Schwarzenegger calls back legislators for emergency budget session
With California's revenue plummeting, the governor says lawmakers will reconvene next week. They will discuss solutions to the foreclosure crisis and an economic stimulus package.
Reporting from Sacramento — Gov. Arnold Schwarzenegger has set Nov. 5 -- the day after next week's election -- as the start of an emergency legislative session to address the state budget deficit, which has swelled by several billion dollars in recent weeks as the stock market has continued its tumble and the economy has soured.
Schwarzenegger said this year's deficit will be "much more" than the $3 billion that state officials projected two weeks ago. Capitol budget analysts say preliminary data indicate the problem will probably grow to at least $10 billion.
The governor and legislative leaders made the announcement to reporters in the hallway outside Schwarzenegger's office, where they had been meeting in private to discuss the fiscal crisis. They said that in the coming days they also will form a commission to study ways to restructure the state tax code to make revenue more stable
Schwarzenegger's move comes a month after lawmakers passed the current budget and adjourned until December, when the next class of lawmakers is scheduled to begin work. But the governor said state revenues are dropping so fast that he and legislative leaders decided to call a lame-duck session.
"The situation is far more severe than it was when we were negotiating the budget" over the summer, Schwarzenegger said.
At that time, experts had warned that the spending plan lawmakers were drafting was optimistic.
"They ignored the obvious," said Christopher Thornberg, principal at Beacon Economics. "They refused to recognize we were heading into this painful recession. It wasn't rocket science."
The state's problems are being compounded by the stock market bust. State revenues are expected to suffer substantially as a result of the carnage on Wall Street.
Relative to other states, California gets a disproportionate share of its revenue from the personal income taxes of the wealthy. The richest 1% of Californians pay half of all the personal income taxes the state collects each year.
"A lot of those folks receive much of their income from capital gains," said H.D. Palmer, deputy director of external affairs for the state Department of Finance.
When the stock market falters and capital gains fall off, state income plummets. This month the Standard and Poor's 500 Index has dropped 24%.
The state also relies heavily on sales taxes. Economists are predicting that those receipts will also take a dive as consumers tighten their belts.
- On Girlie Men and Our Manly Governor Jul 21, 2004
- Camera-Ready Budget Pitch Jan 15, 2004
- Renewing the governor's vows Feb 10, 2008
