California budget overview
Taxes and fees will put about $89 billion into California’s general fund for the fiscal year starting July 1. But at current rates, the state would spend $101 billion. That $12-billion gap between revenue and spending plus the gap in the current fiscal year’s budget and reserve funds adds up to the total deficit, now estimated at about $24 billion.
Closing the gap is made harder by several mandates. For example, voter-passed Proposition 98 requires that roughly 40% of all revenue go to elementary and secondary schools and community colleges. The requirement can be suspended by a two-thirds vote of the Legislature, otherwise $37 billion is off limits to cutting in 2009-2010. The state Constitution requires that interest on state debts, about $4 billion each year, be paid before anything else.
The federal government pays up to 80% of the cost of some health and welfare programs, but in return sets minimum levels of state payments. If the state cuts below those minimums, it loses federal money. Other federal laws require the state to spend money on everything from prisons to universities. All told, well over half of state spending is restricted in some fashion. Other big-ticket items don’t have an immediate effect impact on the deficit. Pensions for state retirees, for example, don’t come out of the general fund.
The Times’ choices for cutting spending, raising taxes or borrowing more money are based on proposals presented by Republicans and Democrats, the governor, members of the Legislature and outside groups. The amounts by which each would reduce the deficit come from the state Department of Finance and the state’s nonpartisan Legislative Analyst. Some have considerable political support, others almost none.