no problem... just raise the taxes some more!!!
Posted on 11/14/2007 4:51:33 PM PST by NormsRevenge
SACRAMENTO – California's budget picture has deteriorated significantly since the summer amid a slumping housing market and slowing economy, leading to a nearly $10 billion revenue shortfall, the state's legislative analyst said Wednesday.
Without immediate spending cuts or other fixes, the state's $4.1 billion reserve will evaporate. California will be nearly $2 billion in the red by the time lawmakers vote on a new budget next summer, according to the analyst's report.
In addition, the shortfall for the budget year that will begin next July has mushroomed by more than 50 percent, leading to the combined $10 billion shortfall for the two fiscal years. That's more than the state spends for the University of California and California State University systems combined – about $7.2 billion for the current fiscal year.
The future looks equally grim, with multibillion-dollar deficits projected to spiral upward for the rest of the decade, Legislative Analyst Elizabeth Hill said.
“Addressing the state's current budget problem is even more urgent because we forecast a continuing gap between revenues and expenditures,” Hill wrote in her analysis.
Assemblyman Roger Niello, vice chairman of the Assembly Budget Committee, called the report a wake-up call for lawmakers.
“We cannot continue to put off the tough decisions required to get our fiscal house in order without facing serious consequences for our state,” he said in a statement. “While tax revenues to the state have softened, the problem continues to be overspending. We must get our spending in line with revenues.”
Gov. Arnold Schwarzenegger last week directed state agencies to prepare for possible deep spending cuts.
He ordered state department heads to draft plans for a 10 percent across-the-board reduction. If enacted, it would be the largest round of budget cuts since Schwarzenegger took office after the 2003 recall of then-Gov. Gray Davis.
The state had faced a projected $5 billion to $6 billion deficit in 2008. Schwarzenegger's administration has in recent months warned that the continued housing slump and weakened credit markets could exacerbate that shortfall.
The latest housing data underscored the downward trend.
DataQuick Information Systems reported Wednesday that the number of new and resale homes sold in Southern California in October was the lowest since the company began keeping records in 1988.
The region's median home price fell 8 percent from October 2006, according to the La Jolla-based company. Data for the rest of the state will be released Thursday.
Figures released Wednesday by Schwarzenegger's Department of Finance suggested the trend would hold up statewide. New home construction permits in September fell to their lowest level since October 1988. For the year, residential construction permitting in the state is off 30 percent from the same period in 2006.
The accelerating decline has caused potential buyers to wait before making a purchase, while severely tightened lending standards have eliminated many potential buyers from California's high-priced housing market.
The plunge in home sales has correlated into an equally steep drop-off in state tax revenue because of lost jobs and purchases in the housing, construction and financial sectors.
The analyst said $2.7 billion of the state's reserve fund will be eaten up by lower-than-expected tax revenue through next summer. The state will take an additional $1 billion hit on falling local property taxes from shrinking home prices. Additionally, the state must make up for lower property tax revenue so schools will remain fully funded.
Some analysts said the governor should have seen the problems coming sooner.
When Schwarzenegger signed the state's overdue spending plan in August, he touted it as a balanced budget.
Even before then, however, turmoil in the housing and credit markets had begun biting into state tax revenue and threatening to make next year's budget even worse.
Economists warned that the continuing decline in new home sales and construction, layoffs and bankruptcies in the mortgage-lending industry, and an increasingly volatile stock market had begun erasing revenue that lawmakers assumed would materialize to cover California's $145 billion budget.
Falling revenue will make it harder for lawmakers to close the gap without considering painful cuts to schools, transportation projects and an array of social services. Schwarzenegger said his administration has been studying ways to address the deficit.
“I have not made any final decisions yet, but it's clear that the decisions that will be involved will be tough,” the governor said in a statement Wednesday. “I have a constitutional requirement to submit a balanced budget to the Legislature in January, and I will fulfill that responsibility.”
He also said the revenue forecast should be an incentive for lawmakers to reform the state's budgeting process. During last summer's budget stalemate, Republican and Democratic legislative leaders said they were open to doing so.
In many ways, the state's budget is besieged by what economists view as the delayed effect of the depressed housing market on California's economy.
Despite more than two years of warnings about a housing bubble and more than a year of sluggish home sales across the state, California's coffers had until recently seen few ill effects of the housing downturn.
As recently as May, Schwarzenegger's finance team revised state job growth figures upward, saying there was little evidence that problems related to housing and lending would spread to other parts of the economy.
That forecast now seems overly optimistic. State cash flow figures released Wednesday show revenue is off more than $1.1 billion since August.
Hey Ahhnuld, ya you little girly man.
Da govunator not so strong now eh.
no problem... just raise the taxes some more!!!
It’s a lot tougher when you can’t just print more money.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Sounds like they are setting up the taxpayers for a BIG tax increase. Maryland just did the same thing.
A emergency “special session” of the legislators. It will be the LARGEST tax increase in Maryland history, at the hands of a Democrat Governor. Our new motto is:
“Welcome to Maryland, What’s in YOUR wallet?”
aw geeesshhh.. Thanks!
My thoughts exactly: It's only money. If it was something important I'd get excited.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
yup... money is only something you need in case you don't die tomorrow.
I saw at least four deficit balloons yesterday and I’m clear down in LA.
Exactly, because every economist agrees that the higher the tax the more the revenue. In fact, if California keeps increasing taxes I might just pack up and move the family and the business there.
Ahnold, sell more bonds.
And for exactly the same reason. Revenues go up one year - strong economy, bond approved, selling off state assets, whatever - and they treat that peak as the new baseline and promise that new money to their friends every year forever thereafter.
It's like looking at your monthly income when you get your Christmas bonus, buying a new car, and then being surprised when you can't make the February payment. It should be criminal.
Okie dokie... time to implement Prop 58! After all, Arnold told us it was a necessary “spending cap” measure that had to be approved along with his $15 billion dolloar boondoggle borrowing program.
So... has he declared an emergency yet to implement spending cuts?
Waiting...
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
The ball is in Arnie’s court. Time to declare a fiscal emergency.
He may try to blame the legislature—I hope the media doesn’t let him get away with it.
http://primary2004.sos.ca.gov/propositions/prop58-analysis.html
Mid-Year Adjustments. Under this measure, if the Governor determines that the state is facing substantial revenue shortfalls or spending deficiencies, the Governor may declare a fiscal emergency. He or she would then be required to propose legislation to address the problem, and call the Legislature into special session for that purpose. If the Legislature fails to pass and send to the Governor legislation to address the budget problem within 45 days, it would be prohibited from (1) acting on any other bills or (2) adjourning in joint recess until such legislation is passed.
Interesting. Thanks for posting.
hmm remember that California did approve a $3 billion bond ($6 billion total principal and interest) for stem cell research
liberal economists actually believe you would move for all those compelling govt services and class equality
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.