An Update on the State's Fiscal Crisis

After legislators and the governor failed to reach an agreement on a revised budget, the state began issuing IOUs approximately one week ago on Thursday, July 2, 2009. This move by state Controller John Chiang is an effort to conserve cash to be able to make payments mandated by the state constitution, federal law and court orders. Democratic leaders and Governor Schwarzenegger remain at odds over how much spending California should cut in order to achieve the necessary savings to meet the budget shortfall of $26.3 billion.

Sunny Hills continues to monitor the state's fiscal crisis and remains alert to any proposed actions that could jeopardize our programs. Certainly, the cash crunch at the county level could result in a slowdown in payments for services rendered, thereby impacting cash flow. (Sunny Hills contracts with counties, not the state, to deliver services.) To weather this fiscal turbulence, Sunny Hills is able to draw down on our line of credit to even out cash flows and sustain our level of services in the community.

Proposed cuts to education could impact Sunny Hills’ nonpublic school, the Marin Academic Center, most likely resulting in weakening enrollment. Mental health funding appears to be secure for the time being, though the failure of the state to make its contribution could jeopardize federal matching funds.

Perhaps most concerning is the Department of Finance’s (DOF) response to the Democrats proposal to “borrow” $2 billion from cities and counties (allowable by Proposition 1A). In response, the DOF has countered with two alternatives, one of which would be to eliminate the state’s share of costs for the Child Welfare Services and Foster Care programs—a move that is likely more rhetoric than reality, but nonetheless would be a significant concern to Sunny Hills.

We presume that state funding for kinship programs (like Sunny Hills’ Sonoma Family Kinship Center) is safe, despite the Governor’s earlier proposal to eliminate this line item entirely. The state’s allocation for such programs is far less than other social services programs and, while it was originally part of the Governor’s “laundry list” of cuts, we have reason to believe those monies will be preserved.

In closing, we continue to be cautious; I will continue to keep you apprised of any new developments at the state-level that could potentially impact the agency.