Deficit could climb, analyst reports

California’s budget deficit may be more than $1 billion larger than even Gov. Jerry Brown’s latest estimate, the Legislature’s financial advisor said Friday.

Brown announced last weekend that the deficit had swelled from $9.2 billion to almost $16 billion. But the nonpartisan legislative analyst’s office said there may be less money available than the governor assumed, possibly increasing the budget gap to at least $17 billion.

The bulk of the difference lies in questions over money from defunct local redevelopment agencies. Brown wants to use $1.4 billion in leftover assets to help plug the budget gap, and the state expects to collect property tax money that used to fund the agencies.

However, Legislative Analyst Mac Taylor’s review said there’s “considerable uncertainty” about that sum and expects it to be much lower, raising the deficit by $900 million.


Taylor said money may be siphoned off before it reaches the state because of the defunct redevelopment agencies’ previous obligations, such as construction projects or bond payments. Lawsuits over the dissolution of the agencies could further complicate the problem. Before the state knows exactly how much money is available, Taylor said, “we have to do audits and checks.”

H.D. Palmer, a spokesman for Brown’s Department of Finance, said the administration is crafting legislation that would allow the state to collect the redevelopment money it wants to balance the budget. The legislation will be considered by lawmakers along with the rest of the budget.

The budget gap could widen further if Taylor’s estimates about tax revenue are correct. He expects the state to collect $392 million less in taxes in the upcoming fiscal year than Brown predicts.

Taylor called that a “rounding error” -- just 4% less than Brown’s $95.7-billion estimate -- and said the governor’s proposal appears reasonable otherwise.


Still, the usual vagaries of California’s economy make it difficult to map out a spending plan. The state relies heavily on income tax revenue to fill its coffers, and tax receipts have been unpredictable.

“State leaders should not be surprised if 2012-13 state revenues end up several billion dollars lower (or higher) than current projections,” Taylor’s report said.

Taylor and lawmakers will continue to scrutinize Brown’s budget proposal, which will be the focus of intense negotiations in the coming weeks. The Legislature is required to approve a spending plan by June 15; the new fiscal year begins July 1.

Brown unveiled his revised budget proposal Monday, calling for cuts to social services and pleading with voters to approve tax hikes in November to help the state balance its books.

California’s estimated budget gap has grown this year because the state has collected less tax revenue than expected and the federal government, courts and Democratic lawmakers have blocked some budget cuts.

Further complicating the situation is a required increase in money for schools, the result of a complex, voter-mandated funding formula. Taylor suggested an alternate calculation on Friday that he said would decrease the state’s obligation to schools by $1.7 billion without jeopardizing classroom funding. That could allow lawmakers to mitigate steep cuts to programs such as welfare and healthcare for the poor.

Palmer defended the administration’s proposal, saying, “We made this calculation based on the Constitution and the letter of the law.” Taylor’s report also zeroed in on some of Brown’s other budget-cutting proposals, such as his push for a four-day workweek for some state employees. The report said state services may become more inconvenient for residents and savings could be negligible.

Plus, since administration officials are trying to cut costs through negotiations with union leaders, the report raised concerns that the state may be forced to make concessions that would increase costs down the line.