Federal budget deal could be reprieve for California finances


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Gov. Jerry Brown’s administration is breathing a sigh of relief this week now that Congress has reached a deal on the federal budget.

President Obama signed legislation on Wednesday that will prevent most tax increases and delay or cancel spending cuts. It was sent to his desk by the U.S. House of Representatives on Tuesday night after intense negotiations on Capitol Hill.


If a deal wasn’t reached, the country could have slid into another recession, costing California an estimated $11 billion in tax revenue over the next year and a half. That would have almost eliminated any gains from Brown’s tax hike plan, which was approved by voters in November.

“To the extent that this agreement averts a recession and the associated revenue loss, we will have dodged a bullet,’ said H.D. Palmer, a spokesman for Brown’s Department of Finance.

The federal legislation that pulls the country back from the so-called ‘fiscal cliff’ is still being reviewed, Palmer said, and will be factored into the state budget proposal that Brown is expected to unveil next week.

The deal was warmly received on Wall Street, where the markets rallied on Wednesday.

But there are still more hurdles in Washington. Federal representatives will need to decide what to do with automatic spending cuts that have only been delayed two months, and whether to increase the country’s ability to borrow money to pay its bills.

Palmer noted that a failure to raise the debt ceiling could cause problems in the stock market, hurting tax revenue in California.


Obama claims victory, heads back to Hawaii

‘Fiscal cliff’ plan clears House with GOP divided

Federal budget standoff could hurt California economy

-- Chris Megerian in Sacramento