California Steps Closer To The Brink

How does the old joke go? "Let's close 'er down and see if anybody notices."

Governor Schwarzenegger Issues Executive Order to Reduce State Spending

Taking immediate action to reduce spending as the state faces a $24.3 billion deficit, Governor Arnold Schwarzenegger today signed Executive Order S-09-09 to eliminate funding for contracts entered into by state agencies and departments after March 1, 2009 for all goods and services excluding those necessary for public safety and to prohibit entering into any new contracts. Additionally, the order directs all state departments to develop and submit to the Department of Finance plans to reduce their future spending on contracts and purchases by at least 15 percent no later than 30 days after the adoption of the revised 2009-10 budget.

“I am committed to ensuring California lives within its means and runs as efficiently as possible,” said Governor Schwarzenegger. “With today’s action, every state agency and department will scrutinize how every penny is spent on contracts to make sure the state is getting the best deal for every taxpayer dollar.”

In addition to today’s executive order and other measures, the Governor has taken the following actions to cut back on state expenses:
· In conjunction with the furlough order, state employees are taking a 9.3 percent reduction in work hours and pay.
· Issued an executive order in February 2008 to cut back administrative costs by 1.5 percent before June 30, 2008, saving $200 million.
· Issued an executive order in July 2008 targeting administrative savings of $190 million by June 30, 2009, with current savings at $180 million as of April 2009.

Text of executive order:

EXECUTIVE ORDER S-09-09

WHEREAS due to developments in the worldwide and national financial markets, and continuing weak performance in the California economy, the General Fund deficit for the 2009-2010 fiscal year is estimated to grow to $24.3 billion; and

WHEREAS the State Controller projects that as of July 29, 2009, California will not have the cash needed to meet all of its payment obligations; and

WHEREAS the projected budget deficit will require critical cuts to State programs and services, and additional borrowing from local governments; and

WHEREAS immediate action is needed to address the budget and cash crisis facing the State of California; and

WHEREAS immediate action to reduce current spending must be taken to ensure, to the maximum extent possible, that the essential services of the State are not jeopardized and the public health and safety is preserved; and

WHEREAS State agencies and departments under my direct executive authority must take all available steps to reduce their expenses to achieve budget and cash savings.

NOW, THEREFORE, I, ARNOLD SCHWARZENEGGER, Governor of the State of California, in accordance with the authority vested in me by the Constitution and the statutes of the State of California, do hereby issue the following orders to become effective immediately:

IT IS ORDERED that except for projects funded by the American Recovery and Reinvestment Act, or projects funded by bonds, grants or projects specifically mandated by court orders, or public-private partnerships that require no direct state expenditures, any funds encumbered on or after March 1, 2009, for contracts entered into for which goods or services have not been provided or for contracts proposed to be entered into during the 2008-2009 fiscal year by State agencies and departments, regardless of funding source, are hereby disencumbered and the funds will revert to their original funding source if no legal liability will be incurred by the State. If a legal liability will be incurred by the State, approval to continue encumbering the funds must be obtained from the Agency Secretary and the Director of the Department of Finance.

IT IS FURTHER ORDERED that by 30 days after the passage of a revised budget for fiscal year 2009-2010, all State departments, regardless of funding source, shall submit a plan to their Agency Secretary that provides for a reduction of the amount of the department’s appropriation to be encumbered by new contracts, extended contracts or purchases from statewide master contracts in the 2009-2010 fiscal year by at least 15 percent, whether the reduction results from cancellation, suspension, renegotiation or otherwise.

IT IS FURTHER ORDERED that effective immediately and until a State department’s plan is approved by the Agency Secretary, a State department is prohibited from entering into any new contracts, amending existing contracts, issuing purchase orders for goods or services, or making purchases from statewide master agreements or leveraged procurement agreements for goods or services.

IT IS FURTHER ORDERED that the Director of the Department of Finance shall establish an exemption process regarding all contract cost reduction measures contained in this Order that Agency Secretaries and Cabinet-level Directors shall utilize to determine if an exemption is justified based on an emergent situation to preserve and protect human life and safety; avoiding significant revenue loss; achieving significant net cost savings; maintaining multi-year IT system and service contracts approved by the Office of the Chief Information Officer; or providing critical services and functions.

IT IS FURTHER ORDERED that the services and functions of state government directly related to the preservation and protection of human life and safety, including but not limited to emergency and disaster response activities and the provision of 24-hour medical care, shall be deemed critical and exempt from this Order.

IT IS FURTHER ORDERED that all Agency Secretaries and Department Directors shall take immediate action to implement this Order to reduce state expenditures.

IT IS REQUESTED that other entities of State government not under my direct executive authority, including the California Public Utilities Commission, the University of California, the California State University, California Community Colleges, the legislative branch (including the Legislative Counsel Bureau), and judicial branch, implement similar or other mitigation measures to achieve budget and cash savings and additional transparency in state government.

This Order is not intended to create, and does not create, any rights or benefits, whether substantive or procedural, or enforceable at law or in equity, against the State of California or its agencies, departments, entities, officers, employees, or any other person.

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


IN WITNESS WHEREOF I have hereunto set my hand and caused the Great Seal of the State of California to be affixed this 8th day of June 2009.

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ARNOLD SCHWARZENEGGER
Governor of California


ATTEST:

________________________________
DEBRA BOWEN
Secretary of State