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Davis, California

Sunday, July 21, 2024

State budget crisis leads to loan freeze

Mike Genest, director of the California Department of Finance, calls this the most challenging fiscal crisis California has ever faced. The California State Controller is projecting that California will be out of cash by February and the California Department of Finance is estimating a $40 billion budget deficit through the fiscal year of 2009-2010.

Mounting frustration onto an already difficult situation is the California state legislature’s inability to agree on a comprehensive budget plan. Governor Arnold Schwarzenegger has called the legislature’s failure to strike a compromise between Republicans and Democrats “unexcusable.”

As a result from the budget crisis and the lack of clear budget plans for the future, the state three-person Pooled Money Investment Board voted on Dec. 17 to halt billions of dollars worth of loans to finance state infrastructure projects.

“We are simply running out of options,” said Jacob Roper, deputy press secretary for the State Controller.

Tom Dresslar, director of communications for the State Treasurer said the state doesn’t have the money to do everything it needs.

“The pot of money that we use to provide financing for infrastructure projects is the same pot that is used to help support the general fund that provides money needed to operate a whole gamut of services: health care, education, social services, law enforcement, you name it,” Dresslar said. “And the problem is that we can’t continue both loaning money for infrastructure projects and supporting the general fund because of our budget situation. We don’t have the cash.”

There are an estimated 2,000 projects that will be affected by this loan freeze from schools to parks to prisons to levees.

The Natomas levee project is one such project that may be in jeopardy due to the lack of state funding. The Natomas levee system currently protects 80,000 citizens from the Sacramento River. However, evaluations of the levee concluded that conditions are so vulnerable that building permits for houses and businesses are not being issued until the levee is fixed.

“The levee is susceptible to deep underseepage,” said Jay Davis, the Sacramento Area Flood Control Agency consultant. “That’s when water penetrates from deep below the levee and of course, the number one importance is to correct that.”

The project is currently still moving forward, as state and local funding is enough to start construction set in April. But the total cost of the Natomas levee project is $618 million and while 10 percent is covered by local funds and 25 percent is covered by state funds, the remaining 65 percent still relies on funding from the federal government.

“Government funding is critical for the project,” Davis said.

For now, Davis remains optimistic.

“There’s concern if this budget crisis is prolonged of course, but it has currently not held up the project. It’s still moving full forward with the planning and design and issuing contracts and getting ready for our April construction.”

Other local projects are in jeopardy as well. According to the Sacramento Bee, funding for an expansion of the UC Davis Medical Center’s surgery and emergency center is in limbo. The project was originally expected to be completed in 2009. Additionally, nearly $1 million in funding for the Yolo Wayfarer Center, a homeless services provider, is also tied up.

The Pooled Money Investment Board plans to meet again later this month.

HELEN ZOU can be reached at city@theaggie.org.


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