WHEREAS, the economies of the nation and California have not recovered from the recession that began in 2001; and

WHEREAS, California continues to be severely affected by a sharply reduced demand for the goods and services of its high technology sector and overseas demand for California-made goods and services; and

WHEREAS, the continuing decline in the stock market will lead to reduced state income tax receipts from capital gains and stock options and in substantially lower personal income tax, sales tax, and corporation tax revenues; and

WHEREAS, as a result of the economic recession, demand for state services and financial assistance for education, health care, and other services is growing significantly, and

WHEREAS, absent immediate corrective action, the State will be unable to meet its obligations under the current budget as enacted by the Legislature in August 2002;

NOW, THEREFORE, I, GRAY DAVIS, Governor of the State of California, by virtue of the power and authority vested in me by the Constitution and statutes of the State of California, do hereby issue this order to become effective immediately:

  1. State agencies and departments shall identify all General Fund savings by reducing expenditures in the current fiscal year wherever possible. State agencies and departments shall take the following actions immediately, where permissible:
    • Reduce, postpone, or cancel new contracts or amendments to existing non-essential contracts to lease or purchase equipment that increase State costs.
    • Reduce, postpone, or cancel new contracts or amendments to existing contracts for non-essential consultant or personal services that increase State costs.
    • Where permissible, cancel all other contracts for non-essential goods and services.
    • Cancel out-of-state travel and in-state travel, except travel for essential functions such as coordinated federal/state/local public safety efforts and revenue-generating and other critical activities.

In taking the above actions, agencies shall give preference to retaining contracts with California companies and businesses where appropriate.

  1. State agencies shall disencumber non-essential contracts or purchase agreements funded by appropriations from prior years, where goods and services have not been received, and to cancel the related contracts, where permissible.
  2. Agency Secretaries and other Cabinet level officials are responsible for ensuring compliance with the provisions of this Executive Order. For those agencies that do not have Cabinet level representation, the Department of Finance will be responsible for ensuring compliance.
  3. The provisions of this Executive Order shall not apply to the Legislative and Judicial branches of government. However, I invite these branches to participate.
  4. For the purposes of this order, the University of California and the California State University System are requested to consult with the Department of Finance for the purpose of implementing the provisions of this Executive Order. Participation, however, should be structured so as to minimize interference with their educational mission.
  5. The Department of Finance is hereby directed to coordinate the implementation of this Executive Order and may issue specific instructions and grant exemptions with regard to its provisions, as appropriate.
  6. This Executive Order will remain in effect until June 30, 2004.

I FURTHER DIRECT that as soon as hereafter possible, this order be filed in the Office of the Secretary of State and that widespread publicity and notice be given to this order.