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Governor Remarks on Budget Crisis

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arnold_cdcan.bmpTRANSCRIPT OF GOVERNOR’S PRESS CONFERENCE WEDNESDAY ON BUDGET CRISIS

OPENING REMARKS BY GOVERNOR:

“Good morning, everybody. Good morning. Well, the legislators heard an earful earlier this week from our financial experts about our financial situation. And it’s exactly the same sad news and same thing that I’ve been saying actually for months now. California faces a growing financial crisis and if we don’t put aside our ideological differences and negotiate and solve this problem, we’re heading towards a financial Armageddon. We can already see it coming. Before the end of December we would pull the plug on $5 billion in road and school construction projects and that will mean it will cost California 200,000 jobs and $12.5 billion in private sector revenues.

So, as you can see, it’s quite the opposite of what we proposed in our economic stimulus package, which is to push billions of dollars of infrastructure bond money out and to create the hundreds of thousands of new jobs. And by the end of February we’re going to run out of cash, which means that we have to make our payments, paying our bills with IOUs. And by the next fiscal year the problem could be even much worse, it could go up to $30 billion.

What is amazing about all of this is the legislators act as if we have $30 billion in surplus. I called a special session last month and told them that they need to address four serious problems:

• Close the current shortfall in the budget,
• Stimulate the economy,
• Help the people stay in their homes, and
• Restore the state’s unemployment insurance fund.

They met, they debated, they postured and they did nothing. They didn’t even deal with a single one of those issues and that was after being three months late already with the budget this year. If that isn’t a shameful performance, I don’t know what is.

Now, on December 1 I declared a special session and declared a fiscal emergency and told the legislature, the new legislature, that the problem was getting worse by the minute. As a matter of fact, our budget situation this year, our budget deficit, is not anymore $11.2 billion; it is now $14.8 billion. And this is why I’m calling for a Big Five Meeting tomorrow, to talk about those new numbers and what that means for the following fiscal year.

As a matter of fact, we have here a clock on the side. As you can see, those numbers are changing all the time. And this represents 35 days since we called the first special session and here you see the numbers. We have, every second the state is losing $470, every minute $28,000 and every hour $1.7 million and every day $40 million. So that is approximately more than a billion dollars a month that we are losing when the legislators don’t act.

So I think that the problem is getting worse because of that. And the State Controller was right when he told the legislators that tax increases or program cuts are very tough to do right now in this economic situation but neither is as toxic as the state’s fiscal health when we do nothing. And this is what I always said; when you have a crisis the most important thing is to make a decision and the worst thing is not to make a decision. And so, in other words, the most costly and damaging thing that we could do right now is not to take any action.

So I call on the legislators — I call on the legislators to be leaders, to negotiate, to compromise and to come to the table and to come to a conclusion here and solve this financial problem once and for all. Otherwise, it’s only going to get worse.

Thank you very much. And now if you have any questions, please feel free.”

QUESTION AND ANSWERS

QUESTION: Governor, you’ve talked about, several times, that you don’t really like Big Five Meetings. You’ve said, even in this room one time, that you don’t get a lot accomplished in them. I’m wondering, isn’t it time for you to change the strategy, maybe call rank and file legislators down to your office individually and talk to them? Because you’re not getting anywhere in Big Fives.

GOVERNOR: Well, first of all, you’re absolutely correct; I don’t like the Big Five Meetings because for me they have never produced much. But I do them because I will do anything in order to move the agenda forward and in order to come to some kind of a compromise so we solve this budget crisis. I also meet individually with the legislative leaders, so you know. And we will also now, since they are more and more coming to town, I will meet them also individually, the legislators. I want to reach out to all of them and explain to them how important this is, to solve this crisis and how we all have to work together, Democrats and Republicans, so I will do anything and everything.

I also made it very clear to the legislative leaders that they should let their friends upstairs know that I’m willing to stay the whole weekend, until Christmas. That no one should leave town, that no one should go on vacation, that we should work through this in order to get this done, because there will be no Christmas gift that would be greater for the people of California than for us to solve this crisis. And this problem, as I said, gets worse every day so, as we speak right now, more and more money is being spent red, is being spent, money that we don’t have.

QUESTION: Governor, last month you called the legislators kindergarteners, acting as kindergarteners because they had failed to act in the special session that ended in November. Now we’ve gone several days past that. What would you call them now?

GOVERNOR: I want just to urge the legislators to do everything they can to come down and negotiate and to lead and to solve this financial crisis immediately.

QUESTION: Governor, you’ve proposed numerous special sessions now. We’re pretty much repeating the pattern two years in a row. You haven’t been able to solve this problem with the legislature and you’re kind of right back where you started when you were elected. Do you think this state is governable? That was a question that came up before the recall and now we’re right back there. So is it a governable state, California?

GOVERNOR: Well, I think that whenever you have a crisis like that and whenever you see the legislature not acting and not solving problems but actually creating problems by not acting, you have people and the press, naturally, talking about all kinds of different ideas. There are a lot of people that have come up to me lately and said why we don’t have a part-time legislature? If they’re full-time and they’re not doing anything, why don’t we have a part-time legislature? We have heard people talk about a Constitutional convention. We have heard all kinds of different ideas like this that people are talking about. Or does the budget system itself work, is the state governable, all of those things.
So I understand the people’s frustration and everyone’s frustration. Look, I’m frustrated. I’m sitting here and we have a system where we rely on the 120 legislators to make those decisions. I cannot make them stay here, I cannot lock them into the building. I don’t have those kinds of powers. Believe me, I would do it otherwise.

QUESTION: Governor, yesterday Mr. Villines said to the editorial board that spending cuts, a spending cap, labor and environmental law reforms, outsourcing, all those things would have to happen before Republicans would be willing to talk about a tax increase. Are you willing to negotiate on those lines?

GOVERNOR: Well, as you know, we made it very clear in our economic stimulus package. When you read through that package you will see we address all of those issues. We address the issues of reform in some of the regulations that will make it easier for businesses. We talk about all the different things that the Republicans are proposing. The only thing we don’t have in there are some of the environmental issues they want to address. But everything is in there.
But I think that what is important is to come to the meeting and to be prepared and to propose those kind of issues. I have been to many meetings; none of those things were discussed. So I think it’s very hard for the Democrats, in a way, to negotiate when no one puts that on the table and says here is the list of things that we ask for and if we have this list then we’re willing to increase taxes and to come up with extra revenues. But it’s always very vague and nothing specific and I think that makes it sometimes frustrating in those negotiations.

But I’m happy that the Republicans have a list now. But again, as you have just said, you can’t go with a list like this and say if you commit to those things and if you’re willing to make those changes, then we are willing to talk about revenue increases. That is not the way you negotiate. You have to say this is what it takes and then I’m ready to increase the revenues and I will get my people upstairs to vote for a revenue increase.

So that has been a holdup. I have felt many times that Republicans did not come prepared and Republicans have not been specific of what they need. They have been very vague.

QUESTION: Governor, you mentioned a figure of 14.8 billion. You think the deficit in the current fiscal year now is 14.8 billion?

GOVERNOR: That’s right.

QUESTION: You also mentioned a figure of 30. You’re saying it will be another 30 next year?

GOVERNOR: No, what I’m saying is that now, by seeing it going up from $11.2 billion to 14.8, that that obviously will have an effect on next year’s budget also, as you know, because this year, when you talk about this, that will be added to next year if we don’t address it this year. And so the numbers, the last numbers that we had was $24 billion plus our $5 billion on the lottery money. So some people count that in, or not count it in. So now the problem will get worse. And we are going to get the numbers; that’s why we have the Big Five Meeting tomorrow. Tomorrow I think that our Finance Department will have more exact numbers of what that means in the out year.

QUESTION: Governor, tomorrow the Air Board is going to pass a scoping plan on AB 32. What do you tell the business community that says that now is not the time to be doing this? What is your [sentence not finished]

GOVERNOR: Well, first of all, let me just say that I recommend very strongly that we move forward, because it doesn’t make any sense that we are looking at our health and destroying our environment and creating global warming and climate change and all of those things, just because it’s not the right time. I think that there are certain things we’ve got to move forward very aggressively. And I think that we have a goal set under AB 32 that means 25 percent reductions in greenhouse gases by the year 2020 and in order to accomplish that goal we have to move forward and make those steps and this will be announced by the Air Board this week.

So I think that they have done an extraordinary job and Mary Nichols has been a champion on that and our EPA and everyone working together on this and a lot of the businesses. I want to compliment the business leaders that have come in and have worked with them very closely.

And you will have people screaming and saying this will lose jobs. As a matter of fact, when you look today at the economy and when you look at the businesses, the green technology and the green economy is actually doing really well.

They cannot build enough solar panels, they don’t have enough workers there, they are hiring more and more workers. I have done a press conference here in Sacramento where they talked about hiring an additional 1,000 people and expanding their business. So that industry is booming. So I think that the more we are committed to those laws and the more we move forward, the more those businesses will expand and this is where the action is.

So I think that we should move forward with this whole thing.

But I understand the businesses’ concern, believe be. But you know, they have been talking about that in 2003, they were concerned about it. Now it’s five years later. They’ve had time to make those changes. And we will give them the time to make the changes and we will not ask them to do things where the technology is not available.

I think Mary Nichols was very careful to look at the technology, to find out when does the new Caterpillar with the new engine come in — well, it’s 2014. So she’s not going to demand by 2009 you’ve got to have a new Caterpillar with the new engine, because it doesn’t exist. So I think that everyone has been very sensitive about that, the way we move forward on this.

QUESTION: Governor, you’ve tried in the past to shame the legislature into action. What makes you think that tactic is going to be any more effective this time?

GOVERNOR: This has very little to do with the legislators and more to do with the people of California. I want the people of California to see how, because of the inaction in Sacramento and their representatives that they have sent to Sacramento to act and to solve problems, because of their inaction how we are losing money every single day. And these are their tax dollars. It’s their money. So that’s what this is about.

And there will be some people that think this is a gimmick but those are the people that don’t want people to see that. They want to hide the facts that we are losing money, billions of dollars, because of their inaction.

And this has been going on not this month, may I remind you. This has been going on since last June because remember, June 15th was the Constitutional deadline for the budget and they were three months late on that. And then, since then, they have been late and have not acted. Even in that budget, where they were three months late, they didn’t solve the structural deficit.

So they’ve got to get going and they’ve got to start negotiating and take this seriously, rather than playing chicken, which is what’s going on now, who blinks first. That’s a very dangerous game, because you’re doing it on behalf of the people of California. It’s their money. It’s not the legislators’ money. If it would be their money they would act totally differently right now. It’s the people’s money. The legislators are good at signing the checks on the back, not the front. Very rarely do they sign a check on the front. It’s the people’s money that they are playing with here and this is why it’s important for the legislators to recognize, now is the time to negotiate, to come together and to compromise and to solve our financial crisis.

Thank you very much. Thank you all.

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