S&P issues warning on California finances

The ratings agency Standard & Poor’s warned on Tuesday that it could downgrade California’s financial outlook if lawmakers don’t pass a credible budget plan this year.

A final budget is due June 15, and lawmakers’ task has become increasingly difficult as the state’s deficit has swelled to nearly $16 billion.

"We could change the outlook to negative or lower the rating if we believe the state's credit quality weakens through the budget process," said a report from Standard & Poor's.

The ratings agency had upgraded California's financial outlook from "stable" to "positive" in February. That means California's credit rating of A-, the lowest of any state, is poised for improvement.

Gov. Jerry Brown's budget proposal is a solid starting point, said Standard & Poor's, but there are many political and policy hurdles left to go.

"We view the legislature's discretion over fiscal policy as effectively amounting to deciding how to allocate spending cuts," the report said.

Photo: The California Assembly floor in a 2008 photo. Credit: Los Angeles Times

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-- Chris Megerian in Sacramento

twitter.com/chrismegerian

Fitch on new California budget problems: Don't panic

 
A Wall Street rating agency on Tuesday called California's new, eye-catchingly large $16-billion deficit "unsurprising" and said it expected little progress until after primary elections next month.

Fitch Rating's note suggested little ground for either panic or optimism about the state's prospects after Gov. Jerry Brown announced the deficit had nearly doubled since he released his initial budget proposal in January. The note briefly reviewed Brown's May budget revision, released Monday.

"The increase in California's budget gap projection is unsurprising given the disappointing actual tax collections through the current fiscal year, adverse court and federal actions, and higher spending needs," Fitch said.

"We believe that the state of California has the ability to address the expanded budget gap," the note continues, "although rebalancing the state's finances and cash flows through fiscal 2013 will not end the state's fiscal uncertainty."

That's because the slow recovery hasn't refilled California's coffers yet, and the state is still paying off debts it incurred to weather the last two recessions, the analysis concludes. It advises to expect little action until after the primary election June 5.

The deadline for the Legislature to pass Brown's $91.4-billion revised budget is June 15. The plan assumes voters will help close the deficit by passing $8.5 billion in taxes in November; the remainder of the deficit is closed by cuts to services, converting state workers to a four-day work week and use of one-time money and surplus state funds.

 RELATED:

Jerry Brown unveils revised budget plan

California deficit balloons to $16 billion

Lawmakers hope to soften some of Brown's proposed cuts

 

--Nicholas Riccardi in Sacramento

Photo: Gov. Jerry Brown discusses his revised budget proposal in Los Angeles. Photo credit: Nick Ut/Associated Press

 

Rafer Johnson makes TV ad for Howard Berman

Former Olympic great Rafer Johnson is starring in a new cable TV ad for Rep. Howard Berman as the longtime congressman battles with fellow Democratic Rep. Brad Sherman for the same San Fernando Valley seat in the House of Representatives.

 “Howard is widely considered one of the most effective congressmen in the nation,” Johnson says in the ad, sounding a couple of key Berman campaign themes, “and he always comes through for the Valley.” 

Johnson initially had backed Sherman but switched sides recently.

Johnson, now in his 70s,  was a gold medalist in decathlon in 1960, was drafted as a running back by the Rams, helped launch the Special Olympics in 1969 and carried the torch to open the 1984 Summer Olympics in Los Angeles.

He’s not the only venerable superstar to make a campaign ad for Berman—TV actress and animal rights activist Betty White, 90, did so as well.

Sherman this week announced another labor endorsement,  that of the 140,000-member Los Angeles County Building and Construction Trades Council.  “Brad Sherman understands the issues affecting working people and their day to day struggles, said trades council Executive-Secretary Robbie Hunter.

Berman has garnered support from much of the state’s  Democratic political elite, including Gov. Jerry Brown and U.S. Sens. Barbara Boxer and Dianne Feinstein.  Sherman insists he’s won more backing than Berman from local leaders and community activists. He also has represented more of the newly drawn 30th Congressional District  than has Berman and therefore was  better known to voters at the start of the race.

An independent citizens commission,  assigned to form new political maps last year without regard to party registration or incumbents’ addresses, drew Sherman’s  and Berman’s homes into the same district, touching off a  nationally watched  intraparty fight that is likely to set a spending record for House races.

Three Republicans,  one other Democrat and one Green Party member also are on the June 5 ballot.

ALSO:

California's deficit grows to $16 billion

Capitol on edge as Gov. Brown pushes taxes, budget cuts

Jerry Brown releases revised budget to close $16-billion gap

--Jean Merl

Photo: Rafer Johnson in 2009, holding the same torch he used to light the Olympic flame in 1984. Credit: Mel Melcon/Los Angeles Times

 

 

 

 

 

Firms step up fracking disclosure; activists want it banned

Oil firms are pledging to step up disclosure of fracking operations in California as the Brown administration and state lawmakers move to write rules governing the controversial procedure.

The Western States Petroleum Assn. on Tuesday released the results of a membership survey showing that major oil companies used hydraulic fracturing on 628 wells in the state in 2011, the overwhelming majority of which were located in Kern County. The information was first reported last month to regulators who requested it amid public and legislative pressure.

California, the fourth-largest oil producing state in the country, does not require oil companies to disclose where they use the procedure or what chemicals they inject into the ground to tap oil deposits. Other states have imposed moratoriums and drawn up rules after toxic chemicals were discovered in drinking water near fracking operations.

Catherine Reheis-Boyd, president of the Western States Petroleum Assn., said the state's major oil producers planned to report their California fracking operations on a national online registry called FracFocus by July. On Tuesday, the website listed just 95 wells.

In a letter to regulators, Reheis-Boyd said the fracking survey was part of an industry effort to demonstrate to the state and the public that hydraulic fracturing is "a safe, well-understood and important energy production technology."

The effort comes as legislation that would make disclosure mandatory works its way through the Legislature and activists call for a statewide ban on fracking.

Food & Water Watch issued its own report on Tuesday and staged a news conference in Los Angeles near one of the country's largest urban oil fields to protest what the group called "the large, uncontrolled public health experiment that is unconventional oil and gas development."

“No amount of regulation can make this fundamentally destructive and toxic drilling safe; most certainly not mere notice of where fracking is taking place or the carcinogenic chemicals being used,” said Kristin Lynch, Pacific region director of Food & Water Watch, in a statement.

The petroleum association challenged the report.

"To call hydraulic fracturing a destructive technology ignores the facts and the experience about this technology," Reheis-Boyd said. "We’ve been doing this practice a long time in California, and there has been no documented incident of groundwater contamination."

California lawmakers push for fracking rules

State officials ask energy firms to disclose "fracking" sites

Oil extraction method widely used in California with little oversight

-- Michael J. Mishak in Sacramento
twitter.com/mjmishak

Photo: Oil wells in Oildale, Calif. Credit: Getty Images

California lawmakers hope to soften some of governor's cuts

Democratic legislators signaled Monday that they will come up with alternatives to some of the deep cuts in social service programs proposed by Gov. Jerry Brown. The governor proposed a revised spending plan for the fiscal year starting July 1 that closes a $16-billion budget gap.

Senate President Pro Tem Darrell Steinberg (D-Sacramento) said his colleagues will probably propose lesser cuts to social service programs, the courts and financial aid for university students, calling for a "balance between making necessary cuts, which we will do, and maintaining and preserving essential services for people, especially people most in need.''

"We are not looking for a big public fight over the next month, but we will work assertively with the governor and the Assembly to find some alternatives to the most egregious cuts,'' Steinberg added.

One alternative may be to dip into the state's proposed reserve fund for next year, Steinberg said, noting it is referred to as the state's rainy-day fund. "It's raining," Steinberg said.

Steinberg and Sen. Mark Leno (D-San Francisco), the budget committee chairman, agreed the deeper deficit shows the need for tax increases proposed by the governor for the November ballot this year. 

"We will not have the resources we need to put California back on its feet without the revenues that the governor is proposing in his November ballot initiative," Leno said.

RELATED:

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-- Patrick McGreevy in Sacramento

California court leaders decry budget cuts

California judicial leaders warned that more than $500 million in new cuts Gov. Jerry Brown proposed in his revised budget Monday could imperil public access to the judicial system.

Read about it on LA NOW.

RELATED:

California's deficit grows to $16 billion

Jerry Brown releases revised budget plan

Capitol on edge as Jerry Brown pushes taxes, spending cuts

-- Nicholas Riccardi in Sacramento

Photo: California Chief Justice Tani Cantil-Sakauye criticized Gov. Jerry Brown's new proposed court cuts on Monday. Photo credit: Kirk McKoy / Los Angeles Times

NYC's Mayor Bloomberg ponies up for California anti-smoking measure

Saying he wants to help fight tobacco company interests, New York City Mayor Michael Bloomberg on Monday  kicked in up to $500,000 to support Proposition 29 on the June 5 California ballot. He challenged supporters to match that amount, yielding a potential $1 million to help pass the measure.

Proposition 29, aimed at reducing smoking, especially among the young, would levy an additional $1 per pack cigarette tax to raise money for research on tobacco-related illnesses and stop-smoking programs.

Major tobacco companies have poured over $30 million into defeating the measure. Some taxpayer organizations also are opposing the proposition on the grounds that it would create another bureaucracy at a time when the state is facing a mounting budget deficit.

Bloomberg, a leading advocate for reducing tobacco use, said in a statement:

"Every day, tobacco kills. Right now, big tobacco is pouring tens of millions into California to defeat a common-sense measure that would help reduce tobacco use, and something has to be done about it."

Bloomberg urged potential donors to "do everything we can to help make Proposition 29 become a reality, because it will save lives."

More information about the measure, including where to donate toward Bloomberg's matching grant, can be found at www.Californiansforacure.org.

ALSO:

California's deficit grows to $16 billion

Jerry Brown targets state workers for cuts

Capitol on edge as Jerry Brown seeks spending cuts, tax hike

— Jean Merl

Photo: NYC Mayor Michael Bloomberg speaks during commencement Sunday at the University of North Carolina, Chapel Hill. Credit: Takaai Iwabu / Raleigh News & Observer / MCT

 

 

 

Jerry Brown releases revised budget to close $16-billion gap

Gov. Jerry Brown on Tuesday released a $91-billion budget proposal that sharply cuts health and welfare spending, reduces state payrolls by 5% and freezes construction of new courthouses.

Brown's revised budget reflects a steadily worsening fiscal picture for California. On Saturday, he announced via YouTube that the state's deficit had grown to $16 billion, nearly twice what he projected when he released his initial budget proposal in January.

The gap grew, the budget revision states, because Brown over-estimated tax revenue by $4.3 billion and the federal government and courts blocked $1.7 billion in cuts the state wanted to make. The remainder of the difference reflects an increase in the amount of money the state is mandated to spend on education under a complex voter-approved formula.

To close the wider gap, Brown has heightened the cuts he wants to make to Medi-Cal, to $1.2 billion, and maintained another $1.2 billion in welfare and child-care savings he proposed in January.

He also wants to slash payments to people who care for the disabled by 7% and reduce the state payroll through a shorter work week or wage concessions. He proposed $500 million in cuts to the state's struggling court system, including a one-year freeze on all new construction projects.

The service reductions are expected to be harsher if voters in November reject Brown's proposed combination of a sales tax hike and increased levies on high earners. The governor presumes that $8.5 billion of the state's $16-billion deficit will be filled by his tax measure. If it fails, he would levy an automatic $5.5-billion cut to public schools, along with ending popular programs such as lifeguards at state beaches.

The situation would be worse were it not for Facebook. The budget presumes the social media company's IPO will kick $1.5 billion in tax revenues into the state's coffers by the end of the fiscal year in June 2013.

The release of the detailed budget revision, a much-anticipated spring ritual in the capital, kicks off the budget season in earnest. The Legislature has little more than a month to pass a budget by the June 15 deadline.

RELATED:

California's deficit grows to $16 billion

Jerry Brown targets state workers for cuts

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-- Nicholas Riccardi in Sacramento

Photo: Gov. Jerry Brown addresses the California Medical Assn. in April. Credit: Rich Pedroncelli / Associated Press

Jerry Brown to unveil plan to close California's $16-billion deficit

Gov. Jerry Brown is scheduled to unveil his revised budget plan on Monday and detail how he will close California's $16-billion deficit.

The size of the gap nearly doubled over the last four months as Brown's optimistic projections from his January budget were repeatedly dashed. Tax revenues are coming in lower than the governor assumed, the state is spending more money than it was supposed to. Courts and the federal government have rejected several of Brown's cash-saving cuts.

The governor couldn't get his fellow Democrats in the Legislature to agree to cuts in social services he proposed in January, when the deficit was $9.2 billion. Now, budget negotiations will begin in earnest to try to meet the June 15 deadline for passage of a new fiscal plan, which Brown is scheduled to release at a 10 a.m. Sacramento news conference.

Brown's proposal has been a tightly guarded secret, but observers are expecting deep cuts in social services. The administration has warned state employee unions that payroll will be reduced. And the governor will assume that part of the deficit will be closed by tax hikes he is asking voters to approve in November.

His spending plan will include "trigger cuts" to some of the most politically popular programs -- including K-12 schools -- that will kick in if voters reject the initiative to increase the sales tax by a quarter of a cent and levies on those making more than $250,000 annually by 1 to 3 percentage points. The taxes could bring in as much as $9 billion in the upcoming fiscal year.

"We can't fill a hole of this magnitude with cuts alone without doing severe damage to our schools," Brown said in a YouTube address released Saturday. "That's why I'm bypassing the gridlock and asking you, the people of California, to approve a plan that avoids cuts to schools and public safety." 

Watch the address below:

 

RELATED:

California deficit swells to $16 billion

Gov. Jerry Brown targets state workers for cuts

Capitol on edge as Jerry Brown pushes taxes, spending cuts

-- Nicholas Riccardi

Photo: Gov. Jerry Brown speaks in San Jose this month. The governor is scheduled to release his May budget revision, detailing $16 billion in cuts, at 10 a.m. Monday. Credit: Paul Sakuma /Associated Press

California deficit has soared to $16 billion, Gov. Jerry Brown says

Gov. Jerry Brown announced on Saturday that the state's deficit has ballooned to $16 billion, a huge increase over his $9.2-billion estimate in January.

The bigger deficit is a significant setback for California, which has struggled to turn the page on a devastating budget crisis. Brown, who announced the deficit on YouTube, is expected to outline his full budget proposal on Monday in Sacramento.

"This means we will have to go much further, and make cuts far greater, than I asked for at the beginning of the year," Brown said in the video.

Lawmakers and others were hoping that a rebounding economy would help the state avoid steep cuts to social services. But revenue in April, the most important month of the year for income taxes, fell far short of expectations, leading to a shortfall of at least $3 billion in the current fiscal year.

The state has also spent $2.1 billion more than expected, according to the controller, further worsening California's financial health.

Advocates involved in budget discussions say they expect deeper cuts to social services than Brown originally proposed in January. Union officials are also in negotiations with administration officials about ways to reduce state payroll costs, an issue that wasn't on the table earlier this year.

Brown has said there will be even deeper cuts, mostly to public education, if voters do not improve tax hikes in November. He is seeking a quarter-cent increase in the state sales tax for four years and a seven-year hike on incomes of $250,000 or more that will range from 1 to 3 percentage points. He says the measure would raise $9 billion in the upcoming budget year.

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Gov. Jerry Brown targets state workers for cuts

Capitol on edge as Gov. Jerry Brown pushes taxes, budget cuts

Dreary April tax collections raise budget worries, controller says

-- Chris Megerian in Sacramento

twitter.com/ChrisMegerian

Photo: Gov. Jerry Brown on Thursday with boxes of petitions to place his tax-hike initiative on the ballot in November. Credit: Rich Pedroncelli / Associated Press