BILL ANALYSIS AJR 23 Page 1 Date of Hearing: January 11, 2010 ASSEMBLY COMMITTEE ON BANKING AND FINANCE Pedro Nava, Chair AJR 23 (De Leon) - As Amended: September 3, 2009 SUBJECT : Economic crisis. SUMMARY : Urges the Congress of the United States and the federal administration to work with the Governor and Legislature of California to provide federal loan guarantees, flexibility with respect to certain programs, and certain funding levels for vital programs. EXISTING LAW establishes the Emergency Economic Stabilization Act of 2008 (HR 1424) on October 3rd, 2008 (EESA), authorizing the Treasury Department to establish the Troubled Assets Relief Program (TARP). FISCAL EFFECT : None COMMENTS : According to the author this resolution is necessary because, " California has been grappling with the worst fiscal crisis since the Great Depression, and making billions of dollars in budget cuts to education and health and human services, the federal government has been spending hundreds of billions of dollars to rescue the banking industry, auto manufactures, and other private sector companies." The author goes on to state, "California currently receives less than 80 cents for every dollar we send to support the federal government and we can no longer afford to be such a "donor state" as our state revenues have dropped nearly 30% over the last 20 years and the state's economy struggles to recover from the global financial market meltdown." Specifically, this resolution urges Congress and the federal administration to work with the Governor and Legislature of California to provide federal loan guarantees to help make necessary short-term borrowing more affordable to California taxpayers, provide the state with more flexibility to accelerate the drawdown of federal benefits and matching grants, provide more flexibility for the state in meeting its maintenance of effort requirements, and provide funding levels for vital programs that fully recognize the unique and devastating circumstances facing this state during the economic crisis. AJR 23 Page 2 This resolution is necessary to recognize California's current economic crisis, leading the nation with a high unemployment rate, high foreclosure rates and falling property values. While the resolution specifically is not asking for a California bailout, the resolution uses TARP as an example of why California should receive more funding since the federal government was quick to bailout the private industry. This country continues to face the worst financial crisis since the great depression. California is facing a $21 billon shortfall through June, 2011. Additional help from the federal government could help stave off more cuts and eliminating important health and welfare programs. A point of frustration remains with the fact that the state sends more tax dollars to Washington D.C. then it receives in return. California is considered a donor state because California taxpayers receive less federal funding per dollar of federal taxes paid than the average state. In 2005, California taxpayers received only 78 cents in federal expenditures for every dollar in federal taxes. In 1995, by contrast, California taxpayers were receiving 94 cents in federal expenditures for each tax dollar. On top of a massive budget deficit, according to the United State Department of Labor, California, as of November, 2009, has a 12.3% unemployment rate. California has one of the highest unemployment rates in the nation. Foreclosure filings continue and property values continue to fall. The latest statistics show as of November 2009, one in 417 households in the country had received a foreclosure filing. California still ranks number three for having the most foreclosures with 1 in every 180 households in foreclosure. Of the $700 billion established under TARP, California banks received $27,639,910,000. The federal government distributed this money with the hopes of increased lending activity which would then provide more liquidity. Instead of increased lending, the media has continuously portrayed banks distributing excessive bonuses and making lavish expenditures while more Californians continue to lose their home and lose their jobs. As one of the largest economies in the world, improving California's fiscal crisis would not only help the people in California but would help the nation come out of this economic recession quicker. Governor Arnold Schwarzenegger recently stated in his State of the State address that California is not AJR 23 Page 3 asking for a bailout but federal fairness. This resolution seems to get to the heart of what California needs from the federal government which is more funding and flexibility. AMENDMENTS: The committee is proposing amendments to this resolution. The amendments do not alter the intent of the resolution but streamline and clarify the author's intent. A mock-up of the amendments are attached to the analysis. REGISTERED SUPPORT / OPPOSITION : Support None on file. Opposition None on file. Analysis Prepared by : Kathleen O'Malley / B. & F. / (916) 319-3081