Budget projections fall behind already, substantive reform needed

150 150 Gina Baleria

“It didn’t take long for California’s optimistic budget to fall behind in tax revenues,” said the Sacramento Bee’s Kevin Yamamura.

Less than two weeks after the rosy-outlook budget was passed, the projections it was built on have started to come unraveled.

Though California did take in more revenue in June 2011 than it did in June 2010 ($440 million more than expected, says the Sacramento Business Journal), the increase was not enough to match what lawmakers banked on when they sent this year’s budget to the governor’s desk.

Here’s a breakdown of the numbers from Yamamura:

Controller John Chiang released data Monday showing that California received $351 million less in May and June than state leaders expected in the budget that Gov. Jerry Brown signed just 12 days ago.

To help close a final $9.6 billion gap, Democratic lawmakers and Brown relied on optimistic assumptions that the state would take in $1.2 billion above projections in May and June, as well as $4 billion more over the following fiscal year. If the state continues to fall short of expectations, it will impose deeper cuts in higher education, social services and K-12 schools under the budget “trigger” deal.

Based on Chiang’s data the state is already behind the May-June milepost. He said the state took in only $849 million of the $1.2 billion in extra cash expected during that period – or $351 million less.

“We don’t have a detailed cash flow (of Brown’s budget) to break it down,” said Chiang spokesman Jacob Roper. “We can’t look at it and say whether it was softness in corporate tax refunds or excise taxes or withholdings being down.”

It’s important to keep in mind that this is only negative news relative to optimistic assumptions that lawmakers relied upon to close the deficit. The state did take in more money than analysts projected earlier this year, as well as $1 billion, or 9 percent, more than in June 2010.

California Forward has proposed several structural changes to our fiscal system to stabilize the process, including  performance-based budgeting and multi-year budgeting, which are currently working their way through the legislature as SB14 and SB15. We also want to see lawmakers adopt a pay-as-you go budgeting model, as well as a mechanism for using one-time revenue to pay down debt and increase the general fund. For more on California Forward’s fiscal proposals, click here.


Gina Baleria

All stories by: Gina Baleria