Governor Signs Rare On-Time Budget

Friday, Jul 1, 2011  |  Updated 6:45 AM PDT
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Gov. Jerry Brown stands next to a chart that shows dollar amounts in the millions that were cut from the State's budget. He signed a rare on-time budget Thursday.

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Gov. Jerry Brown on Thursday signed a rare on-time budget a day before the start of California's fiscal year, a package that is a combination of spending cuts, fee hikes and the promise of higher tax revenue that might never materialize.

Brown signed the $86 billion spending plan after majority Democrats passed it without Republican support. They acted for the first time under a voter-approved law that allows budgets — but not tax increases — to be passed with a simple majority, rather than a two-thirds vote.

Lawmakers also were motivated to complete a deal because the same law halted their salaries and living expenses until they passed a balanced budget.

But there were winners and losers on both sides.

In signing the budget, Brown said general fund spending is at its lowest level since the 1972-73 fiscal year when measured as a share of the state's economy.

"This is an honest but painful budget that returns California's General Fund spending to levels unseen since the 1970s," he said in a statement. "This is a huge step forward. But California's long-term stability depends on our willingness to continue to pay down debt and live within our means."

In years past, lawmakers sometimes went months beyond the start of the fiscal year before approving a budget, including last year's record stalemate, which ended in October.

While California has a spending plan for its new fiscal year, Brown has warned that the state will continue to have ongoing deficits unless it can find a way to bring its annual tax revenue in line with spending obligations.

The latest budget include cuts to higher education, welfare, health care for the poor and disabled, in-home supportive services, state parks and other core functions of government. It also relies on optimistic projections that tax revenue will be about $12 billion higher in the coming fiscal year than projected in January, largely because the wealthy are doing so well.

If that higher revenue does not materialize, more cuts would have to be made during the middle of the fiscal year. That would include authorizing school districts to reduce their school year by seven days.

The new spending plan projects a $5 billion shortfall for the fiscal year that will begin July 1, 2012.

Brown has said the best way to avoid ongoing deficits is to find new ways to raise revenue. The Democratic governor was unable to renew several expiring tax increases this year, but has vowed to fight for more tax revenue at the ballot next year to help the state pay down debt and restore education.

California had started the year with a projected $26.6 billion shortfall, forcing Democrats to adopt billions of dollars in cuts to social service programs, higher education and corrections.

The remaining budget package passed this week relies on further spending cuts to close the remaining $9.6 billion deficit.

While the governor projected $6.6 billion in higher revenue in his May revision, the new package projects an additional $4 billion in higher tax revenue and an additional $1.2 billion coming in spring.

Brown has indicated he will pursue another ballot measure for November 2012, but so far has given no details on what taxes he would include. That means it will be up to voters to decide the biggest issue the governor promised but failed to deliver this year — an increase in taxes to help end the state's ongoing budget mess.

Brown promised voters during his campaign for governor last year that he would not impose tax increases without a vote of the people.

He had hoped to ask Californians to extend for up to five years a series of temporary increases in the sales, vehicle and income taxes approved by the state Legislature in 2009. But he was unable to get two Republican votes in each house of the state Legislature to put that measure on the ballot.

The last of those tax increases will expire Thursday.

"The devastating cuts contained in this budget are a direct result of the unwillingness of legislative Republicans to allow the people of California to vote on tax extensions," said Lillian Taiz, president of the California Faculty Association and a history professor at California State University, Los Angeles.

In addition to higher fees for college students, the new budget imposes an extra fee on vehicle registration and a $150 assessment on rural property owners for fire protection. Those levies are almost certain to be challenged in court because they did not get the two-thirds vote required for tax increases.

The budget also shifts responsibility for low-level offenders from the state to counties, helping the state meet a federal court mandate to reduce its prison population.

Rank-and-file lawmakers have lost about $400 a day in salary and living expenses since the June 15 constitutional deadline for the Legislature to pass a balanced budget, or a total of roughly $4,000 each. Their base salary is $95,291 a year, not counting per diem expenses that can add another $20,000 or $30,000.
 

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