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Monday, May 16, 2022

Budget Impasse Starting to Take Toll on State Vendors

Budget Impasse Starting to Take Toll on State Vendors

By HOWARD FINE

Staff Reporter

The state budget stalemate has hit home for L.A.-based electrical supply wholesaler Aaron Comfort.

Comfort’s firm, Supreme Wholesale Electric Inc., gets 10 percent of its revenues from supplying electrical equipment to California prisons and other state agencies. For the last month, he’s not been getting paid.

“I’m having to borrow from my credit line,” said Comfort, adding that he’s not going to deliver any more electrical equipment to the state until he can be assured he’ll be paid.

Comfort is one of scores of business owners who work with the state but are not getting paid, thanks to the record-long budget crisis.

The state’s fiscal year began on July 1. While the state Senate passed a budget just before the July 4 holiday, the state Assembly has been deadlocked over how to close a record $23.5 billion deficit. The Democratic majority has insisted on a mix of tax increases, borrowing and spending cuts; Republicans have generally held the line against new taxes.

The budget requires a two-thirds majority to pass, which means at least four Republicans must sign on. As of late last week, the Republicans were still holding out.

The impact of the budget crisis was hardly felt in July and August because the state sold $7.5 billion in bonds to cover its most urgent bills. But from the start, state officials have determined that vendors and elected officials and their staffs would not be paid.

Some state vendors have been hit harder than others. Several said it often takes two or three months from the time the goods are sold or the work is performed until payment is received. Often, the companies themselves take several weeks to bill the state; the state in turn takes several weeks to pay invoices when they come in, even when there is a budget.

Vendors generally rely on the state for only a small percentage of their overall revenues, usually less than 10 percent.

That’s the case for Gary Fishman, owner of Ventura-based Johnstone Supply, a provider of electrical equipment with offices in Lancaster, Upland, Baldwin Park and Thousand Oaks. Fishman said less than 5 percent of his total business comes from sales of air conditioning, heating and lighting equipment to the state.

“It’s only been a minor issue so far,” Fishman said. “But if the budget stalemate continues, it will become a problem for us.”

But neither Fishman nor Comfort said they planned to drop the state as a client. “It’s a risk that comes with the territory,” Fishman said.

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