Late budget could have consequences


Many of California's adult health day care centers are about to feel the effects of Capitol gridlock. With no state budget in place, physical therapy, medical check-ups and social activities will go unfunded for thousands of seniors and the disabled.

"The state can say, 'Geez, I can't pay you.' But I can't say that to my employees. I can't say that to my vendors. I can't keep putting them off because they're not going to supply us. If they don't supply us, we have to shut down," says Robertson's Adult Center manager Jim MacDonald.

"If this place closes, I don't know what I would do. I've been coming here for 15 years," says program participant Randy Jost.

The budget stalement is far from resolved with strong ideological divisions over whether to cut programs or raise taxes to whittle down the deficit.

"Those are complicated issues that need to be thoroughly looked at, and I think they're all doing whatever they can to get it done and move the ball forward," says Gov. Arnold Schwarzenegger.

Unlike other years, the impasse this year has far greater consequences: the state will run out of cash in just a few weeks.

And Wall Street is in no mood to give a financially shaky California a loan, so the state would have to take out a high-risk, essentially a sub-prime, loan with very high interest rates.

"In August, we're going to have to start the process of external borrowing, which is going to cost the taxpayers of California more money than we should have to pay," says CA State Controller John Chiang.

The ever-optimistic and wealthy Governor isn't worried about the state's cash crunch. He even joked about it.

It would be far cheaper to have a budget in place to get favorable rates. California took out one of those expensive loans back in 2003 and taxpayers ended up paying a quarter of a billion dollars in interest rates and fees – money that could have been used for roads, schools and social programs.

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