Posted on 11/17/2004 8:04:27 PM PST by NormsRevenge
SACRAMENTO - An improving economy is no match for runaway spending by state agencies and lawmakers will face a budget deficit next year of $6.7 billion, according to a report released Wednesday by the Legislature's nonpartisan budget analyst.
A variety of one-time solutions and loans used to paper over this year's budget will expire at the end of June, leaving the Legislature and Gov. Arnold Schwarzenegger with a big gap to fill and hard choices to make.
"We still have a lot of hard work to do," said Legislative Analyst Elizabeth Hill, whose office advises the Legislature on financial issues. "We really haven't addressed the large structural imbalance facing the state of California."
Lawmakers and the governor agreed last summer on a $105 billion budget that included more than $7 billion in one-time solutions, fund transfers and borrowing. Those options aren't available for the next budget, Hill said, and even with the state's improving business activity there's little chance California "can grow its way out of the deficit."
Without higher taxes to increase revenues, big cuts in spending or a combination of both, the state will face an even larger deficit of nearly $10 billion in 2006-2007, Hill said. She recommended a combination of taxes and cuts.
Lawmakers can close some of the deficit by tapping the remaining $3.5 billion from the $15 billion bond issue voters approved in March, but Hill warned against any new borrowing. California already has $26 billion in debt for ongoing budget needs, including bond sales and loans from local government, schools and transportation accounts.
By 2006-2007, it will cost the state $4 billion a year to pay for the existing loans, which is more than the state pays for the University of California system, Hill said.
Schwarzenegger said earlier this month that he still opposes higher taxes and believes the budget can be balanced by cutting the growth rate of key programs, although he didn't detail the specific programs. He's due to submit his budget plan to the Legislature on Jan. 10.
The debate between more service cuts or higher taxes has already started. Some Democratic leaders have said they will fight for higher taxes if the alternative is the choice is between taxes and deeper cuts to social and public health programs.
On Wednesday, however, Assembly Speaker Fabian Nunez, D-Los Angeles, said only that the state deficit is a "great threat" to the future and hinted that he would support a tax increase.
"We will work with the administration to craft an honest budget that tackles the budget gap without Band-Aids or gimmicks," said Nunez in a statement.
California wouldn't face this choice now if the Legislature had passed many of the spending cuts Schwarzenegger proposed last January, said Senate Republican Leader Dick Ackerman of Fullerton.
Hill said the state could reduce the size of next year's deficit and those in ongoing years by ignoring $1.4 billion in additional money schools could claim because of unexpected higher tax collections this year.
Lawmakers could do that without taking the politically charged step of suspending a voter-approved spending guarantee for schools, called Proposition 98, Hill said. Proposition 98 was already suspended in August as part of the current budget agreement, so the increased money collected this year falls under that agreement, she added.
Schools won't be hurt if they don't get the extra money, Hill said, because they already agreed to a funding minimum that didn't include it. If that money is left in the state's general fund, the project budget shortfall would drop from $6.7 billion to $3.9 billion, because the savings would apply to both the 2004-2005 budget and the 2005-2006 budget.
That's unacceptable, said Kevin Gordon, executive director of the California Association of School Business Officials.
During last year's negotiations with the governor, school officials accepted a $2 billion cut from money to which they were entitled. They also looked forward to more money being available from an improving economy, Gordon said, and schools are already planning on spending that $1.4 billion.
State Superintendent of Public Instruction Jack OConnell today issued the following statement in response to the Legislative Analysts Office recommendation that the Legislature not live up to our obligation to schools under this years budget agreement and to not fully fund Proposition 98 in the upcoming budget cycle.
State Superintendent of Public Instruction Jack O'Connell agreed, noting that since 2000 public schools have lost $9 billion in state money.
"The fact that these cuts were followed by the flattening of our test scores after five years of steady improvement certainly is no coincidence," O'Connell said in a statement. "While money is not the only factor, it plays a critical role in student achievement."
ON THE NET
http://www.lao.ca.gov/main.aspx
those numbers are due in part to the taxes of businesses and individuals that fled the state.
some states such as colorado gained loads of cash-rich evangelical christians who sold their california houses.
wow. what a hole.
we keep digging ourselves deeper and deeper.
Eliminating welfare and other entitlements to the millions of illegal aliens would certainly help our fiscal health.
The politicians here can't do what every family does: cut back on expenses. Instead, they keep charging the state's expenses to a credit card. That's their idea of "fiscal austerity."
My prediction is looking good. Within a year California income taxes will be going up.
This state is a basket case yet the democrats keep winning elections ? Voter fraud is the only thing I can attribute it to. How do all the tax hike measures keep passing ?
You can attribute it to Earl Warren's "One Man On Vote" Supreme Court Ruling of 45 years ago that stacked each state's deck in favor of the "Blue Counties" and the cities.
This is CA's "Direct Democrazy" come home to roost!!!
It's nothing but Mob Rule and Arnold's Celebrity Rule is making it worse!!!
The "Red Counties" are at the mercy of the "Blue Zones!" Hiram Johnson and Earl Warren's great experiment in Swiss Democrazy are blowing up in OUR faces!!!
This should prove interesting to watch.
Californians LOVE big government but don't want to PAY the higher taxes to support it. Heck, tax increases lost BIG in both the Bay Area and Los Angeles County, both Democratic Party strongholds.
You can attribute it to Earl Warren's "One Man On Vote"
That, along with total misrepresentation of the initiatives. The $15 billion bond measure was sold as a one time (until next time) borrowing to pay off past debt (not true) in combination with a "spending cap" (that wasn't a spending cap), etc.
Check out the sales job fromYesOn71.com for the Stem Cell Boondoggle:
YES on 71 protects taxpayers and our state budget.Prop 71 won’t increase or create any taxes. It authorizes tax-free state bonds that will provide an average of $295 million per year over ten years to support stem cell research at California universities, medical schools and research facilities.
These bonds will be self-financing during the first five years, so there’s no cost to the state’s general fund during this period of economic recovery.
Won’t increase or create any taxes... Tax free... self-financing... no cost...
Sounds Great, don't it?
.
This fits the pattern of CA voters... they like liberalism so long as they don't have to foot the bill for it.
Earl Warren is an iteresting read. The abuse of the 14th amendment has caused a lot of problems for this country.
Well with the only issues you care about are fornicating with the same sex and aborting babys (now the state will pay so some can be used for stem cell research) as the liberals in LA and SF, the rest of California just cannot overcome it.
Most people's ability to sift through the mumbo-jumbo-sales job is about nil.
The fact that these kind of initiatives can be MARKETED in such a misleading way is criminal, IMO.
We really need to address the Prop 187 issues. We cannot continue to support the country of Mexico. No more aid to illegal aliens.
Kalifornia liberals are like a bunch of hyenas devouring what remains of a lion's kill. The lion has long since left the scene and will not return. Soon the hyenas will be forced to devour each other. I can hardly wait.
LMAO!!! What a mess!
Arnold is surely aware that tax hike = forget about being President someday.
Maybe it's time to start a California bankruptcy pool.
I'll say: March 31, 2006.
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