California mid-year budget news is looking grim




The State budget that was finally adopted this year assumed an optimistic revenue increase of $ 4 billion, and provided for automatic mid fiscal year “trigger cuts” if actual revenue is significantly less. Looks like the “less” is happening.

According to a newsletter of the California Family Resource Association (CFRA), California Controller John Chiang recently reported that state revenues fell short in October by $810.5 million, bringing the total shortfall in the first four months of the fiscal year to over $1.2 billion. CFRA also reports that the Legislative Analyst’s Office (LAO) just released its analysis, which forecasts that by the end of the fiscal year the state will end up $3.7 billion below the level assumed in the June budget package. The LAO report estimates that the revenue shortfall will translate into $2 billion in trigger cuts including all of the Tier 1 cuts and more than half of the Tier 2 cuts.

What are Tier I and Tier II cuts? CFRA reports they are as follows:

Tier 1: If the state receives only $2-$3 billion of the assumed $ 4 billion revenue increase, $600 million in cuts will go into effect;

• $100 million cut to University of California

• $100 million cut to California State University

• $100 million cut to In-Home Supportive Services

• $100 million cut to Department of Developmental Services

• $72 million cut to Public Safety Programs

• $30 million cut to Community Colleges triggering a $10/unit fee hike

• $23 million Across-the-Board cut to Childcare Funding

• $20 million cut to Department of Corrections and Rehabilitation

• $16 million cut to California State Library grants

• $15 million cut related to Medi-Cal Managed Care

• $15 million cut to California Emergency Management Agency

• $10 million cut to Department of Social Services in anti-fraud grants

Tier 2: If the state receives $0 – $2 billion of the assumed $ 4 billion revenue increase, an additional $1.9 billion in cuts will take effect;

• $1.5 billion reduction to K-12 schools that allows districts to drop seven classroom days

• $248 million cut that eliminates School Bus Transportation

• $72 million cut to Community Colleges

CFRA reports that by December 15th, the Director of the Department of Finance is to review the state’s numbers and the LAO’s analysis and officially determine whether the trigger must be pulled and what level of cuts will take effect. All of the trigger cuts would be implemented on January 1, 2012, except for the proposal that reduces 7 days from the K-12 school-year which may be implemented February 1, 2012.

If this is not bad enough news, we have a local dispute that appears to add fuel to this fire. The Board of Supervisors has decided it can divert $ 75 million of property tax revenues from public schools and Community Colleges to plug a $ 48 million dollar hole in the county budget that is blamed on – you guessed it – the state budget. The Supervisors believe the state is required to backfill this money by law and that the local schools will be made whole. The County Superintendent of Schools and other education leaders appear to have been caught flat footed by this move by the Supervisors and have doubts about the State being legally obligated – or financially able given the dire situation of state finances – to backfill the money the County plans to take. There is the smell of litigation in the air over this one.

For years we have seen Governors of both parties and our State Legislature kick the can down the road by adopting budgets based upon optimistic revenue assumptions, estimated savings that never seem to materialize, and rolling costs from one fiscal year into the next. It is looking like this year may be the year of reckoning, and if so it ain’t going to be pretty.

About Over But Not Out

A retired Orange County employee, and moderate Republican. The editor seriously does not know OBNO's identity as did not the former editor, but his point of view is obviously interesting and valued.