New California Budget Hinges on Tax Hike

SACRAMENTO, Calif. (CN) - Gov. Jerry Brown says he can close California's nearly $16 billion spending gap with a $91.3 billion budget, but voters will first need to pass his tax increases in November.

Spending reductions account for almost half of the effort to close the $15.7 billion gap, according to Brown's budget summary. Education took the greatest hit, losing nearly $2.4 billion from previous levels with cuts to largely extraneous programs, the suspension of nonmandated spending and changes to spending process mandated by Proposition 98.

Brown's budge also axes more than $1.8 billion from health and human services by eliminating the Healthy Families program. Children using those services will be transferred to California Medical Assistance Program. The state will offset Medi-Cal's new costs by merging the delivery of services to people eligible for both state and federal health services.

Hospitals and nursing homes will also lose Medi-Cal, and the budget takes another chunk out of in-home supportive services - a move likely to be challenged again in federal court.

Parents who fail to meet federal work requirements will also face cuts in the California Work Opportunities and Responsibility to Kids program, or CalWORKs.

State workers will feel the pinch, too, with an across-the-board 5 percent pay cut.

Brown says his administration has focused on shrinking state government, already eliminating 30,000 positions and 50 boards, commissions, task forces, offices and departments since he took office in 2011.

And the judiciary will feel its share of budgetary pain. In addition to tighter controls recently enacted by the Legislature, the new budget hands another $544 million cut to the state's already cash-strapped courts.

California will offset a one-time general fund decrease of $486 million by suspending court-construction plans, requiring the judiciary to dip into reserves and increase civil court filing fees.

For all Brown's talk of fiscal responsibility, California's final budget for 2012-2013 is not without its gimmicks. More than $2.5 billion - 15 percent - of the budget "balancing" proposals require the transfer of special funds to the general fund. The budget also shanghais vehicle weight fees from the California Department of Transportation. And it extends loan repayments into future years, guaranteeing that the pain will endure for years to come.

Brown has admitted that the "balancing" act requires that voters approve his package of tax increases in November. The measure increases taxes on households earning over $250,000 for seven years and raises California's sales tax by a quarter percent for four years. Brown says the increases will generate $8.5 billion through 2013, with $2.9 billion already earmarked for education.

"My revenue proposal is fair and temporary," Brown said in a statement after signing the budget late Wednesday. "Our state budget problem was built up over a decade, and it won't be fixed overnight. These temporary increases will ensure funding for our schools until the economy improves."

A recent field poll found that 52 percent of voters currently back Brown's initiative, but 13 percent are still undecided. Another poll shows large proportions of voters say they don't have much confidence in either Brown or the Legislature to effectively resolve the state's budget deficit.

If voters fail to pass Brown's tax increases, the enacted budget includes $6 billion in trigger cuts that would land in January. The vast majority of the cuts - a huge $5.4 billion - would hit California's K-12 schools and community colleges. The University of California and California State University systems would each face $250 million cuts. Brown promises that the cuts protect public safety.

At the end of the day, California's budget problems hinge on legislative overspending. Total state spending has increased by $4.4 billion since 2007-08 - the start of the current worldwide economic crisis, according to Brown's budget.

The raw numbers do not portend much change.

If the governor's tax package passes, the state expects to generate nearly $133 billion in revenue next year. Unfortunately, 2012-13 expenditures are projected at more than $142 billion across the board.

Brown says he is still optimistic that this budget that will solve California's woes.

"This budget reflects tough choices that will help get California back on track," he said in a statement. "I commend the Legislature for making difficult decisions, especially enacting welfare reform and across-the-board pay cuts. All this lays the foundation for job growth and continuing economic expansion."

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