Posted on 01/12/2006 12:07:18 PM PST by calcowgirl
SACRAMENTO - Gov. Arnold Schwarzenegger's $123 billion budget proposal spends too much of a one-time windfall on new or expanded programs, leading to higher deficits in future years, the state's nonpartisan legislative analyst said Thursday.
The review urges lawmakers to consider putting more of an estimated $4 billion in unanticipated income into reserve accounts or use it to pay off existing debts.
"The overall plan moves the state in the wrong direction in reaching its longer-term goals of getting its fiscal house in order," said the report from Legislative Analyst Elizabeth Hill.
Schwarzenegger released his plan Tuesday, calling it a fiscally responsible proposal that provided needed spending increases for education and public health programs. He noted that it included no tax increase and no new borrowing.
The budget continues a structural imbalance in which basic state spending outpaces expected revenue. But Schwarzenegger was able to increase spending because tax revenues are running ahead of projections this year.
Hill's report found the governor's plan proposes $4 billion in higher spending during the 2006-2007 fiscal year, which begins July 1. Half of that would go toward new or expanded programs.
The legislative analyst found $2.5 billion in additional funding for public schools and colleges. Schwarzenegger did propose using $920 million to repay a loan to a transportation fund.
If the budget is adopted as the governor proposed, the state would face a shortfall in the 2007-2008 fiscal year of more than $5 billion, the report stated.
Hill also reviewed Schwarzenegger's $222.6 billion public works construction program, saying the governor made broad assumptions about the sources of money that would be needed to pay for it.
He wants voters to approve $68 billion in bonds in a series of elections through 2014 as part of an ambitious program to upgrade roads, transit systems, levees, schools, prisons, courthouses and government buildings. He made the proposal last week during his State of the State address.
Billions of dollars that would fund the rest of the program are uncertain, Hill said. Those sources include federal matching funds and assumed contributions from local governments and private investors.
http://www.lao.ca.gov/2006/budget_ov/2006-07_budget_ov.htm
January 12, 2006
2006-07 Overview of the Governors Budget
The 2006-07 Governors Budget now projects that the state will be able to fund much more than a current-law budget and still maintain fiscal balance in 2006-07. The plan, however, moves the state in the wrong direction in terms of reaching its longer-term goal of getting its fiscal house in order. Given the states current structural budget shortfall, we believe that the 2006-07 budget should focus more on paying down existing debt before making expansive new commitments.
In our November forecast, we indicated that a much-improved revenue picture would enable California to fund current-law budget requirements in 2006-07, but that the state still faced a longer-term structural gap between revenues and expenditures.
As a result of further improvements in the revenue outlook, the 2006-07 Governors Budget now projects that the state will be able to fund much more than a current-law budget and still maintain fiscal balance in the budget year. Specifically, the proposal includes over $4 billion in higher spending, including over $2 billion for new or expanded programs and $920 million for the prepayment of a loan due to transportation in 2007-08. The budget package also contains a major long-term infrastructure proposal covering transportation, flood protection and water supply, education, and corrections.
(snip)
Acknowledgments
This report was prepared by Brad Williams, with assistance from many others in the office. The Legislative Analyst's Office (LAO) is a nonpartisan office which provides fiscal and policy information and advice to the Legislature.
"leading to higher deficits in future years"
As porposed now, it put us into a 6 billion dollar deficit every year as far out as you can see now.
He obviously has no appreciation for the theories he professed to follow.
Unfortunately, Arnold is about the best we are going to get in California on a statewide basis.
Arnold won because he was a celebrity and mimicked McClintock by touting fiscal conservatism and Cut-Cut-Cut. Had he run on the platform he is following, he would have lost (unless he put a "D" by his name).
At least he ... has resisted giving drivers licenses to illegal aliens
If we could erase all of Arnold's other actions to date (borrowing, record spending increases, Sierra Nevada conservancy, gun bans, etc. etc. etc.), I'd actually vote in favor of drivers licenses for illegals (which I violently oppose). The few crumbs Arnold has thrown to the right are far outweighed by the other actions he has inititated, promoted, or endorsed.
Schwarzenegger neither resisted a temptation nor pandered to a minority voting block.
Schwarzenegger vetoed the legislation because just behind the cameras was a mob, numbering in the millions, full of righteous anger, armed with pitchforks and ready to do the Austrian bodily harm.
Schwarzenegger took the only course that would allow him to go home that evening and come back and play another day.
The 2004-05 fiscal year concluded with a reserve of $9.1 billion. The reserve amount is up sharply from the $7.5 billion estimate included in the 2005-06 Budget Act, and is $1 billion more than the amount assumed in our November forecast. This improvement from both of the previous estimates is due mainly to large upward revisions to year-end revenue accruals to the corporation tax and personal income tax. More generally, the large 2004-05 reserve is a reflection of strong amnesty payments received last year, and includes the proceeds of the deficit-financing bonds issued in 2003-04.
In 2005-06, expenditures are expected to exceed revenues by $2.6 billion, leaving $6.5 billion in the reserve.
In 2006-07, expenditures increase to nearly $98 billion, while revenues are projected to reach $92 billion. The resulting large operating shortfall results in a further decline in the reserve, to $613 million by the close of the budget year.
Figure 3 Governors Budget |
||||
(Dollars in Millions) |
||||
|
|
|
Proposed for 2006-07 |
|
|
Actual |
Estimated |
Amount |
Percent |
Prior-year fund balance |
$7,228 |
$9,634 |
$7,031 |
|
Revenues and transfers |
82,209 |
87,691 |
92,005 |
4.9% |
Total resources available |
($89,438) |
($97,325) |
($99,036) |
|
Expenditures |
$79,804 |
$90,294 |
$97,902 |
8.4% |
Ending fund balance |
$9,634 |
$7,031 |
$1,134 |
|
Encumbrances |
$521 |
$521 |
$521 |
|
Reserve |
$9,112 |
$6,510 |
$613 |
|
Budget Stabilization Account |
|
|
$460 |
|
Reserve for Economic Uncertainties |
$9,112 |
$6,510 |
153 |
|
1% of General Fund revenue for 2006-07 is estimated at $460B.
Here's where lots of your education $$$ go:
"Coinciding with special education law is a large number of unfunded mandates that are not reimbursed by the state or federal government. For example, the financial encroachment on the Districts general fund has reached approximately $1,000,000 per year. Some examples are as follows:
When a special education student requires transportation, the District must provide it. We are currently transporting 36 students at an average cost of $900 per student per month.
If a student must be placed in a County program, the cost is approximately $22,000 per student per year.
If a student must be placed in a non-public school placement, the average cost is $32,000 per year.
When students receive one-to-one aides, the cost for a 15 hour aide is approximately $15,000 per year."
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