sr-021009-13e13-E
February 10, 2009
Council Meeting: February 10, 2009 Santa Monica, California
CITY CLERK'S OFFICE -MEMORANDUM
To: City Council
From: Councilmember McKeown
Date: February 10, 2009
13-E: Request of Councilmember McKeown that, in the interest ofmaintaining
local housing stability, the Council cansider the temporary use of City funds to
cover expected state non-payments and/or IOUs as needed by residents for rent
and mortgage payments, and direct stafF to investigate financial and
administrative possibilities.
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http:l/w+aver.sc®.ca.govieralfiisca]issueslcayments0~1-2009b.shtml#oaymentmenu
http:l/v~nvvv. sco. ca. ~ovleolfiscalissues/cayments0l-20094. shim I
13-
February 10, 2009
~~
~~ ~~_ ~.~ r ~.~.
~oritrolfler to delay ~ertaira Payments for ga Days
~'o Presea°ve ~asla for 5el~ools axed ®tlaer Legally Protested ~xpea~dltua°es
As State Controller, John Chiang is responsible for ensuring the State has
sufficient funds to meet its financial obligations.
With no signs of an economic recovery in sight, it is critical that the
Governor and the Legislature enact a sound budget solution that provides
much-needed cash by February 1. If not, the State will be $346 million in
the red at the end of February, and $5.2 billion in the red in April.
In order to preserve cash for education, debt service and other payments
that are deemed by the State Constitution, federal law orcourt rulings as
having first claim to available Gerieral Fund cash, the Controller
announced he will begin delaying, for 30 days, payments to all other
programs that are funded out of the State's depleted General Fund.
Those payments that will be delayed include thousands of payments to
The delay in payments also will
apply to tax refunds that millions `"'""'""""
of individuals and businesses ~1~I~OFt-18'SI
have earned, expect and Partnes=rnarsut
deserve. Not only will the 30=day
delay in refund payments cause
significant financial harm to $~oat3~Pmn
California families, it wilt delay s2,#~rt~~n
the economic stimulus expected ~asixtrishien " S2,3C~li5on""
from consumer spending.
Postponing the payment of tax
refunds also v~ill ultimately cost so
the state tens of millions of "'ymlr:»~
dollars in interest payments if
those payments are postponed
beyond the date prescribed by
law. ,5~asan+oe, ...,...,. .,....„. .,, ....,:',
businesses for services and products they provide to the State; to ~~~~ its=~ ~~~-~ ~ t~~
assistance for more than a million aged, blind and disabled Californians ~ ~"
that goes to pay their rent, utilifies, or put food on their tables; to State
agencies that use the payments to fund critical public services, ranging from public safety to health and welfare.
If the Governor and Legislature
fail to provide real and adequate
solutions by late February, the
Controller said he will be forced
to postpone those payments far
another 30 days.
Below is information regarding rrao xxaaonu~r~~~~dgmw+§r~vmn~x
which legally protected payments arrxo~xmmearwsnip~smwa~c4v.e~n~-
vdll continue to be paid, what _ -
payments will be delayed,
frequently asked questions, and the text of a letter from the Controller to Legislators.
http://www.sco.ca.gov/eo/fiscalissues/payments0l-2009a.shtml 1/29/2009
Estimated GeneraY~u-~! Dish
7ota1 tea ~ Made Yofial Payrt
Deli
$6.63 billion $3.48 billion
Retells of ~ayrnents i~ 3e iVla~e ir; ret3a"Lard ?l}~39
Retails at ~aysnenis to e Relayetl #tir 30 Rae
Freguentiv zskec7 £2uest9csns {F~CsI
Letter l•rom the Contralaer to Ler~'slatoss
to tie TotaO Disbu in
.February
$10.11 billion
Gantraller's 5tateraent r erardlraq Pa:,anent Relays to l+Iianat~e Cash Crisis
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Privacy Pel"scy
Cal"rfomia State Controller's Office, Controller John Chiang
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-~> Tax Refun~s
-~~ Local Assistance
-?? Social Services
->> Other Local Assistance
~> State Operations
lax Refan<cs
Estimated Payments to be Delayed
Category _ Payments to Be
Delayed
Personal Income Tax Refunds $1.91 tHllion
Bank and Corporation Tax Refunds $81 million
Backt4_Dela,~L er ~ ir'e^u.
tacac Assistance
Estimated Payments to be Delayed
Category Payments to Be
Delayed
_..... Education...... _.. $13 million
Student Aid Commission (Ca1GRANTS)
Back to Delayed Pa ~ments n.~'~~_n~:.
..Social Services
Estimated Payments to be Decayed
Category Payments to Be
flayed
Department of Soda1 Services
Payments to Federal Socal Security Administration $188 million
for State's Share of SSIlSSP Assistance
.....Department of Soda) Services
CalWorks
{Temporary Assistance to Needy Families for Basic $114 million
Needs, Indudes Speafic Welfare-to-Work
Requirements, Provides Supportive Services such
as Childcare}
http:/Iwww.sco.ca.gov/eo/fiscalissuesipayments0l-2009cshtml 1/29/2009
Department of Social Services
County Administration
(Payment for Operating Costs and Salaries of $122 millior
County Staff Who Administer Public Assistance
Programs}
Back to Delayed Paym~rts_1y12ru
Othee Lopl Assistance
Estmatal Payments to be Delayed
~~®ry Payments to Be
Delayed
DHSC Medi-Cal County Administrative Costs $22 million
Department of Developmental Services
(Funding for Regions! Centers that Provide Services $280 million
to Individuals with Developmental Disabilities}
Department of Mental Health
(Assists Counties in Providing Mental Heath $77 million
Treatment and Rehabilitative Services}
Department of Alcohol and Drug Abuse
(Assists Counties in Providing Prevention, $19 million
Treatment and Recovery Services} I
Miscellaneous Local Assistance $142 million
Sack to DElayea ~aym~n+s 54zru
State Opeeations
Estimated Payments to be Delayed
Category Payments to Be
Delayed
Unallocated State Operations
(For Agency Utilities, Lease, Office Equipment $515 million
Maintenance)
Back to Delaye_d__Palrn_ert~ ~J~enu
Remrr_tc Ma_m Feor~ia_1 2Ct?9 f?a~merts__P_age
Fiy~c~ P~~lict
California State Controller's Office, Corrtroller John Chiang
httpa/www.sco.ca.gov/eo/fiscalissues/payments0l-2009cshtml 1/29/2009
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~ERU;~~R't 2i~09 ES (Ift7c1°fED P~i~'~r3~~s''?°a ~<? (-3E s~t~,~L3E
Sc':?gcis and Hyne ~-'u aii_q_n_
-_' Debt Seniice
_%~~ Pa+lroll
-~ Pensions
~' It~tedi-Cal
~~%%C'~ther Heaith Care Sen~ices
}~ External BorroUnnq
Cther
Schools and Higher Education
Estimated Payments to Be Made
Category Payments to tie Made
School Apportionment - $1.66 billion
Revenue Limit
K-12 Categoricais $395 million
Schools (Other Education)
CalWorks Stage 2 and 3 $897 million
Child Development and Special Purpose
University of Calffornia $199 million
State Universities and Colleges $203 million
Ca6fomia Community Colleges $386 million
Bac4 to Payments N?ena
!)ebt Service
Estimated Payments to Se Made
Category .Payments to tae Made
General Obligafion Bonds $780 million
__.
Lease Revenue Bonds $46 million
No Payment in Fetxuary
Repayment of Internal Borrowing (Next Payment
Scheduled for March)
Back to Pavmerts P11~ru
httpa/wwwsco.ca.gov/eo/fiscalissues/payments0l-2009b.shtml 1/29/2009
Payroll
Estimated Payments to Be Made
Category Payments to Be Made
Payroll Transfer $815 million
Department of Social Services (DSS) $290 million
In-Home Support Services
BacktgPayments Menu
Pension Systems
Estimated Payments to Be Made
Category Payments to Be Made
Payment to Public Employees' Retirement System Paid Quarterly (Neat
Paymen4 Scheduled for
(CaIPERS) April)
Payment to State Teachers' Retirement System Paid Quarterly (Neat
Payment Scheduled for j
{CaISTRS) April}
Payment to Ca1STRS Supplemental Benefd Paid Quarterly (Next
Maintenance Account Payment Scheduled for
(Budget Act item 1920.011-0001) ' April)
Back to Payments N'.enu
.......Nadi-Cal.....
Estimated Payments to Be Made
Cat~ory .Payments to Be Made
Departrnent of Health Care Services $ggg million
Institutional and Non-Institutional
Backt_o__Pay_meMs Menu
Ottrer Health Care Services _
Estimated Payments to Be Made
Category Payments to Be Made
Managed Risk Medcal Insurance Board's Healthy $30 million
Families Program
Back to Pavmenis iVlenu
External Borrowing
Estimated Payments to Be Made
Category Payments to Be Made
No Payment in February
Revenue Antiapation Note Series A-1 (Next Payment
Scheduled for May)
No Payment in February
Revenue Anticipation Nate Series A-2 (Next Payment
Scheduled for June}
Back to Payments. Uenu
http://www.sco.ca.gov/eolfiscaiissues/payments0l-2009bshtml 1!29/2009
Other
Estimated Payments to Be Made
Category Payments to Be Made
Capital Outlay (Proposition 42 Transfer) $8 million
Non-Governmental Costs $1 million
(Counties for Social Welfare)
Department of Child Support Services
(Local Child Support agency Administration and $19 million
Operating F~cpenses
Back to Payments hAenu
getum to N1a n ~ebri~ary.~ Os_~~ym ris ~~c
PrI}/2_C~_~Olipt
California State Controllers Office, Controller John Chiang
http://wwwsco.ca.gov/eo/fiscalissues/payments0l-2009bshtml 1/29/2009
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°.eturn fo 1+ian ra5i ary 2~U_~ F~,m~rts -ate
FREQUENTLY ASFCED QUESTIONS
1. How bad is the State's cash flow?
It is critical that the Govemor and the Legislature enact a sound budget
solution that provides much-needed cash by Febmary 1. If not, the State
will be $346 million in the red at the end of February, and $52 billion in the
red in April. Wfthout corrective aeon by lawmakers, the State's shortfall
may exceed $10 billion by July.
2. Why is the State delaying payments?
In order to ensure that there is adequate cash for education, debt service
and other General Fund payments that are deemed by the State
Constipation, federal law or court rulings as having first daim to available General Fund cash, the Cordrolier must, starting in
February, begin delaying payments to others funded by the State's depleted General Fund.
3. What payments will be delayed?
Thousands of payments to businesses for services and products they provide to the State; to assistance for morethan a million
aged, blind and disabled Cal'rfornians that goes to pay their rent, utilities, or put food on their tables; to State agendes that use the
payments to fund cdticai public services, ranging from public safiety to health and welfare; and to pay tax refunds for individuals and
businesses that overpaid their 2008 taxes. A more complete I_Ist of those payments that will be delayed is available on this Web site.
4. How tong will the payments be delayed?
For the month of February, the delays will be for 30 days. Departments are directed to take the fu1130 days allowed by the Prompt
Payment Act to process General Fund claims submitted by vendors, thus minimizing the potential for interests costs related to the
delayed payments. The SCO will also hdd claims an additiona130 days and, assuming the daim is correct and valid, will
subsequently begin processing these claims.
5. Why don't you just issue registered warrants, or IOUs?
There are no assurances at this time that all Tinandai institutions will accept registered warrants (IOUs) and it is unlikely that any
registered warrants issued will be redeemed by the State for several months. Additionally, registered warrants likely will complicate
the cash flow borrowing which the State will be required to undertake in July. As the Govemor and Legislature work to fix our budget,
they are expected to need short-term or cash-flow borrowing from the credit markets to make any new budget work
6. Doesn't delaying payments also hurt the State's ability to seek loans?
Delaying payments is a more common accounting practice used by many businesses when cash is less than what is needed to
immediately meet their obligations. Wait Street recognizes that tactic and can relate the State's use of itto the private sector. By
delaying payments the State can immediately issue payments as soon as cesh becomes available: IOUs are more complex, and the
redemption process could delay the time it takes to transmitthose funds to the redpient
7. Will 1 get interest?
If Personal Income Tax refunds are not paid on or before May 30, 2009, then interest accrues at 5°k from April 15, 200Q until 30
days prior to the payment issue date. If Bank and Corporation Tax refunds are not issued on or before June 15, interest accrues from
March 15 at 2°~, unti130 days prior to the issuahce date. ti paid Beyond July 9, it is possible different interest factors may apply after
June 30, as the Franchise tax Board sets the interest rates semi-annually.
8. What payments will continue to be made?
http:/1www.sco.ca.gov/eolfiscalissueslpayments0l-2009dshunl .1/2912009
The payments that will be made as regulary scheduled are those deemed by the State Constitution, federal law or court order as
having first daim on General Fund cash, such as:
Edugtion (indudes K-12, UC, state and community colleges)
' Debt service (General Obligation bonds, lease revenue bonds, internal borrowing)
%% Payroll
Department of Sodal Services !n-home Support Service with federal match.
'> Managed Risk Medical Insurance Board's HeaMhy Families Program
A list of payments that will be made on the regular schedule is available on this Web sRe.
9. Why are state lawmakers and Constitutional Officers stilt getting their eegu~r pay when other payments aee delayed?
The only time the Controller can withhold salaries for elected State offidals, their appointed staff and others who are not covered by
the federal Fair Labor Standards Act is during times when there is no budget in place. Nhth a budget in place, the Controller has no
discretion to withhold salaries when there is an appropriation from the Legislature.
10. WiII my SSItSSP payment be delayed?
The SSI is a federal program administered by the Federal Sodal Services Administration (SSA). SSP is a supplemental state-funded
program that also is administered through the SSA The SSA has "floated' the States portion in the past when the State could noY
provide funding due to a lack of a budget. Because the SSA requires a 30.day notification before ceasing payment, state health
officials believe the SSA will contnue to dsburse both federal and state payments to California's elderly, blind and disabled
redpienis at leastthrough March and possibly April.
19.1 am an IHSS worker. Will my pay be decayed?
In-Home Supportive Services workers will continue to receive their regular paychecks as required by the federal Fair Labor
Standards Act (ELBA}.
72. Whale Medi-Cal payments will continue to Pre paid®n a regular schedule?
Both institutional and non-institutional Medi-Cal paymenis will continue to be paid regularly. Payments will continue to be made for
institutonaE and non-institutional providers, inducting doctors, nurses, dentists, aduh day health care, home health care agencies,
regional health care agendas, pharmacies, and other Medi-Cal home- and community-based services.
--? f3ack to Top or` Pam Content
Return to U2 :? r~ti ,~ ^noc °ay~En#s =agz
Priyac~_Foicy
Cal'rfomia State Controllefs Office, Controller John Chiang
http://www.sco.ca.govleo/fiscalissues/payments0l-2009d.shtml 1129/2009