On May 14,
Governor Arnold Schwarzenegger unveiled his May budget revision,
which addresses a budget deficit that the governor pegged at $19.1 billion.
This figure is comprised of a current year shortfall of $7.7 billion, a budget
year shortfall of $10.2 billion and a reserve of $1.2 billion.
Governor Schwarzenegger's plan includes $12.4 billion in expenditure
reductions, $3.4 billion in anticipated federal funds, $1.3 billion in
"alternative funding" and $2.1 billion in fund shifts and other
revenues.
Cal-Tax President Teresa Casazza said:
"The governor's budget plan wisely avoids tax increases that would
make the state's economic problems even worse. With so many Californians out of
work, and so many businesses struggling to stay open, adding to the already
high tax burden would not help the people of this state.
"There is no easy way out of the budget problems that have
snowballed as the state has made unsustainable spending commitments, and the
choices remain difficult. To increase revenue, lawmakers need to focus on
bringing back jobs and growing the economy. And we need to continue to focus on
substantial savings available by eliminating existing waste, fraud and
mismanagement from state government."
The budget includes a $637 million spending reduction in the In-Home
Supportive Services program, and elimination of the state's welfare-to-work
program (CalWORKS).
For K-12 education, the core spending for schools stays as originally
proposed in January, and is $502 million higher than required by Proposition
98. The plan also proposes $445 million in savings from a one-day-per-month
personal leave program.
During his press conference, the governor said he would not sign a
budget that does not include budget reform and pension reform. He also called
upon the Legislature to revisit the recommendations of the tax commission that
produced a report last year. That report by the
Commission on the 21st Century Economy gained no traction in the Legislature.
The governor said he is "not interested in just sticking with that
formula (proposed by the tax commission)," but said the Legislature should
use the commission's report as a starting point.
The changes to the governor's January budget, as described by the
Governor's Office, include:
· Loan $650 million from the Highway Users Tax Account to the General Fund, to be repaid by June 2013. This funding is available on a one‑time‑only basis, as specified in Chapter 12, Statutes of 2010, the recently enacted excise fuel tax legislation. Use of these funds is proposed in subsequent years to help fill the long‑ term funding gap for the State Highway Operations and Protection Program.
· An increase of $140.1 million to reflect the withdrawal of the Governor's Budget proposal to fund state parks from Tranquillon Ridge oil revenues. The recent oil spill in the Gulf of Mexico has magnified the risk of offshore oil drilling. Consequently, the Administration no longer supports the Tranquillon Ridge proposal. The May Revision fully restores funding to state parks in 2010‑11.
· An increase of $197,000 and 1.8 positions to create a collection cost recovery fee program at the Board of Equalization (BOE). This fee will be imposed upon delinquent accounts receivable to cover the actual costs incurred by BOE to collect the amounts owed. The fee is expected to generate $4 million in General Fund revenues in 2010‑11, increasing to $13 million in subsequent years.
Legislative reactions to the governor's plan indicate that budget
negotiations may not go smoothly.
Democratic legislative leaders said they will not support the governor's
proposal to end CalWORKS, and several Democratic
lawmakers voiced support for tax increases.
Assembly Republican Leader Martin Garrick urged Democrats to use the
governor's plan as a framework from which to craft a budget, and not to start
over or add spending back into the plan. He also said taxes will be "dead
on arrival," because Republicans will not support any increases, and thus
they won't get the required two-thirds vote.
State Controller John Chiang said the state will have enough cash on
hand to meet its financial obligations through June.
Cal-TaxReports, May 17, 2010
© 2010 California Taxpayers'
Association.
All Rights Reserved.