Votes rejected five budget-related ballot measures at the May 19th special election, bringing the state's current budget deficit to $21.3 billion. California legislators will now be forced to decide which state state will be axed in order to balance the budget. A sixth ballot initiative, which will institute a salary freeze for state elected officials during bad budget years, was overwhelmingly approved by voters.

“The voters have spoken and they are telling us that government should do the best it can with the money it has,” said Senate President Pro Tem Darrell Steinberg, D-Sacramento. “We will immediately and responsibly get to work to balance the budget.”

The initiatives were placed on the ballot by the state’s legislators as part of the February budget agreement that sought to close the state’s expected 2009-2010 budget gap. Experts had originally said that the measures’ failure would only create a $6 billion deficit but, as the state’s economy worsened and state revenues declined, the deficit expanded substantially.

Days before the special election, Governor Arnold Schwarzenegger unveiled a budget plan that seeks to balance the budget through massive cuts in state education, healthcare, social services, law enforcement, and local government programs. While there is no indication that the state will reduce its spending on public works, the governor’s proposal will take $2 billion away from local governments, who may be compelled to borrow from local public works appropriations to cover the loss.

“I absolutely despise taking money from local government,” said Gov. Schwazenegger before the vote. “This is only under the worst-case scenario in case those initiatives don’t pass, because this goes for the very heart of our communities, our firefighters, our police officers, our parks, libraries and so on. But these are the numbers, and they don’t lie.”

Legislators will debate the governor’s plan in the coming weeks, but Democrats seem reluctant to accept the proposals.

“As California's economic freefall continues, the governor's [proposal] calls for deep reductions at a time when services demands are at an all-time high. I do not support a raid on local government whose coffers are already deeply depleted,” said Assemblymember Mariko Yamada, D-Davis. “These difficult times require all of us to share in sacrificing for the common good. However, a one-size-fits-all approach to the budget can have dangerous, unintended consequences especially for the most vulnerable populations, at times resulting in lost revenues and even overall higher costs to the state.”

A protracted budget debate between the state's Democrats and Republicans may damage the public works market. During the winter’s budget negotiations, the planned and active state-funded public works projects were delayed because the state had run out of money. According to the Legislative Analyst’s Office, the state may be broke by July.

Stay up-to-date on budget and stimulus news and information with DBE Goodfaith’s California Budget & Stimulus Blog.

To view see proposition results by county, visit: http://projects.latimes.com/elections/2009-05-19/california-propositions/results/map/

For a summary of each ballot initiative, visit: http://www.voterguide.sos.ca.gov/

SBA raises surety bond limit for small businesses

Since the passage of the American Recovery and Reinvestment Act (ARRA) in February, contractors of all shapes and sizes have tried to win public works projects funded by the stimulus package. However, it is often difficult for small businesses to obtain the bonding required to bid a project. To ensure that small businesses remain competitive in the procurement market, the ARRA set aside funds to increase the limit of United States Small Business Administration (SBA)-backed surety bonds for small businesses from $2 million to $5 million.

“During these difficult economic times these changes are particularly helpful to small and emerging contractors who need access to surety bonds so they can bid on public construction and service projects,” said Acting SBA Administrator Darryl K. Hairston. “These changes will support small and emerging businesses nationwide, particularly construction contractors who have seen their markets hurt by a poor economy and lagging construction environment.”

A surety bond is a written three-party agreement between a bonding company, prime contractor, and the project owner that holds the prime contractor monetarily responsible if it fails to uphold the terms of the contract. Without a contract surety bond, it is virtually impossible for a prime contractor to win a construction contract.

Under the SBA Surety Bond Guarantee (SBG) program, the agency does not directly bond a contractor. The SBA has partnered with members of the surety industry to guarantee to the insurance companies 70 to 90 percent of the bond, up to $5 million. To apply for the SBA guarantee, a contractor must complete a standard surety application and required SBA forms. It is at the bonding agent’s discretion whether or not to execute the bond with an SBA guarantee.

Additionally, small business wishing to take advantage of the SBG program must meet certain size requirements. To be classified as a small business concern by the SBA, a businesses average annual receipts, including those of their affiliates, for the last three fiscal years cannot exceed $6.5 million.

Companies that receive the SBA surety bond guarantees are subject to certain fees and expenses. First, the contractor is required to pay a guarantee fee equal to a certain percentage of the contract amount. At the present time, contractors are charged $7.29 per thousand dollars of a contract’s worth. Also, when the bond is issued, the business is responsible for the surety company’s bond premium. Small businesses, though, do not have to pay an application fee to the SBA.

Recently, the California Department of Transportation (Caltrans) and the SBA agreed to a Joint Bonding Assistance Initiative that will help small and emerging businesses obtain bonds and increase the number of small business qualified to bid on construction contracts. Additionally, the agreement will reduce contract performance risk, increase bonding capacity of small businesses working with Caltrans, and increase the number of surety contracts participating in the SBG Program.

For more information on the SBA surety bond guarantee increase, visit: http://www.sba.gov/idc/groups/public/documents/sba_homepage/
sba_rcvry_act_surety_bonds.pdf

To learn more about the SBA Surety Bond Guarantee Program, visit: http://www.sba.gov/idc/groups/public/documents/sd_sioux_falls/
sd_suretybonds.pdf

To learn how to apply for an SBA Surety Bond Guarantee, visit: http://www.sba.gov/aboutsba/sbaprograms/osg/
OSG_HOWTOAPPLY_SBOND_GUARANTEE.html

To view a list of participating Surety Companies and Agents, visit: http://www.sba.gov/idc/groups/public/documents/sba_program_office/
osg_bond_agency_list.pdf

To read the press release announcing the SBA-Caltrans partnership, visit: http://www.sba.gov/idc/groups/public/documents/sba_homepage/
news_release_09-27.pdf

What is DBE Goodfaith?

DBE Goodfaith Inc. is an outreach assistance firm dedicated to providing a reliable web-based service solution for businesses seeking socially and economically disadvantaged business (DBE/DVBE/WBE/SBE/MBE/HUB) participation on government-funded projects.

With the help of our services, businesses can comply with the Good Faith Effort requirements of state and local government disadvantaged business programs. By placing subcontracting opportunity ads on our website and directly soliciting disadvantaged business firms via email, fax, and telephone, we help take the stress out of the Good Faith Process and allow firms to concentrate on building quality, competitive bids. To ensure that all disadvantaged businesses are included in our outreach procedures, we maintain an up-to-date database of all registered disadvantaged firms in California, Nevada, New York, and soon Texas. When customers search our online database, they can easily find disadvantaged businesses by their location and/or the type of goods and services or work they provide.

Also, in an effort to inform and educate the community on procurement, construction, and other pertinent topics, we publish electronic newsletters throughout the year. In our e-newsletter, businesses can find in-depth discussions on procedures and regulations effecting disadvantaged business programs, analysis of current events, and other valuable resources such as events listings. We also offer construction trade and focus information on our website related to DVBE, DBE, MBE, WBE, and other programs.

For more information on our services, please visit our website at: http://www.dbegoodfaith.com