EXECUTIVE ORDER S-05-08


WHEREAS in January, I declared the existence of a fiscal emergency in California due, in part, to a projected $14.5 billion cumulative budget shortfall for Fiscal Years 2007-08 and 2008-09; and

WHEREAS at the same time I caused the Legislature to gather in a special session to consider my proposals to address that fiscal emergency; and

WHEREAS among those proposals was one to suspend the General Fund transfer required by Section 20(b)(3) of Article XVI of the Constitution of the State of California to be made on September 30, 2008, which was anticipated to result in a reduction in General Fund expenditures in the amount of approximately $1.509 billion; and

WHEREAS in that special session, the Legislature enacted revenue measures and expenditure reductions to address the then-projected cumulative budget shortfall, and reflected in their solutions an expectation that the proposed suspension would take place; and

WHEREAS since that special session slower rates of economic growth have lowered the revenue projections for Fiscal Year 2008-09; and

WHEREAS as reported in the May Revision to the Governor's Budget for Fiscal Year 2008-09, the Department of Finance now estimates that, even with the solutions adopted in the special session, the remaining budget shortfall for Fiscal Years 2007-08 and 2008-09 will be $17.234 billion unless further solutions are authorized by the Legislature; 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, 2008, 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 to deposit 50 percent of that transfer into a sinking fund subaccount for the purpose of retiring outstanding Economic Recovery Bonds; 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, 2008, is estimated to be $3.018 billion, $1.509 billion of which would be transferred for the purpose of retiring outstanding Economic Recovery Bonds and no longer be available for the operations of the State government; and

WHEREAS Section 20(e) of Article XVI of the Constitution of the State of California provides that any transfer required by Section 20(b)(3) may be suspended by an executive order issued no later than June 1 of the fiscal year preceding the payment; 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 the suspension of the transfer is necessary to adequately fund the Special Fund for Economic Uncertainties, a reserve fund within the General Fund, and will not reduce the regularly scheduled payments of the Economic Recovery Bonds.

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, 2008, transfer from the General Fund to the Budget Stabilization Account for the purpose of adequately funding the Special Fund for Economic Uncertainties.