Dave Cox Senate Report: August 2007

Budget Update

The Senate adopted a State Budget on August 21st, 52 days past the beginning of the fiscal year on July 1st. I voted against the budget because I felt that it did not do enough to reduce expenditures to bring them in line with expected revenues, and failed to address the long-term reductions that are needed to avoid serious deficits in future years.

Senate Republicans refused to support the budget because we felt that it did not adequately address these two problems: current year expenditures and out-year deficits. In addition, there were a small number of side issues, contained in legislative bills called “trailer bills” that are necessary to implement the budget, that needed to be fixed before the main budget bill was passed.

A major issue that you may have heard about in the media is the lawsuit that Attorney General Jerry Brown filed against San Bernardino County that is trying to adopt their local general plan to guide future development within their community. This lawsuit was based on Assembly Bill 32, the Global Warming Solutions Act of 2006, which was adopted last year and has not yet been fully implemented. In fact, the regulations to implement this bill have not even been drafted yet by the California Air Resources Board. The rules of the game do not yet exist.

In spite of this, the Attorney General has stated that he will file other lawsuits against other cities and counties that he feels do not adequately address global warming in their general plans. It is our view that a situation where the Attorney General, using taxpayer’s money, would sue a local government on legislation not yet implemented, forcing them to use their taxpayer’s money to defend themselves, is not acceptable. This amounts to California taxpayers suing themselves.

The Legislature adopted a bill (SB 97) that prevents the Attorney General from filing such lawsuits against projects funded by the state bond measures passed last year that were intended to finance transportation and flood control infrastructure. This was a compromise solution to the problem that I believe was an important issue that needed to be settled. While I voted to support SB 97, it did not go far enough to fix the problem.

Since the Governor unveiled his budget in January, Senate Republicans have been calling for a balanced and responsible budget.  One that does not continue to pay for services today with borrowed money that our children and grandchildren will pay for far into the future.  We have also called for a prudent reserve and a budget that makes progress on reducing the structural deficit.  During the extended budget delay, Senate Republicans proposed a budget with more than $840 million in spending reductions that would establish a healthy reserve to address questionable revenue assumptions contained in the budget that was under consideration.

In the end, the Governor promised to line-item veto nearly $700 million in expenditures from the budget the Legislature passed. With this assurance, Republican Leader Dick Ackerman provided the final vote that was needed to pass the budget.

This was an especially difficult budget delay for many people. I am glad that it is over for this year. The problem that I have talked about for the last several years still remains: while revenue to the state treasury has continued to increase, state expenditures have outpaced that growth every year. We need to address this structural deficit problem or it will only get worse in the future.

Back to the top

Do Californians Care?

During the state budget delay, our offices received a heightened number of calls, faxes, and e-mails regarding budget issues. Some wanted the issue resolved immediately, and others encouraged me to continue to hold out for a balanced budget. Every important issue always has two sides.

But how many people are well informed about these issues? Do most people follow political stories and public officials on a daily basis? The answer to this question appears to be “no.” According to the Public Policy Institute of California in a survey conducted in June, only eight percent of Californians could identify the Speaker of the California State Assembly as Fabian Nunez of Los Angeles, and only three percent could identify the President Pro Tem of the Senate as Don Perata of Oakland. The Governor of California does not have this problem, as 93 percent of all adults could identify him as Arnold Schwarzenegger.

To view the PPIC poll you can go here.

Back to the top

The Subprime Mortgage Crisis

As a member of the Senate Committee on Banking, Finance and Insurance, I attended an informational hearing on the subprime mortgage situation this week. This was the third in a series of hearings to examine the situation in the California mortgage markets.

The most severe problem is occurring in what is called the “subprime” market, meaning that these were mortgage loans originated using adjustable interest rates that were placed with little or no money down. These loans are currently failing at a rate of 15 times higher than prime mortgage loans, which are mostly fixed rate mortgages. Foreclosures of these subprime mortgages are occurring more frequently in the Central Valley and Inland Empire area in southern California. These are areas that have experienced high rates of growth in housing construction over the last several years.

Most experts believe that the unfortunate situation of foreclosures and losses in the valuation of residential property will get worse before it gets better. The loans that originated in late 2005 and 2006, when the number of subprime loans was at its peak, are due to have their adjustable interest rates reset in the next few months. This may increase foreclosure activity and further depress home values nationwide.

The overwhelming impression I gained from this and previous hearings is the necessity for homeowners who find themselves in difficult circumstances to immediately contact their mortgage lender and attempt to arrange for assistance. In many instances, lenders will work with homeowners to prevent the situation from deteriorating into a foreclosure.

There are several non-profit organizations that are also offering assistance. One is the Homeownership Preservation Foundation that has a 24 hour hotline at 1-888-995-HOPE. Volunteers on this “HOPE hotline” will assist borrowers with problems and connect them with their lenders and local organizations that can help. The California Business, Transportation and Housing Agency has set up a website with links to state and federal agencies that could offer assistance. That website is located at :
www.yourhome.ca.gov

For background information on the housing crisis and how it may effect the California economy, click on this link.

Back to the top

Quotes of the Week

“Some problems are so complex that you have to be highly intelligent and well informed just to be undecided about them.”
-- Laurence J. Peter

“I'm proud that I'm a politician. A politician is a man who understands government, and it takes a politician to run a government. A statesman is a politician who's been dead 10 or 15 years.”
-- Harry S. Truman

Back to the top