Governor Jerry Brown is looking to cure the state’s budget woes with more cuts, more taxes, and more realignment.
The state, which will face a $9.2 billion deficit in the coming fiscal year will balance its budget with more than $4 billion in cuts, a proposed tax increase of $6.9 billion – of which $4.4 billion will be available for general fund spending. That revenue increase depends upon the voters’ passage of Governor Brown’s Ballot Initiative that would raise sales taxes and personal income taxes on those earners making more than $250,000 per year. Also included as a budget solution was a $1.4 billion shift to the local level, mostly falling to the K-12 school system.
The $4.2 billion in cuts, which come from Welfare, Welfare to Work, and Social support services, are base cuts. Those cuts assume the passage of the Governor’s tax proposal. Should that fail, trigger cuts will be implemented cutting schools by nearly $5 billion and resulting in the cancellation of three weeks of school. The UC and CSU system would also face further reductions.
The budget also lays out the basis for Phase 2 of the Governor’s realignment plan. While the first phase was approved and funded in the 2011 budget year, this second phase would involve social services and would coincide with national healthcare reform.
“We should be giving more discretion to counties, cities, and school districts,” said Governor Brown at the Thursday press conference. “I have confidence that the local democracy is at least vigorous and responsive as our statewide democracy.”
The budget has called for a slow economic recovery. Unemployment rates will not reach pre-recession levels until 2016, while the total number of unemployed Californians is projected to increase by .6% in 2012 and unemployment will remain statistically unchanged at 12%.
Despite that somewhat anemic economic performance, the Governor presented an economic outlook that calls for Californians to earn 3.8% more in the coming year, corporate pre-tax profits to increase by 3.4%, and new car registrations to increase 11.7%.