As California prepares to ask investors for $5.4 billion next week, state Treasurer Bill Lockyer is none too pleased with a last-minute bill related to automatic budget cuts.
Lockyer had to amend his disclosure statement to explain that lawmakers may require Gov. Jerry Brown's administration to consult on alternatives to as much as $2.5 billion in "trigger" cuts under Assembly Bill X1 20. Brown and lawmakers agreed in June to prescribe cuts to schools and other public programs that would take place if the state falls behind its optimistic revenue projections.
Brown opposes the bill, and the Senate budget committee did not approve the measure Tuesday night in its first examination.
"We like the triggers fine just the way they are," said Lockyer spokesman Tom Dresslar. "We would have preferred that the Legislature not monkey around with them. The triggers were one of the strongest features of the budget. It's unfortunate there's a possibility they will be weakened."
Democratic lawmakers say the blowback is much ado about nothing. Sen. Mark Leno, D-San Francisco, chairman of the Senate budget committee, said before yesterday's hearing that the bill allows for better planning and more disclosure. He noted that lawmakers always have the power to change cuts mid-year, and this bill serves to underscore that point.
California has to borrow short-term cash each fall because it receives the bulk of its tax revenues between January and June. The state will begin selling $5.4 billion in short-term notes to the public on Tuesday.
Gabriel Petek, a Standard & Poor's analyst, said the legislation itself shouldn't concern investors as long as the Brown administration carries out mid-year cuts if revenues fall short. Nothing in the bill undermines the governor's authority to impose the prescribed cuts, though it is clear he would face political pressure to reexamine them.
"We had been thinking there was likely to be some pushback politically on the implementation of the trigger cuts," said Petek, who raised that possibility last week in his own analysis of the $5.4 billion borrowing. "From a credit perspective, we think (the triggers) are an important part of the overall budget. Any weakening of resolve by the administration would be more a concern to us than this legislation."