges requires leadership, vision, creativity and political courage.
It's my pleasure, on behalf of the city of Culver City, to welcome the Honorable Governor of the state of California, Arnold Schwarzenegger.
GOVERNOR SCHWARZENEGGER: Thank you very much, Mayor Weissman, for your nice introduction and thank you also to Mayor Mitchell for helping us pull this event together. And I want to thank all of you for being here today on such short notice. But as you know, we have a very important election coming up, so I thought that we all should get together and talk a little bit about what the consequences are of the outcome if it passes and if it doesn't pass.
In 2003 when I ran for governor I ran because I wanted to go and fix the budget problem that we have and fix all the things that are broken in this state. Even though we fixed a lot of different things, but one of the things we couldn't fix yet is the broken budget system. We don't have a cap on spending, we don't have a rainy day fund. And that's why the state always go back to transportation and takes money from transportation, they take money from local government, they take money from pensions, they borrow money, and there's always chaos.
So I wanted to fix that so that we live within our means and move forward. And, of course, twice before those ideas were taken out. You know, at one time I asked the legislators to approve a budget system that is a good budget system with reforms, and they voted it down. They had no interest in putting a cap on spending because they wanted to spend more than we have. And then the second time was when I took it directly to the people of California, which was in 2005, and then there was $160 million spent against those initiatives and they were taken out.
So this is why I wanted to come here today to you. And I think it's our responsibility, because we have such a great partnership with all of you and have done so many things together, to share some of those thoughts with you on what is going to happen in the next few days. I think that to update you on this information is always very crucial, because you have been there with us from the beginning.
Of course, when we talk about numbers, it's always easy to talk about numbers. But the important thing is to let everyone know that behind those numbers are real people, people that are the kindergarteners that are learning to read, firefighters risking their lives to keep others safe, health care workers ensuring that the elderly remain in their homes and so on. California dollars and cents affect real lives. And that is why is I have been fighting and fighting and fighting, not so much for the party as for the people of California. That's what this is all about. It's not a political fight; it's a fight about what is best for the people.
And in February we were very fortunate to have the legislators come together after months of battling. Two-thirds of the legislators came together and voted on the budget, to take on that challenge of $42 billionwhich is a historic numbera $42 billion deficit. It was done with a combination of things, which includes tax increases and also severe cuts.
But $6 billion worth of those solutions will go before the voters and they are critical, a critical piece to the state's budget puzzle. Whether they pass or fail, I think we have the responsibility to plan for either of those scenarios. That's why we are doing now our May Revise. And when we do our May Revise this time, which we will announce on May 14th, you will see two May Revises, so that the people see what the difference is. If on May 19th it passes, here is one scenario; this is what we need to do in order to balance our books by July 1st.
If it doesn't pass, if those initiatives don't pass, then here is the other scenario with the more severe cuts, which is the $6 billion hole that we are talking about. And, of course, that will have a tremendous affect. I know that the result of the propositions failing on May 19th will mean $6 billion in additional severe cuts.
Now, we know that the state will be forced to reduce essential services when that happens. That could include schools, health care, prisons, fire stations and local services. Our Department of Finance has been drafting options now in case those initiatives fail. If they fail none of those options are pleasant, that is the important thing for people to know.
But let me give you just an idea of how the Department of Finance sees those things shaping up right now. And these are just some ideas, this is nothing concrete. This is not the official May Revise, may I remind you. These are just some of the ideas of what will happen if the initiatives don't pass.
Fire stations, for instance: Unfortunately, our state is facing very real possibilities of closing fire stations and reducing our fire staff. That includes a 10 percent reduction in CAL FIRE's overall budget, closing 11 conservation camps, closing 20 fire stations and staffing engines with just three people rather than the four people, which is so important during the fire season.
Prisons: Prisons are another option that must be explored, namely releasing around 40,000 inmates. Releasing non-serious, nonviolent, non-sex offenders, of course; we would never release those. But those are the ones that could be released if they are non-serious or non-violent, non-sex offenders. We could save in general funds about $53 million in 2009-2010. Releasing all the undocumented immigrant prisoners to the federal custody could save us another $182 million for 2009-2010.
And, of course, when it comes to schools, unfortunately they would also face severe reductions. If you take the Legislative Analyst's projections, there could be $3.6 billion in additional reductions to education. You heard me right, $3.6 billion. That means that this money will come by laying off, for instance, 51,000 teachers, or shutting down every school in the state for 18.5 days, or increasing class sizes by 17 percent, or laying off 90,000 support staff, ranging from custodians and food service workers to bus drivers, maintenance people and so on.
When it comes to local governmentand that's why I wanted to also have you hear thatwe may no other option than to look at borrowing from local government. Now, as you know, that I am very much against borrowing or taking any money from local government and I've fought that battle the whole last year. That's what Proposition 1A is about, to protect local government. But within that provision we can borrow twice in 10 years. So what this would mean is that we will come to you and borrow money, which will be around $2 billion in 2009-2010, from cities and from counties, meaning reductions in locally funded services such as police officers and fire stations. So that's the affect it would have.
The state could also be forced to look at further cuts in Medi-Cal. That is really terrible, because we already have made severe cuts in Medi-Cal and also severe cuts in home-support services. But we would have to go back and make some more cuts in that. And that's not a good thing to do, of course, because whenever you have a declining economy those are the areas that need your support the most and need the money the most.
This is the reality of what we are facing in our state, and it's just basically the $6 billion question.
But I think it is important for people to know that this is about California's legacy. This is not about my legacy, it's not about the politicians in Sacramento, it's not about Democrats versus the Republicans, none of that. This is about the state's legacy and it's about that the state of California's legacy is at stake. It's about putting the Golden State back on track to get it into the right direction.
And I think the important thing is also to know that when we have our act together and when things are moving forward in the right way, like if those initiatives pass, then, of course, we can go out, we'll have the financial community on our side. People all over the country and all over the world will have confidence again in California and we can go and sell our bonds, if it our bonds for stem cell research, our bonds for hospitals, our bonds for infrastructure and all this. We have seen, the last time when we passed the budget in February, how quickly the treasurer could go out and sell the bonds, $6.5 billion worth of bonds and $6.9 billion worth of bonds, because people had confidence again.
So if you have any questions about this, because I wanted to come here and have just an open discussion about this and what your thinking is and what we can do together in order to really help you so that you can out and communicate with the people and let them know how important this is and how urgent this is.
So with that, I want to open it up to maybe some of you local folks where the real action actually is.
QUESTION: (Inaudible)
GOVERNOR: Sure.
QUESTION: My question is, why? I mean, I look at myself, I'm living with HIV/AIDS, I'm on Social Security Disability. I've had to cut back substantially to live within that mean. (Inaudible) very minimal, I can only take so much of it because I'll lose my Social Security. If I can cut back, why can't the state?
GOVERNOR: Well, that's a very good question. And I think it's important to note that last year we made 10 percent cuts in the budget, because we saw the problem coming. And then this year we made an additional 10 percent cuts in the budget, this fiscal year, so that's now 20 percent. And then, when we saw, while we were negotiating we saw the problem getting worse, we even cut more. We cut 17no, it was actually $16 billion this year. Rather than $10 billion, we cut $16 billion this year.
So altogether, between last year and this year it's $26 billion in cuts, and we did the revenue increase of $12 billion to solve the thing. By the time we were finished with the negotiations and we started putting this on the ballot, we found out from the Legislative Analyst's Office and also from our Finance Department that actually the budget is $8 billion short, that the revenues are $8 billion short. It was just in two months.
So what you see here is a drop in revenues because of the overall economic crisis that is worldwide, and these drops in revenues they have in Germany and Japan and China and everywhere, all around the world, of course. So this is what we are faced with. We are seeing, of a $100 billion budget, all of a sudden we only have $75 billion left and therefore you have to make severe cuts.
But our budget was done where we included the lottery and where we included taking money from Proposition 10 and from Proposition 63. And so now if those things don't pass, if our budget package that the people are supposed to approve, if that doesn't pass, then we will have an additional $6 billion in problems. So that is you're cutting into some really serious services for the people of California.
And the people will make the choice. But what is important for us to do is to let people know, here is what will happen, so that comes May 20th and we then make the announcement and say OK, here is the budget that we have to now adopt because you didn't vote for those initiatives, we don't want anyone to be surprised and say, Oh, I didn't know this would happen, I didn't know you'd have to lay off 50,000 teachers, 50,000 more teachers or anything like that. We just want to make it clear and let everyone know what the consequences will be.
QUESTION: Will you fight, though, to protect the city's money? I'm already $2 million on an $18 million deficit.
GOVERNOR: As I have said to you many times, that I always will fight for local government. And much as I also said when I was up at the fires in Santa Barbara, that I will always fight for the firefighters, because I think when you talk about public safety and when you talk about helping the people on the local level, of course people need those services.
But if you only have so much money, somewhere you have to take money out; somewhere this $6 billion has to come from. Now, I have not sat down with the legislative leaders yet and said OK, let's work this out together. And so this is why I say these are proposals of what it could mean. And they may have some ideas on how to get additional revenues. They maybe can call Obama and say hey, we need another $10 billion. I don't know. But all I can tell you is the way it is right now, severe cuts will happen. And it's important also for people to know this is not a scare tactic. This is just to let you know what could happen.
QUESTION: Governor?
GOVERNOR: Yes?
QUESTION: We appreciate the cities appreciate very much the efforts that you've made to work with us in the past on these issues. But we here, and all of our cities to varying degrees, we're at the basic level. We take care of the stuff under the ground, the sewers, the water pipes, the streets, the potholes, the signals, the streetlights, the police and fire.
And in the city of (Inaudible) we're stressed very differently. We are requesting a 10 percent cut from all our employees, we're looking at various other things. We're kind of at the edge of going off this cliff. And if you have to go to Plan BI don't want to appear negative or anything like that, but if you have to go to a different plan it could very well push us and a number of cities off the edge of the cliff. We've just lost the Hahn Corporation (Phonetic), which is a major manufacturer of metal furniture, they just announced they're shutting down in our community. They're our second largest employer. And we're facing some very difficult times.
And so (Inaudible) I know you have a very difficult task in front of you, that you're able to work with the legislature and if you have to go to Plan B, realize that in the local communities, here where the rubber meets the road, we're the ones that have people throw things at us at city council meetings. When we don't fix the potholes or the water pipes break or the sewer overflows or whatever, it's critical. And we just hope that you will realize that and be as careful as you can with that pencil when you have to do some things.
GOVERNOR: Well, first of all, let me tell you, I totally hear you, because this is a common story that I hear from a lot of local officials and leaders, mayors, county officials and everyone. It's the same story. It's like, you know, the straw that breaks the camel's back. We don't want to be that straw, because everyone, you're all out there hanging on the cliff. So we don't want to be the ones that push you over.
Now, when we get to that point, obviously we're going to work with you, because the only way we can take on any of those challenges is if we do it together. I don't believe that we in Sacramento should just sit there and make our decisions independently without outreach and without being in touch with you and doing it together with you. So we will be always working with you, if they pass or don't pass. We're going to go and march through this together and try to figure out how do we help each other as quickly and as well, as much as possible.
QUESTION: Governor?
GOVERNOR: Yes?
QUESTION: Governor, one of the things that's kind of difficult is that there's an imbalance of funds. In our city we are trying to build a brand-new park. Our city is one square mile. It's a veryit's a low-income, middle-income city. It doesn't have that many services or resources. We're trying to build a park. We were granted funds and then we were told that our funds are on hold because of the economic situation.
At the same time, we're battling LAUSD. They're trying to build a school in our city. We're trying to work with them to pick a spot that would be beneficial for both our city and the other cities. And at the same time we're being told that teachers are being laid off. So to our community, our community is saying, well, what is happening in Sacramento? We're told that we can't get money for a park, they're laying off our teachers, but LAUSD is bulldozing is try to build brand-new schools. And if you go to the southeast you'll see construction all over.
So the question is, why does it seem that there's no money for certain programs that are really important for local cities, but there seems to be funding for items thatif we're laying off teachers, why are we budding brand-new schools? And so we are trying to give confidence to the people, yes, you need to vote for this. We know that they're going to go ahead and have the funds go the right way. But in today's world right now, currently, it's hard to convince them that we have these actual events happening in our city.
GOVERNOR: OK. Just so you know, two different things; services and ongoing programs versus infrastructure building. In 2006 and in 2004, 2002, the people of California have very clearly voted for infrastructure bonds to build schools and to refurbish, to add, to improve the schools and so on. I remember the last one that I was involved with, which was in 2006, to build $10 billion worth of schools and $20 billion of infrastructure and transportation and affordable housing, to fix the levees and all of those things. Californians have finally made a commitment to rebuild California.
Well, now they sold those infrastructure bonds. And they went out to the people and after the people have approved, they went out and sold it successfully and now they have this money lying there. And now they have a plan. Here we're going to build a school, here we're going to build a school, here we are short on classrooms, we have to build a school here. And those things take years to plan and to get the permits and so on. And now they are on automatic pilot. The money is available for building those schools. You couldn't take that money and say, because it has been approved by the people, and say let's use that for hiring more teachers. You couldn't legally do that. So this money is for building the schools. That's why it does not cross over.
The other thing is Proposition 98 money. So what I'm saying here is if these propositions don't pass we would have to haveand with the situation that we are in, we will have to have another $3.6 billion in cuts, and that is an equivalent of laying off 51,000 teachers, or a combination of laying off teachers, laying off some of the support services, cutting down the school year and those kind of things.
So like I said, we have not come to a final conclusion, because I want to work out some of this stuff with the legislative leaders. But those are severe cuts, historic cuts to Proposition 98. And so I think people should be aware of that, that we need this extra $6 billion, otherwise $6 billion worth of cuts have to be made. And as you know, half of those cuts, or half of the budget, is always education, so that's where the big cuts will come from; prison, education, health care. This is where the big money is.
Yes?
QUESTION: The hardest part is that, for selling it on the local level, is we've made the cuts, we've balanced the budgets, and yet we're being taken money from us doing our jobs the way we should. And the biggest obstacle I keep hearing too is that even some of the propositions are even changing what some of the voters wanted to do. And here it is bringing it back, so it's a hard sell from a local standpoint. And then we have the threathey, we balanced the budget and now you're taking this subprime loan, if you will, from the state, and you're going to pay it back within three years. We don't have the three years. We need to pay our policemen, our firemen, we need to pay our roads today. So it's a very hard sell from the local economy standpoint. And yet we've done our jobs right.
GOVERNOR: Well, no, absolutely. But remember when we passed Proposition 1A a few years ago that it said that the state cannot go in and take any more money from you without permission, and they can only borrow and no more stealing and all of those things, and it passed overwhelmingly with 82 percent or whatever it was.
QUESTION: Governor, I think you just hit on a key issue. You made a couple of statements in your own remarks you said that nobody is mador they're mad at Sacramento, and that is true. But they're not mad at us, as local politicians. But should we get to what you may have to declare with Prop 1A and take our money, they are going to be mad at us and, like what Mario just said, we have done our jobs. But a poll less that 30 days ago showed that 75 percent of the people are against public safety cuts. So you said they're mad at Sacramento, but yet you've said they're not going to suffer. This is huge disconnect for normal citizens.
GOVERNOR: Right.
QUESTION: Governor, I really appreciate the partnership you've had with cities in the past and hopefully we'll continue that partnership. But I must comment on the Plan B. You were just talking about the difficulty of borrowing money. Obviously, part of Plan B that you mentioned earlier is to borrow money from the cities. And from a city's perspective it's kind of like a subprime loan. You're asking us to loan money to a state entity that isn't credit worthy. And so I'm here to ask your support on that issue; you have supported us in this past.
But also to offer our support. We'll be happy to wave our cards around and make the pitch that borrowing money from the cities isn't a viable alternative. It takes money that we need now. It promises to pay it back from an entity that, quite frankly, we're not sure will be paying it back, and we're not sure when they would get around to paying it back. And I hope you'll continue to make that argument, as you have in the past, to support us, and that we're here to continue supporting you with that message. The state is not a good borrower; they're a subprime. We ought not be making the cities loan to subprime credit-worthy people.
GOVERNOR: Right. Thank you.
>>: Governor, thank you very much.
>>: I think we have time for one more question.
QUESTION: Thank you, Governor. I appreciate it. As president of a contract city, as my colleagues know, that I've praised the Governor many, many times for being such a good friend of local governments. Governor, I've said it before your staff, I've said it before you before. We really do appreciate it, and we hope that you will continue fighting the fight with us.
It is extremely important that my colleagues are making the case for you as to how we would suffer, but it's also important to note that the local governments actually do continue to pay the state to the tune of close to a billion dollars a year, even post-Proposition 1A, from our property tax revenues. It's not like local governments are not pitching in. We are forced to let people go from our city staffs. The question is, is the state letting people go from their staffs before reaching to us, who are already doing the sacrifice at the very local level?
So we thank you for fighting the fight with us and we hope that you will continue, as Owen suggested, we would be there anytime you want for us to be there to fight this fight, because we know our local constituents are with us when you're talking about local services and firefighters, police.
Tomorrow Judy and I sit in our city, in our law enforcement meeting, to talk about potential cuts to our corps deputies, which are our school police. I've heard already from many moms in our community saying that's a horrible idea. Please help us fight the fight with you and we assure you that we will fight that fight with you as well. Thank you again.
GOVERNOR: Thank you very much.
>>: And I want to thank the Governor for coming today and taking time out to speak with all of us and hear our concerns. We certainly have enjoyed a partnership with you, Governor, over the last few years. You've always been a strong ally of local government, you have protected our local revenues, and we appreciate that.
As you've heard today, cities are in fiscal emergencies themselves; they're making cuts, they're laying off people, postponing projects. And I think you've also heard today that our residents, our voters, would like to see the state make the necessary cuts that they have to make in order to get their budget in control. As we have made our budgets balance, we expect the state to do the same.
And you know the League and Contract cities have supported the ballot measures. We commend you and the legislature for balancing the budget this time with state monies. You haven't turned to local monies or to borrowing to balance that budget and we're very thankful that you have taken those steps. We know that your support for local government has involved statements that borrowing from local government is irresponsible and I recall you saying, just a few months ago, we can't kick the can down the road. And that's what happens when you borrow.
And we had launched a campaign last September, or in the summer when we were trying to balance the budget, to cut up the credit card. And so I'm going to give you today our new credit card. This is expired. So we want you to know that the credit card has expired and we would like to see a balanced budget, balanced with state monies.
So thank you so much for coming. We enjoy your partnership and look forward to working with you in the future.
GOVERNOR: Thank you very much. Thank you, and thank you all. (Applause)
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