Last week, Gov. Jerry Brown released the revision of his January budget proposal for fiscal 2012-13, which begins on July 1. Unfortunately, the state’s financial conditions have not improved during the past four months.
Although Brown stressed that this budget situation is much better than a year ago, he also admitted that the projected budget problem of $15.7 billion is more than $6 billion greater than his January forecast. Brown proposes a $92.6 billion budget.
The biggest contributor to the deficit’s expansion is slow revenue recovery. Revenue estimates are now nearly $4.3 billion less than January’s estimates. An additional $2.4 billion is needed for additional school funding based on Proposition 98 calculations. And the final $1.7 billion is the result of federal courts denying several cost saving measures, which the governor had proposed.
“Once again California is dealing with the side effects of unrealistic revenue projections and budgeting gimmicks,” said Assemblyman Brian Nestande (R-64). “In January the budget shortfall was estimated to be $9.2 billion and with the governor’s May revision the gap has increased to $15.7 billion. The imaginary money the majority party counted on in last year’s budget never materialized and they have refused to cut big government.”
To achieve a balanced budget, the governor proposed another $4.1 billion in program reductions. These are mostly centered on Medi-Cal and in-home social services. Other funding shifts are proposed to eliminate the difference.
However, the entire proposal relies on approval of Brown’s tax initiative in November. If approved, he projects the state will collect an additional $5.6 billion.
This comes from temporary income tax and sales tax increases. They would expire in four years.
While Brown’s May revision would increase funding to K-14 educational programs, the 2012-13 budget dependence on the tax initiative means substantial cuts if the tax initiative fails.
“As education spending accounts for 53 percent of General Fund spending and the May Revision substantially increases K-14 spending and protects the University of California and California State University from deeper cuts, schools and universities would be most affected without the additional revenues,” according to the governor’s May Revision.
Without the tax increases, Brown estimates many programs besides education will suffer. This includes state parks as well as CAL FIRE.
The state’s legislative analyst’s generally concurred with the governor’s revenue estimates for this and next year. However starting in 2013-14, the LAO’s revenue projections begin to fall below the governor’s estimates. Unless these are addressed, the current structural budget deficit may well continue for years beyond 2012-13.
The $92.6 billion total budget is nearly $10 billion less than 2007-08 levels which were the largest ever, but nearly $13 billion more than 2004-05 budget. The 2012-13 revenue projections exceed every year since 2000 except for 2007-08.
