Both Democratic leaders think that a deal is only days away, although the most controversial of issues has yet to be decided, whether to suspend the Proposition 98 school-funding formula to cut $3 billion this year from schools and community colleges.
Proposition 1A also remains under discussion in Big 5 meetings and CSDA urges districts to continue to send letters and to adopt resolutions of fiscal hardship. Templates can be found on our Protect Special Districts’ Services web section.
Last Friday, State Controller John Chiang released new cash numbers for the month of June, which fell more than $1 billion below estimates from last month.
Specifically, personal income taxes in June were $987 million below what the governor had estimated in its May revision, while sales taxes were down $154 million. These shortfalls were offset somewhat by corporate tax payments that were $1.31 billion above estimates, attributed by a surge in corporate tax payments made to avoid a new state penalty. The full summary analysis can be viewed here.
IOUs were issued on July 2 in order to avoid a large cash shortfall at the end of July. Cash projections show that the issuance of IOUs will preserve enough cash to make protected payments (payments protected by the State Constitution, federal law or court decisions) through September; although by October the cash shortfall will endanger the state’s ability to make those protected payments.
Also last Friday, big banks, led by Bank of America, Wells Fargo and Chase, held firm in their promise to not accept IOUs after the close of business Friday (July 10). The only major banks that relented were Citi and Bank of the West. Citi said it would honor IOUs until this Friday, July 17, and Bank of the West said it would accept IOUs from current customers “until further notice.”
Meanwhile, Senate policy and fiscal committees and Assembly fiscal committees will hear dozens of bills this week in preparation for summer recess, set to begin this Friday.