California budget deficit grows deeper
Gov. Jerry Brown is scheduled to issue a revised state budget within the next two weeks, so it probably came as bad news that revenue now will be “a few billion dollars” shy of the governor’s previous budget projections through June 2013. That means the $9.4 billion shortfall Mr. Brown already expected will be considerably worse.
Dramatically less revenue should be a stark signpost on the road to budget sanity in Sacramento. It should provide plenty of motivation for the governor and Legislature to seriously consider substantial cuts in spending, and an opportunity to greatly scale back the size and scope of government.
Flanked by clergy from across the state Gov. Jerry Brown discusses his proposed tax initiative during a news conference with PICO California in Sacramento, Calif., Thursday, April 26. PICO, a network of community and religious groups, endorsed Brown’s proposed tax initiative, which includes a raise of the state sales tax, for the November ballot.
Unfortunately, instead, it probably will spur the governor and tax-and-spend-oriented legislators to ratchet up the campaign for a November ballot measure to substantially increase taxes.
Complicating budget planning, the Analyst’s Office says, is the difficulty determining the shortfall’s effect because of the complexity of education finance formulas that guarantee minimal levels of funding for public schools.
Even if voters approve the governor’s proposed tax initiative in November, which we find unlikely, it is uncertain it would raise the $6 billion Mr. Brown estimates. The initiative would impose a quarter-cent sales tax increase and increase income taxes on those earning more than $250,000 a year. But higher tax rates discourage economic development and motivate high-earners to shield income, offsetting hoped-for revenue increases.
Even so, the tax increases would bring not nearly enough new revenue to close the now nearly $12 billion projected deficit through the end of the next fiscal year, June 30, 2013. There is a possibility of a one-time windfall to the state treasury from the anticipated stock offering from Facebook.
But wishful thinking and one-time windfalls are not the stuff of responsible budgeting. Democratic lawmakers hoped for a windfall in April, the largest tax collection month, but the opposite happened.
Those would be encouraging words, except that doing “what we have to do” in the parlance of the tax-and-spend crowd almost never means reducing spending but, instead, concocting new ways to extract more money from taxpayers.
The Orange County Register