Update: State budget impasse already threatens $12 billion in payments

California’s 2-month-old state budget impasse has blocked, cut or jeopardized nearly $12 billion in payments to community colleges, the courts, education, health care for the poor, college aid, mental health services, and thousands of state workers, according to state Controller John Chiang, who signs the state’s checks.

Chiang said that since July 1, when the 2008-09 fiscal year began, he has made some payments but been unable to make others, reflecting the mosaic of rules that surround California’s budgeting. The state’s spending obligations, although often simplified by political leaders during the heat of budget negotiations, actually is complex. Some spending, such as payments to K-12 education, are required by voter-approved constitutional rules or because of court orders; some are not.

Payments have been threatened to community colleges, so-called categorical programs, lawmakers and elected officials, appointees and other Civil Service-exempt workers, legislative staffers, non-payroll court programs and some welfare programs. State vendors, those who provide services to the state under contract, have had payments interrupted.

The controller, who also is fighting the Schwarzenegger administration over the piece of the governor’s budget that reduces the pay of 180,000 state workers to the federal minimum wage level of $6.55 an hour, released a description of the budget payments, category-by-category, for July, August and September.

Chiang wants the pay-cut case shifted to federal jurisdiction.The administration opposes it and is expected to formally file its position this week with the courts.

“The controller believes that since the (pay cut) issue involves federal law, getting guidance from the federal courts is the most appropriate,” said Chiang spokeswoman Hallye Jordan. The Department of Personnel Administration, which represents the governor’s administration’s on collective bargaining issues, said its position would be detailed later in the court filing.

By mid-week, the central budget dispute between lawmakers and the governor—how to close a $15.2 billion shortage – remained unresolved, at least in part because the legislative Republicans are rejecting the governor’s plan to raise the sales tax to cover part of the shortage. The stalemate may go beyond the first week of September—if it does, the state will have set a new record for being without a budget. Passage of a budget through the Legislature requires a two-thirds vote, which means there must be bipartisan agreement for a spending plan to win approval.

Chiang said the state has sufficient cash to pay its bills – for the time being.

“Our main argument is that is not necessary (to stop payments). We have sufficient resources to get us through at least to the end of October, which is when the treasury will dip below the $2.5 billion cash cushion. We won’t go to zero, but we will dip below,” Jordan said.

Chiang listed the payments, category-by-category, and totaled up both the allowed and blocked disbursements. During the first two months of the new fiscal year, about $4.3 billion worth of scheduled payments have been blocked. Through the end of Sept. 26, if no budget has been approved, the level of blocked payments will rise to $11.9 billion, he said.

“As currently estimated, my office will be prohibited from making at least $7,666,672,000 in payments in major budget categories during the month of September 2008 if no budget is enacted. This is in addition to at least $3,030,767,000 in payments in major budget categories that our office has been unable to make for the month of August, and at least $1,247,846,000 in payments in major budget categories that our office has been unable to make for the month of July,” he said.

Chiang also said he would continue to write checks for payments for what he defined as “essential services.”

Those include federally-ordered services such as Supplemental Security Income/State Supplementary Payment and In-Home Support Services; debt service and other payments required by the state constitution; payroll for state employees covered by the Federal Fair Labor Standards Act; vendor payments for services provided in the last fiscal year; expenses with ongoing appropriations from the Legislature, including Medi-Cal, CalWORKs, income tax refunds and payments on claims for unclaimed property.