Watching the news out of Sacramento is like watching a train barreling down the tracks at you. Here's the latest scary news out of the controller's office:

Dear Governor and Members:

... Based on the May Revision revenue and expenditure estimates provided to us late last week by the Department of Finance and taking into account the actual cash receipts and expenditures my office tracks, it is clear the health of the State's treasury has significantly
deteriorated since the adoption of the 2009-10 Budget Act a mere three months ago.  Our latest projections show that beginning on July 29, California will not have the cash needed to meet all of its payment obligations.  On that date, the State will be in the red by $317.1 million; two days later, on July 31, our cash deficit increases to a negative $1.02 billion. 

As the attached chart demonstrates, the State's cash problems will only grow in severity in the subsequent months without Legislative action.  The State will reach its lowest cash balance in April 2010, when we will fall short of meeting our payment obligations by nearly $22 billion.  That is more than four times the $5.1 billion cash deficit we faced this past spring.  But the painful options we used in February to ensure we had sufficient cash to make education and debt service payments required by the Constitution, federal law and court rulings - including delays in tax refunds and vendor payments and shutting down 5,300 public works projects - will not come close to providing an adequate solution in the coming months.

 ... Because of these reasons, I strongly urge you to take action no later than June 15th.

Failure to immediately address the budget deficit and cash shortage will severely damage our already fragile fiscal position.  A protracted stalemate would do immeasurable harm to our economy by potentially extending a recession that many economists predict will bottom out by early 2010.  Inaction would create an even greater fiscal hardship for Californians, especially those businesses that provide goods to the State and those vulnerable individuals who depend on public health and social services.  The ability of the State to discharge its most fundamental duties of protecting its citizens, educating its youth, and safeguarding its natural resources will be compromised.

Please recognize that only you, the Legislature and the Governor, can prevent the fiscal catastrophe that we face.  You have a narrow window to address the State's budget and cash challenges, and I respectfully urge you to take prompt action.

JOHN CHIANG
California State Controller

— Posted by government team leader Christine Bedell