EXHIBIT 3-B
 

 

 

May 3, 2010

 

 

To:             Darby Fuerst, General Manager

                  Monterey Peninsula Water Management District

 

From:         John Arriaga, President

                  JEA & Associates

 

Re:             State Report – Budget and Beyond

 

State Budget Update

While the Legislature has delayed taking any substantive action on trying to balance the budget—all in anticipation of a big revenue bump in April—the news at the end of the month does not support optimism. At of the end of March, General Fund revenue collections were $2.7 billion ahead of forecast levels for 2009-10, with $1.0 billion of that amount coming from the personal income tax, leading some to hope that an “April Surprise” would take a large bite out of the budget shortfall.

As of April 30, the final tally for income tax collections, the Franchise Tax Board reported the amount collected is just over $7.6 billion—roughly $2.9 billion short of the $10.5 billion Governor Schwarzenegger expected in his January 8 budget proposal.

Bank and corporations taxes, predicted to total $1.9 billion for the month, were $1.5 billion, worsening the state’s budget hole by another $400 million.  On the final day of April, a month which generates 17 percent of the fiscal year’s income tax revenue, the Employment Development Department reported $158 million in withholding for 2010 taxes and the tax board logged $89 million in 2009 tax payments, after subtracting refund requests.

In light of the weakness of the state’s economy—unemployment remains stubbornly high and key economic indicators are still weak—modest revenue collections should not come as a surprise. If anything, budgeteers should be thankful that revenues have held up as well as they have.

This week, Senate President pro Tempore Darrell Steinberg and Assembly Speaker John Pérez travel to Washington, D.C. to speak to Obama administration officials and members of Congress about more federal funds for California. The Governor will release his May Revision on May 14, which includes both updated revenue forecasts and policy proposals. In light of recent revenue totals, there will likely be little to celebrate.

State and Legislative Highlights

 

Highlights of other state and legislative activity to date since my last report:

 

·        Finally, after a failed try in the Assembly, then-Senator Abel Maldonado was confirmed at Lieutenant Governor.  His inauguration is tomorrow, May 4.

·        The Governor’s untimely calling of the special elections to fill Maldonado’s now-vacant 15th Senate District seat has caused great consternation among the five counties who will have to have four, back-to-back elections:  June 8, June 22 (SD 15 primary), August 17 (SD 15 final) and November 2, at a collective cost of nearly $3 million.

·        As promised, Speaker John Pérez appointed a new leadership team, including two Republicans to chair policy committees (Assembly Local Government, Paul Smyth-R-Santa Clarita and Assembly Veterans Affairs, Paul Cook-R-Yucaipa).  Here is the new membership for the Assembly Water, Parks and Wildlife Committee:

Jared Huffman (D-San Rafael), Chair; Jean Fuller (R-Bakersfield), Vice Chair;

Joel Anderson (R-La Mesa); Juan Arambula (I-Fresno); T. Berryhill (R-Modesto); Robert Blumenfield (D-Van Nuys); Anna Caballero (D-Salinas); Hector De La Torre (D-South Gate); Nathan Fletcher (R-San Diego); Bonnie Lowenthal (D-Long Beach); Mary Salas (D-Chula Vista); Mariko Yamada (D-Davis) and 1 Democratic Vacancy).

·        AB 155 (Mendoza), a bill inimical to local governments, including special districts like the Monterey Peninsula Water Management District, once thought dead in the Senate, has been resurrected at the behest of public safety and employee unions and is headed full-steam ahead to the governor.  The bill requires that local governments seeking Chapter 9 bankruptcy in federal court to first receive permission from the California Debt and Investment Advisory Commission, an obscure, politically appointed body in the State Treasurer’s Office.

·        The League of California Cities, California Alliance for Jobs and the California Transit Association turned in over 1.1 million signatures to the Secretary of State last week in hopes of qualifying the “Local Taxpayer, Public Safety and Transportation Act of 2010” for the November 2010 ballot.  If passed by the voters, the initiative closes loopholes to prevent the state from taking, diverting or borrowing local governments, transportation and public transit funds.