California Budget Crisis: $16 Billion in the Red

California Facing Higher $16 Billion Shortfall

May 13, 2012

AP - California's budget deficit has swelled to a projected $16 billion — much larger than had been predicted just months ago — and will force severe cuts to schools and public safety if voters fail to approve tax increases in November, Gov. Jerry Brown said Saturday.

The Democratic governor said the shortfall grew from $9.2 billion in January in part because tax collections have not come in as high as expected and the economy isn't growing as fast as hoped for. The deficit has also risen because lawsuits and federal requirements have blocked billions of dollars in state cuts.

"This means we will have to go much farther and make cuts far greater than I asked for at the beginning of the year," Brown said in an online video. "But we can't fill this hole with cuts alone without doing severe damage to our schools. That's why I'm bypassing the gridlock and asking you, the people of California, to approve a plan that avoids cuts to schools and public safety."

Brown did not release details of the newly calculated deficit Saturday, but he is expected to lay out a revised spending plan Monday. The new plan for the fiscal year that starts July 1 hinges in large part on voters approving higher taxes.

The governor has said those tax increases are needed to help pull the state out of a crippling decade shaped by the collapse of the housing market and recession. Without them, he warned, public schools and colleges, and public safety, will suffer deeper cuts.

"What I'm proposing is not a panacea, but it goes a long way toward cleaning up the state's budget mess," Brown said.

Democrats, who control the Legislature, have resisted Brown's proposed cuts so far this year. Republican lawmakers criticized the majority party for building in overly optimistic tax revenues.

"Today's news underscores how we must rein in spending and let our economy grow by leaving overburdened taxpayers alone," said Assembly Republican leader Connie Conway in a statement.

The governor pursued a ballot initiative because Republican lawmakers would not provide the votes needed to reach the two-thirds legislative majority required to raise taxes.

Assembly Speaker John Perez, D-Los Angeles, acknowledged that lawmakers have "limited and difficult choices left to solve the deficit." Senate President Pro Tem Darrell Steinberg, D-Sacramento, said he wasn't surprised by the deficit spike given that state tax revenue have fallen $3.5 billion below projections in the current year.

"We will deal with it," Steinberg said Saturday. "And we know that more cuts are inevitable but we will do our very, very best to save more than we lose, especially for those in need."

Under Brown's tax plan, California would temporarily raise the state's sales tax by a quarter-cent and increase the income tax on people who make $250,000 or more. Brown is projecting his tax initiative would raise as much as $9 billion, but a review by the nonpartisan analyst's office estimates revenue of $6.8 billion in fiscal year 2012-13.

Supporters of the "Schools and Local Public Safety Protection Act of 2012" say the additional revenue would help maintain current funding levels for public schools and colleges and pay for programs that benefit seniors and low-income families. It also would provide local governments with a constitutional guarantee of funding to comply with a new state law that shifts lower-level offenders from state prisons to county jails.

A second tax hike headed for the November ballot is being promoted by Los Angeles civil rights attorney Molly Munger, whose initiative would raise income taxes on a sliding scale for nearly all wage-earners to help fund schools.

Anti-tax groups and Republican lawmakers say both tax increases will hurt California's economic recovery. State GOP Chairman Tom Del Beccaro has embarked on a statewide campaign to discuss alternatives to Brown's tax hikes.

The governor is expected to propose a contingency plan with a list of unpopular cuts that would kick in automatically if voters reject tax hikes this fall. In January, he said they would result in a K-12 school year shortened by up to three weeks, higher college tuition fees and reduced funding for courts.

Related:

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