Brown Is Closer to Balancing Budget

By Gene Cubbison
|  Monday, May 16, 2011  |  Updated 9:56 PM PDT
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Brown Is Closer to Balancing Budget

According to the Governor's so-called 'May Revise' of his original budget, a surge of nearly $7 billion in tax revenue will shrink the state's budget gap to around $10 billion through the fiscal year ending June 30, 2012.

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Brown Is Closer to Balancing Budget

He's close but still "no cigar."
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California's budget deficit has gotten a whole lot smaller than once projected;  but not small enough so that Gov. Brown thinks it can be covered without extending income, sales and vehicle tax hikes that took effect two years ago.

According to the Governor's so-called 'May Revise' of his original budget, a surge of nearly $7 billion in tax revenue will shrink the state's budget gap to around $10 billion through the fiscal year ending June 30, 2012.
 
He's closer to balancing it -- but still 'no cigar'.
 
"So when some people come and say, 'Hey, ya got some more money; we're out of the woods' -- untrue!" the governor told reporters during a morning news conference and PowerPoint presentation in Sacramento.  "We have a serious structural budget deficit now, $34.7 billion, and into the future, unless we cure it."
 
The Governor has already cut $11 billion in spending -- a move that'll cost 5,500 state workers their jobs.
 
Published reports out of the state Capitol say he'll ask the Democrat-controlled Legislature to extend some of the previous tax hikes that expire in June.

In the absence of a required two-thirds majority (assuming the governor hasn't garnered enough Republican votes), there's speculation that this could be the strategy:

While the courts process an expected Republican legal challenge, state government keeps operating until the voters ratify the taxes during a special election in November.  Political observers see that as a financially risky roll of the dice, both in  the Court of Law and the Court of Public Opinion.
 
"Governor Brown may be playing with fire here, if he's seen as violating his central campaign pledge of not raising taxes without a vote of the people," said UC San Diego political science professor Thad Kousser.  "All of his polling shows that was what won him the campaign."
 
Kousser also suggests the governor and Democratic legislators might change the menu of tax options in a special election, withdrawing regressive measures such as the current surcharges to sales and vehicle levies.
 
"(They could) go back to the income tax we had about ten years ago, where it soaked the rich a little bit more," Kousser explained.  "To a lot of voters, that might be appealing."
 
San Diego political consultant Cynthia Vicknair says the tax extensions might be more viable, politically, if coupled with major state pension reforms.
 
"I don't think citizens are ready to increase taxes," Vicknair said, "when they feel that the only people who benefit from the tax increases are public employees and their pension costs."
 
As for higher tax extensions for the wealthy, Vicknair cautioned: "You end up seeing those people leave the state ... (Gov. Brown) needs to get those people back here, creating jobs, so we have more people paying taxes -- as opposed to fewer people paying more taxes."
 
The Brown Administration also is cutting 43 state boards and commissions, many of whose members get six-figure salaries for jobs seen as political patronage.
 
If lawmakers don't produce a budget by midnight June 30th, they're docked their own salaries and per diem, with no retroactive payments.

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