State deficit estimate hits $16 billion
California’s projected budget deficit has ballooned to $16 billion, much larger than the $9.2 billion estimated in January, Gov. Jerry Brown said, and he warned of more painful spending cuts.
“We will have to go much further, and make cuts far greater, than I asked for at the beginning of the year,” Brown said in a video posted Saturday on YouTube. He plans to detail his revised spending plan in the Capitol on Monday.
It’s a significant setback for Brown, who began his return engagement in Sacramento by promising to get the budget back under control. Advocates expect the state’s financial problems to take an even greater toll on welfare and healthcare for the poor; state workers are also bracing for cuts.
California’s financial situation worsened this year after the courts and the federal government blocked hundreds of millions of dollars in cuts to healthcare programs, and Democratic lawmakers refused to make reductions Brown wanted in March. In addition, taxes fell short of expectations, particularly in April, the most important month for income taxes.
There’s a $3.5-billion tax shortfall in the current fiscal year, according to the controller. The state also has spent $2.1 billion more than expected.
Brown’s video announcement did not specify what new cuts he will ask lawmakers to make. On Thursday he said his revised spending plan would fall between $85 billion and $90 billion, down from the $92.6-billion proposal he released in January.
Anthony Wright, who advocates for affordable healthcare, predicted that Monday would be the “anti-Christmas.” College leaders are also concerned, and University of California officials say they may have to raise tuition at least 6% in the fall if they don’t get more money.
Lawmakers will spend the next month negotiating a final spending plan, which is due June 15.
Brown’s announcement doubled as a sales pitch for tax hikes that he hopes voters approve at the ballot box in November. He said budget cuts, primarily to public education, would be even worse without increasing the sales tax a quarter-cent for four years and raising levies on incomes of $250,000 or more by 1 to 3 percentage points for seven years.
“We can’t fill a hole of this magnitude with cuts alone without doing severe damage to our schools,” Brown says. “That’s why I’m bypassing the gridlock and asking you, the people of California, to approve a plan that avoids cuts to schools and public safety.”
Jack Pitney, a political science professor at Claremont McKenna College, said the bad news about the deficit could complicate Brown’s push for higher taxes. He said voters may think, “You can’t even handle the money we’ve already sent you. Why should we send you more?”
Assembly Speaker John A. Perez (D-Los Angeles) said severe spending reductions in previous years have left few places for lawmakers to make more cuts, meaning higher taxes are needed to close the larger-than-expected deficit.
“The size of the deficit and the dwindling of options after years of severe budget cuts also show that our state absolutely needs voters to pair cuts with revenues,” he said in a statement.
Republicans blamed Democrats for predicting a $4-billion windfall in the current budget, which never materialized.
“The imaginary money the majority party counted on in last year’s sham of a budget never materialized, and they have refused to cut big government,” Assembly Republican Leader Connie Conway of Tulare said in a statement.
Senate Republican Leader Bob Huff of Diamond Bar said Democratic lawmakers should have reduced spending on welfare and other social services in March, as Brown requested. Democrats had hoped a rebounding economy would negate the need to puncture more holes in the state’s social safety net.
“By not enacting those cuts then, we can’t make them up now,” Huff said.
Senate President Pro Tem Darrell Steinberg (D-Sacramento) said he didn’t regret holding off on budget cuts earlier this year, even if it cost the state hundreds of millions of dollars.
“The cuts that are a matter of life and death we should avoid at all cost,” he said. “And we should try to spread out the impact as widely as possible.”
California’s budget deficit peaked at $42 billion in 2009, after the onset of the global financial crisis. The Legislature approved tax increases lasting for two years, but voters later rejected a proposal to keep those taxes on the books through 2014.
When he took office last year, Brown wanted to ask voters once again to extend the Schwarzenegger-era tax hikes. But Republicans blocked his effort to place the issue on the ballot in a special election last spring. Those levies, and other tax changes proposed by Brown, would have been worth $12 billion in the current budget year, according to the Department of Finance.
Last year’s budget gap was $26 billion, $10 billion larger than the deficit Brown said the state now faces.
“Every year we use these temporary solutions,” said Christopher Thornberg, founding partner of Beacon Economics, which consults for the controller’s office. “And of course, the next year revenues don’t come back again, and we’re back where we started from.”