Last week, the legislative budget conference committee voted to reject the proposal to suspend Proposition 1A, a measure that allows the state to borrow property tax revenues from local government during a severe fiscal hardship.

The Association of California Water Agencies has spearheaded the opposition to a Prop 1A suspension. In early May, the governor proposed to suspend Prop 1A and borrow approximately $2 billion from local government to help bridge the state’s massive budget deficit. The non-partisan Legislative Analyst’s Office offered an alternative solution that would borrow a larger percentage of property tax revenues from those local agencies, like water and wastewater districts.

Over these past couple of months, special districts, cities and counties maintained a unified front against a Prop 1A suspension. It was this unity and outpour of opposition that contributed to the budget conference committee’s rejection this past week. While the rejection of Prop 1A by the committee is a positive sign, this is by no means the final budget package. Even if Prop 1A is not included in this budget package, with the instability of the economy and recent decreases in state revenues there is a high probability that the legislature may have to revisit budget issues again this 2009/10 fiscal year.

The state is projected to run out of cash by July 28. Without a balanced budget plan in place, the state would have two options: borrow at high interest rates to maintain its cash flow (assuming Wall Street would be willing to lend billions in the face of such uncertainty) or defer payments and run the risk of insolvency. Last week, Gov. Arnold Schwarzenegger said high interest borrowing was not an option he would consider.

Visit the state’s website to read more on the current budget crisis (www.gov.ca.gov)

This entry was posted on Monday, June 22nd, 2009 at 8:08 am and is filed under Central Basin News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.