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February 17, 2009

Corona Chamber Issues Letter of Support to Area Legislators on State Budget Negotiations

The Corona Chamber sent the following letter today to area legislators on the pending state budget negotiations:

Senator John J. Benoit

State Capitol, Room 4066

Sacramento, CA 95814

Via Fax: (916) 327-2187

Assembly Member Jeff Miller

Room 3149, State Capitol
Sacramento, CA 95814
Via Fax: 916-319-2171

Subject: State Budget Negotiations

Dear Senator Benoit and Assembly Member Miller:

Passing a balanced state budget is not an easy task given the political climate in Sacramento. However, passing a state budget by dipping into the back pockets of hard working Californians is just wrong. We urge you, and especially the Governor, to fight any effort to raise taxes on a citizenry who have been asked time and time again to invest more and more – while legislative leaders in Sacramento continue to leverage our state’s future.

Finally, on behalf of the Corona business community, we would like to thank both of you for standing firm to oppose any budget proposal that includes tax increases.

Your leadership in this regard is greatly appreciated.

Sincerely,

Bobby Spiegel

President and CEO

Cynthia Schneider

Chair, Legislative Action Committee

May 16, 2008

Corona Chamber Supports Governor’s Plan to Remedy Out-of-Control State Spending

The Corona Chamber of Commerce supports the Governor’s proposed Budget Stabilization Act. The Act which will create a “rainy day” fund in the state budget. Any surplus in the state budget would be placed into a savings account to be used to balance the budget in years when a budget deficit is projected. Currently, when the Governor signs the state budget, spending is committed. If revenues begin to decrease, the Governor has the option of declaring a fiscal state of emergency and may call a special session of the State Legislature to reduce spending. However, the politics of this process, according to the Corona Chamber, hinder the reduction of state spending, especially when immediate action is necessary.

“It is important to find a solution to keep a balanced budget year after year,” stated Cynthia Schneider, Chair of the Legislative Action Committee of the Chamber. “Our city, schools and businesses depend on a balanced state budget especially during difficult economic times. The Governor’s proposed Budget Stabilization Act is the right solution to fix the current spending problem so we can maintain a strong local economy,” continued Schneider.

The Budget Stabilization Act also allows California to reduce spending mid-year. Currently, California does not have the ability to reduce spending to accommodate reductions in revenue. The excess revenues, which are defined in the act as state tax revenues above a reasonable, long-term average rate of growth, will be determined by the state Department of Finance. The department will then release a revenue projection two times each year: in January and May.

The Act will create automatic reductions in state spending, triggered by the Governor, if the Department of Finance predicts a year-end budget deficit. If a deficit is predicted, state agencies must reduce their spending by either two percent or five percent, depending upon the projected deficit. The Act also requires that the legislature enact a statute specifying how the state will reduce spending by two to five percent to meet Budget Stabilization Act requirements as soon as a deficit is projected.

April 24, 2008

Corona Chamber Supports Governor's Proposed Budget Rainy Day Fund

The Corona Chamber of Commerce supports Governor Schwarzenegger's proposed Budget Stabilization Act. This Act will establish a Revenue Stabilization Fund (RSF), which is simply a savings account for excess revenues taken in by the state each year.

This proposal is important to you because it will limit future budget deficits from impacting Corona and our region from drastic cuts in important services such as education and transportation funding.

Click here to take action on this issue.

Key Points of this Call to Action

1. End Fluctuating tax revenue and auto-pilot spending, which dictates approximately 90 percent of state expenditures. This process has, created more than a decade of unpredictable and unstable budget cycles, which benefit no one.
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2. Establish a Revenue Stabilization Fund, basically a savings account for years when state tax revenues are above a reasonable, long-term average rate of growth. This fund will be used to even out funding for the state budget in years when revenues are below average.

3. Keep us from living above our means by triggering reductions in state spending of between two and five percent if a year-end budget deficit is predicted.

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Background

"California’s economy continues to grow, in spite of the current housing downturn, and the state continues to enjoy overall job growth," stated Cynthia Schneider, Chair of the Corona Chamber's Legislative Action Committee. "However, California still faces a projected $14 billion budget gap that necessitates across-the-board-cuts. Something needs to be done and the Governor's Revenue Stabilization Fund is the right idea at the right time," continued Schneider.

California’s budget problem is chronic, and driven by two factors: The state historically spends all the money it takes in during years of high revenue growth, leading to unsustainable spending levels in the long run.

California has not slowed spending growth fast enough. Automatic formulas will increase spending in FY 2007-08 by 7.3 percent, unless we take action now. Each month California spends $600 million more than the state takes in.

The majority of spending in the budget is set on auto-pilot. Currently about 90 percent of the budget is tied up with contracts and statutory requirements.

“Excess revenues” are defined as state tax revenues above a reasonable, long-term average rate of growth. The state Department of Finance will calculate and release this revenue projection two times each year: in January and May. This amendment will require that the state deposit excess revenues into the RSF. The RSF will make these savings automatic—thus ensuring that California does not again fall into the trap of spending all its revenues in prosperous times.

In years when tax revenues are below average and California cannot meet its spending obligations, the state will transfer the difference from the RSF into the General Fund. Transfers will only take place when revenue grows at a rate below the long-term average. The state cannot transfer funds just to avoid deficits.

The Budget Stabilization Act will allow California to reduce spending when necessary. Right now, California doesn’t have this flexibility. Once the Governor signs the budget, spending is locked in unless the Governor declares a fiscal state of emergency and calls a special session. Under this Act, automatic reductions in state spending will be triggered by the Governor if the Department of Finance predicts a year-end budget deficit.

The Department of Finance will calculate and release this projection three times each year: in November, January and June. If a deficit is predicted, state agencies must reduce their spending by either two percent or five percent, depending on the deficit’s projected size. If the deficit is projected at one percent or less, agencies will reduce spending by two percent. If the deficit is projected at greater than one percent, agencies will reduce spending by five percent.

This amendment requires that the legislature enact a statute specifying how the state will reduce spending by two and five percent to meet Budget Stabilization Act requirements as soon as a deficit is projected.

If the legislature does not specify the reductions—or if their reductions are insufficient—the amendment allows the Governor to waive state law and regulations in order to achieve the savings needed to bring California's budget into balance. Debt service, contracts and other constitutionally-protected payments are exempt.

Spending changes enacted by the Budget Stabilization Act remain in effect until a new budget or other statutory change is enacted by the legislature. Tax increases, urgency measures and most General Fund appropriations will still have to be enacted by two thirds majorities in both houses of the legislature.

Governor Schwarzenegger campaigned and was elected on the promise of greater fiscal stability and and reforming workers’ compensation. The spending limit was not included in the final proposition package that went before California voters.

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Click here for more information from the Office of the Governor.

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