Just as the weather last week suddenly turned from a summer to a winter pattern, even going so far as to have cooler interior temperatures and warmer temperatures along the coast, the economic climate of California has made a very SUDDEN change! After years of double-digit deficits (that is double digits in the BILLIONS of dollars), the state of California faces “only” a $1.9 billion budget gap next year! Projections for FUTURE years are even BETTER, with BILLIONS of dollars in SURPLUSES!
Mac Taylor, the legislative analyst, described the financial situation as a “dramatic turnaround” and cautioned legislators to build a reserve and pay off other debts before spending too heavily on services.
“But, definitely, this a much, much more positive situation than we’ve faced in many, many years. On the whole it’s pretty good news,” Taylor said.
The state this year will spend $94 billion in general fund services, which include public education, colleges and universities, prisons, and health and human services, according to Taylor.
A year ago, Taylor forecast the deficit at $13 billion. The previous year, the deficit was $25.4 billion! At the peak, in February of 2009, California’s deficit was $42 billion! (Not bad for a STATE, huh? 😉 ) Governor Jerry Brown will make his own budget proposal, including a forecast for the deficit, in January 2o13. California legislators will have until mid-June to pass a budget for the new fiscal year, which begins July 1.
According to Taylor, key factors in the (amazing, to me!) turnaround are the improving state economy, earlier budget cuts, and the passage of the Proposition 30 tax measure. “Proposition 30 provides for personal income tax increase over seven years for California residents with an annual income over US$250,000, to be implemented retroactively starting January 1, 2012. The measure also provides for an increase in the state sales tax by 0.25 percent over four years starting 2013.” (Hmmmm, taxing the rich seems to have “paid off!” ) The fiscal outlook forecasts a budget surplus of $1 billion by 2014 and a surplus of over $9 billion by 2014! What is now known as the “structural deficit,” the amount of the deficit carried over from year to year, will be eliminated! SFGate.com says:
The budget deficit is a combination of the shortfall for the current fiscal year – $948 million – plus a projected difference of $936 million between expenditures and revenues in the fiscal year starting July 1.
That deficit is due mainly to cities and counties not turning over as much money as was expected from the wind-down of redevelopment agencies. That money is sent to school districts and other local entities, reducing the amount the state has to spend on schools.
Brown’s budget projected $3.2 billion in savings from that, but the analyst projects it will come in at $1.4 billion. Also, the budget anticipated $1.9 billion in profit from sales of shares of Facebook, but Taylor said that is likely to be $1.2 billion.
Other higher-than-projected costs, along with a $1.4 billion upward adjustment of revenues from a past year, added together to result in the final deficit number.
Democrats are eager to restore some cuts that they have made to state services, and they will be able to do so, since the latest election gave Democrats a supermajority in BOTH houses of the legislature.
We’ll just have to wait to see how irresponsibly Democrats act (oh, they will) with a supermajority in both houses. 😉
2012: $1.9 billion deficit
2011: $13 billion deficit
2010: $25.4 billion deficit
2009: $20.7 billion deficit
2008: $27.8 billion deficit
2007: $10 billion deficit
2006: $2.4 billion deficit
2005: $1.2 billion reserve
Source: Legislative Analyst’s Office
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