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Brown and Whitman offer few specifics on how to fix California's crushing budget deficits

by Greg Lucas, published

While California’s two gubernatorial candidates have leveled bipartisan criticism at this year’s budget process – 85 days into the new fiscal year without a spending plan  -- neither has presented any specifics on how they plan to balance California’s chronically-in-the-red books next year when it’s their responsibility. 

     "What we are suffering from is a tremendous lack of leadership in Sacramento," Whitman said of this year’s record delay at a September 1 campaign stop in Folsom. "(Legislative leaders) would have been in the governor's office, under my leadership, every day. I would have chained them to the desk to get this done." 

Democrat Jerry Brown, California’s attorney general, says on his campaign website, that the Legislature is “broken” and stuck in a “morass of poisonous partisanship.”  But neither candidate offers any details as to the budget one of them will propose in January for the fiscal year beginning July 1, 2011. 

In its November 2009 examination of the state’s fiscal outlook, the Legislative Analyst predicts a $21.3 billion gap between revenues and spending commitments for FY 2011.  The following fiscal year, 2012 -2013, the gap grows to $23 billion when the state is required to repay cities and counties $2 billion it “borrowed” to help balance last year’s budget.    The analyst predicts a shortfall of $20 billion for the fiscal year beginning July 1, 2013 and $18 billion for the following year. Brown says it will take “old-fashioned hard work, patience and a keen understanding of the process” to resolve the state’s budget mess.  Whitman says she has a plan to reduce $15 billion in state spending. In a March interview with the Riverside Press-Enterprise after a San Bernardino campaign appearance, Whitman said paring back the state work force could save as much as $3.5 billion and a reduction in “fraud and waste” would yield $4.5 billion in savings.  “Reforming” the state’s welfare system could also save billions, Whitman says.  The California Teachers Association, a strong supporter of Democratic legislative and statewide candidates, criticized Whitman’s proposal in a television ad because $15 billion in spending cuts would reduce state support for public schools by roughly half that amount.  Under complex formulas in the state constitution, public schools receive a minimum of 40 cents of every dollar in revenue that flows to the state.  On her campaign website, Whitman says California’s “long-term economic viability and competitiveness is directly connected to the quality of the education system in our state.” 

Brown echoes Whitman on his campaign website: “Long-term economic growth requires investment in education, infrastructure, our environment and our kids,” he says.  Whitman says that whatever spending reduction she would make would not jeopardize public safety. 

In his eight-page proposal to “get California’s government working again,” Brown offers few specifics on how he might close a $21.3 billion spending gap although he says the next governor should “level with the people and present an honest budget without the smoke and mirrors.”  He pledges to “engage” with both Republican and Democratic lawmakers and “listen to the concerns of groups most impacted by key budgetary decisions.”  Of the few specifics, Brown vows to “make immediate cuts” to governor’s office staff, “especially in the areas of press and communications, lawyers and other staff who are duplicative with agency and department personnel”Operational costs and discretionary spending, like overtime and travel, would also be reduced both there and in other state agencies, Brown pledges, noting that the staff of the office has increased “significantly” since he was the state’s chief executive more than 30 years ago.  The budget for the governor’s office and its 185 employees is $19.5 million. The budget for the legislative, executive and judicial branches is $3.4 billion out of a state general fund of $86 billion. 

Brown’s advocacy of a “rainy day fund” to cushion the state against unforeseen costs would also increase the expected 2011 budget shortfall.  Whitman also proposes tax cuts of at least $4.7 billion and as much as $12.3 billion.  The biggest ticket item on her list is elimination of the state’s tax on capital gains.  Over the past decade, state tax records show capital gains collections totaling $70.3 billion, ranging from a low of $3.2 billion annually to a high of $11.7 billion — an average of $7 billion between 2000 and 2009.  Such a tax cut could exacerbate the state’s financial condition for the fiscal year beginning July 1, 2011 which is already shaping up to be an even worse fiscal year than the current one.  Federal economic stimulus funds won’t be available to prop the state up in the 2011-2012 fiscal year.  Another key reason for the sizable budget gap is that the temporary taxes approved in February 2009 expire. The taxes were intended to help the state close what was that year a $42 billion budget gap.  The largest amount of revenue lost comes from the end of a 1 percent increase in the sales tax -- $4.5 billion. A slight increase in vehicle license fees to 1.15 percent, which legislative Democrats want to make permanent in their budget proposal for the current fiscal year, also disappears resulting in a $1.5 billion revenue loss. So does a .25 percent surcharge on state income taxes. 

The tax credit the state offers for dependents is also set to climb to $319 from $102, emptying state coffers of $702 million.  “The forecast of the general fund’s annual operating shortfall is affected significantly by the expiration at the end of … all of the temporary tax increases approved in February 2009,” the legislative analyst writes.  “These expirations, coupled with increasing program spending, cause the operating shortfall to rise to $21.3 billion,” the forecast says. 

As the teachers association points out, the chief victims of budget shortfalls are public schools and community colleges who will see their state support reduced.    “If the state funds schools at the levels reflected in our forecast, school districts could face significant difficulties due to the simultaneous decreases in federal and state/local funding,” the analyst says in its forecast.

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