Not to be outdone by other states’ fiscal nightmares, California’s Legislative Analyst’s Office has reported that incoming governor Jerry Brown will have to face projected shortfalls remaining this year totaling $6 billion and an estimated deficit next year of $19 billion. The report also predicted similar budget deficits through 2016 of about $20 billion in each year, although it said that the actual amounts could be higher.
Just last month, Governor Arnold Schwarzenegger signed the most recent $86.6 billion state budget following a historic 100-day delay. The state’s fiscal year began on July 1. The Legislative Analyst’s Office blamed the current year’s problem on faulty assumptions made by lawmakers in their budget-balancing actions when they sought to erase this year’s $19 billion shortfall.
As an example, the report said the state is unlikely to receive $3.5 billion of federal funds as part of $5.3 billion line item included in the budget. The analyst said that the governor and lawmakers used accounting tricks and temporary fixes to close the gap, setting up the state for even more problems next year.
The cost of California prisons continues to soar and the new estimate of this year’s cost was adjusted upward of nearly $1 billion from what was expected just a couple of months ago. Not only is the budget suffering from rising costs throughout state government, the economy is taking its toll. The report blames the economy for falling tax receipts and predicts that revenues won’t return to the 2007-2008 peak levels until 2015-2016.
Much of next year’s deficit comes from the expiration of about $8 billion in temporary tax increases that are set to expire. Another tax increase seems unlikely, since a measure passed on Nov. 2 provides for a two-thirds vote in the legislature to increase state taxes and fees. Californians are in no mood for new taxes since they are already among the highest taxed in the nation and just voted to reject an increase in vehicle registration fees of $18 to help keep state parks open.
“Unless plans are put in place to begin tackling the ongoing budget problem, it will continue to be difficult for the state to address fundamental public-sector goals — such as rebuilding aging infrastructure, addressing massive retirement liabilities, maintaining service levels of high-priority government programs and improving the state’s tax system,” the report said.
Brown takes office on Jan. 3 and has until Jan. 10 to propose a plan to eliminate the current year’s deficit.