Governor proposes $3 billion suspension of Prop. 98
Analysis from CSBA's Governmental Relations Department
Published: July 1, 2009
Gov. Arnold Schwarzenegger this morning called for the suspension of Proposition 98 in the fiscal year that starts today in the wake of last night’s inaction on the budget in the state Senate.
The Senate had failed to pass three bills to address the state's cash flow shortage. Among other things, the measures would have reduced the 2008-09 Proposition 98 minimum funding guarantee to education by $1.6 billion and deferred more 2008-09 revenues for schools while shifting $350 million from redevelopment agency property tax revenues to schools (this would have resulted in an equivalent state savings). Reducing Proposition 98 funding in 2008-09 would have also reduced the minimum guarantee for 2009-10.
The governor had vowed to veto the bills in any event, calling them only a partial solution and saying he wanted to receive a “whole package”—a state budget without any deficit.
At a press conference this morning, the governor said the new budget shortfall now stands at $26.3 billion and proposed to suspend Proposition 98 to reduce 2009-10 education funding by $3 billion. The governor also reiterated his recent demand to reform public employee pensions and said he is:
• declaring a fiscal emergency
• refusing to sign any other legislation until the budget is enacted
• ordering a third furlough day for more than 200,000 [per the Bee] state employees
• contacting banks to convince them to accept IOUs from the state
More floor sessions are scheduled for today, but it is not known at this time what, if any, kind of action is being considered.