EXECUTIVE ORDER S-07-09


            WHEREAS in February 2009, after months of disagreement and debate, Republicans and Democrats came together, with a two-thirds vote, to close the unprecedented $41.6 billion state budget deficit; and

            WHEREAS the budget I signed in February for Fiscal Year 2009-10 enacted revenue measures and expenditure reductions to address the then-projected cumulative budget shortfall, and reflected an expectation that the September 30, 2009 General Fund transfer to the Budget Stabilization Account required by Section 20(b)(3) of Article XVI of the Constitution of the State of California would be suspended; and

            WHEREAS the global recession has since deepened and California's economy continues to struggle, causing the budget to fall out of balance again by an estimated $21.3 billion; and

            WHEREAS since February, slower rates of economic growth have lowered the revenue projections for Fiscal Years 2008-09 and 2009-10; and

            WHEREAS as reported in the May Revision to the Governor's Budget for Fiscal Year 2009-10, the Department of Finance now estimates the budget shortfall for Fiscal Years 2008-09 and 2009-10 will be approximately $21 billion unless further solutions are authorized by the Legislature; and

            WHEREAS since the state will not proceed with $5.5 billion in reimbursement warrants (RAWs) cash-flow borrowing as a budget solution, more severe spending cuts are required in the state's programs and services; and

            WHEREAS on May 22, 2009, the Legislative Analyst predicted that the Governor's May Revision  revenue projections may prove overly optimistic, and instead, projected that the drop in revenues will be at least $3 billion worse than projected, putting the size of the state's shortfall at more than $24 billion for Fiscal Year 2009-10; and

            WHEREAS the projected $24 billion budget deficit will require deeper cuts to state programs and services, additional borrowing from local governments, and the release of thousands of prison inmates who are undocumented immigrants; and

            WHEREAS Section 20(b)(3) of Article XVI of the Constitution of the State of California requires the Controller, no later than September 30, 2009, to transfer a sum equal to 3 percent of the estimated amount of General Fund revenues for the current fiscal year to the Budget Stabilization Account; and

            WHEREAS the transfer required by Section 20(b)(3) of Article XVI of the Constitution of the State of California to be made on September 30, 2009, is estimated to be approximately $2.8 billion; and 

            WHEREAS the purposes of the transfer are to establish a reserve available to the Legislature for transfer to the General Fund upon a majority vote and a sinking fund subaccount for the purpose of retiring outstanding Economic Recovery Bonds; and

            WHEREAS Section 20(e) of Article XVI of the Constitution of the State of California provides that any transfer from the General Fund to the Budget Stabilization Account may be suspended by an executive order issued no later than June 1 of 2009; and

            WHEREAS the suspension of the transfer is necessary to alleviate the need for additional program cuts given the unprecedented budget deficit.

            NOW, THEREFORE, I, ARNOLD SCHWARZENEGGER, Governor of the State of California, in accordance with Section 20(e) of Article XVI of the Constitution of the State of California, HEREBY ORDER the suspension of the September 30, 2009, transfer from the General Fund to the Budget Stabilization Account for the purpose of alleviating the need for additional program cuts to address the unprecedented budget deficit.