To no one's surprise, the latest version of the 2009-10 state budget has sprung a leak. Controller John Chiang reported October 9 that major state general fund revenues were $1.2 billion below estimates in the month of September. Personal income tax receipts were down $934 million (17.3 percent) below estimates, corporate taxes were $183 million (10.5 percent) short, and sales tax revenue was $100 million (4.5 percent) below estimates. Cigarette taxes also came in well below estimates (26 percent below the target for July through September).
Mr. Chiang said: "Revenues more than $1 billion under estimates and recent adverse court rulings are dealing a major blow to a budget that is barely 10 weeks old. While there are encouraging signs that California's economy is preparing for a comeback, the recession continues to drag state revenues down. I urge lawmakers and the governor to prepare for more difficult decisions ahead."
On the expenditure side, the areas where actual general fund spending is exceeding estimates are for the "Legislative, Judicial and Executive" allocation, where spending for July through September is above estimates by 19 percent ($528 million vs. a $444 million estimate); health services (5.2 percent over estimates); K-12 schools (3.1 percent over estimates); local assistance for other education (16 percent); corrections (77.2 percent); developmental services (71.1 percent); and other health services (83.2 percent).
Spending for legislative, executive and judicial purposes is $324.5 million for 2009 vs. $185.1 million reported in September 2008.
In the first version of the 2009-10 budget, adopted in February, legislators sought to balance the spending plan with, among other things, a $9 billion tax increase. In the second version of the budget, adopted in July, legislators tried to balance the plan with budget reductions and gimmicky financing. What will the third version of the 2009-10 budget look like?
Other budget-related news:
New Spending Programs Never Stop. Even with massive budget cuts and deficits as far as the eye can see, there is no stopping the Legislature from enacting new spending programs. On October 11, the governor signed AB 590 (Feuer), establishing a program to provide free legal services to the poor in civil cases involving critical issues. To pay for the program, $10 will be taken out of a $25-to-$35 fee for various court services. Whether this will be enough is anyone's guess. The Sacramento Daily Recorder reports that California is the first state in the nation to establish this new program for the poor.
Assemblyman Mike Feuer said, "The current economic crisis and state budget cuts make this measure more critical than ever."
They're Back – More Spending Funded by Gimmicks. The Senate called itself back into regular session October 14, and promptly passed legislation spending $16.3 million that the governor cut with a line-item veto (SB X3 13, Alquist). The legislation provides additional dollars to domestic violence shelters. To fund this higher level of spending, the bill borrows money from the Renewable Fuel Technology Fund. The money will have to be repaid, with interest, by June 30, 2013.
The bill now goes to the governor. The vote in the Senate was 38-0.
(Cal-Tax:
Taken together, these two items show that the state is establishing new programs
while it is borrowing money to fund existing programs – and the borrowing
increases the cost of these existing programs.)
Cal-TaxReports, October 19, 2009
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