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SCCA Governance
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February 10 Membership Meeting |
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State Controller John Chiang says "Last half of year will be very bad."
"For those of you dependent on state funding,
the last half of the year will be very, very
bad,"
said California State Controller John Chiang
last night at the February membership meeting of
the Southern California Contractors Association
(SCCA).
More than 107 SCCA members and
guests, many of whom do infrastructure work for
Caltrans, as well as other state and local
agencies, heard Chiang paint a bleak
picture of the state's economic future. "We may be forced to issue IOU's for state
payments again this summer," he said.
Chiang
traced the origins of the current financial
crisis and the futile hodgepodge of financial
"solutions" the legislature and two
governors have used to try to patch budgets over
the last two decades. He explained there
is little wiggle room for lawmakers as
education, healthcare, social services and
prisons currently consume 93 percent of the
state's general fund. He also told the
contractors not to expect much in the way of
bond funding for state work, even though $53
billion in voter-approved bonds are still unused
.
"California, like the rest of America,
depends on credit to operate," Chiang said,
adding that the state borrows huge amounts of
cash at the beginning of each fiscal year, to be
paid back in April as state income taxes fill
the treasury. Downgrades to the state's credit
rating block borrowing as a solution to the
current crisis. "More than 80 percent of the
mutual funds in the country can't buy California
bonds because of the debt rating," he said.
The
consequences of this are far-reaching,
Chiang said, explaining that 75 percent of state
funding eventually ends up in the hands of local
government for basic public services and
infrastructure projects.
He said
that since the state cannot declare bankruptcy,
the answer to the financial dilemma is either a
combination of deep cuts and tax increases or
"default." The default option will result
in the state being tied up in court for years,
Chiang said, taking the tough decisions out of
the hands of the legislature, the governor and
the voters.
The Southern California
Contractors Association serves the needs
of union signatory construction firms and the
companies that supply them in the 12 southern
counties of California. SCCA represents its
members in labor, regulatory and legislative
issues as well as being a key source of
information for thousands of construction
companies in our trade area through its
magazine, newsletters and meetings.
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