Emergency Powers
In ruling that Governor Arnold Schwarzenegger has emergency powers to order furloughs for state workers, Sacramento Superior Court Judge Patrick Marlette said, “The current circumstances constitute an emergency.”
With the state teetering on the financial precipice, soon unable to pay bills, the judge apparently equated California’s situation to any natural disaster that might hit the state.
The Governor sees it the same way. Recently, Schwarzenegger said he views our fiscal emergency like he would view an earthquake. It’s a crisis of the moment that demands immediate attention.
Now that we have a judge agreeing that the governor has extraordinary powers to confront this fiscal crisis, the question is: How far can the governor take this emergency power?
I–O-What? The Fun of Deferred Payments and “Registered Warrants”
The State of California is one of the most prosperous and desirous places to live anywhere on earth. It is the eighth largest economy in the world. Yet, the state is on the verge of issuing IOUs to pay its bills. Experts claim a perfect storm of economic down-turn, overly progressive tax system and collapsing credit market have led to the state’s cash crunch.
California’s cash crunch has made the issuing of IOUs to pay the state’s obligations a real possibility. Without cash in the bank, checks will bounce. California’s constitution, federal law and case law mandate that the state must meet certain obligations, such as debt service on its external loans. The state must have enough cash on hand for payments. Therefore, to ensure the state can meet its obligations to schools and repay external loans, IOUs may have to be issued in lieu of salaries and per diem payments to 1,700 legislators, state elected officers, judges and their appointed staff, as well as tax refunds owed to individuals and businesses.
California State Controller John Chiang has indicated that his office may be forced to issue “IOUs” as early as Feb. 1, 2009 depending on the “cash on hand” situation at the time.
Home sales rebound as prices continue freefall
California home prices continue their freefall. This week, Standard and Poor’s released its monthly index of metro home prices, and California registers another record year-over-year drop. The composite average for San Francisco, Los Angeles and San Diego prices dropped in November by 28 percent from the previous year, the same as last month’s year-over-year drop – the largest ever recorded by the state, and exceeded only by the Sunbelt cities of Phoenix and Las Vegas.
According to this index, California’s composite home prices are equivalent to where they were in 2002 or 2003, depending on the region of the state.
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