LAO: Calif. Falls $3.7B Short of Fiscal Year’s Revenue Expectations

On Wednesday, the non-partisan Legislative Analyst's Office released a report projecting that California will be $3.7 billion short of revenue expectations this fiscal year, raising the possibility that additional cuts to education, and health and human services programs will be needed, the Ventura County Star reports (Herdt, Ventura County Star, 11/16).

LAO's report does not guarantee that more cuts will be triggered automatically because officials also will consider a December revenue report by the state Department of Finance.

Gov. Jerry Brown's (D) administration will make a decision on the trigger cuts based on the more optimistic of the two forecasts (Buchanan, San Francisco Chronicle, 11/17).

Background

In June, Brown approved an $86 billion state budget plan that was based on spending cuts, fee hikes and expectations of higher revenue later in the fiscal year (Lin, AP/Contra Costa Times, 11/16). Lawmakers also relied on an assumption that the state would receive $4 billion in new revenue over what previously was expected through June 2012 (California Healthline, 11/15).

Under Brown's plan, additional budget cuts could be triggered for health care and education programs if revenue projections fall short by more than $1 billion.

Additional cuts could include:

• $100 million from the Department of Developmental Services;
• $100 million from In-Home Supportive Services -- a program for the elderly and people who are blind or have disabilities -- and a 20% reduction in service hours;
• $15 million from Medi-Cal, California's Medicaid program; and
• $10 million from IHSS anti-fraud initiatives (AP/Contra Costa Times, 11/16).

Details of LAO's Report

The LAO report estimates that California will collect only $300 million of the $4 billion that lawmakers expected in additional revenues. Overall, the state will collect $84.8 billion in revenue this fiscal year, according to the report. The budget package relied on $88.5 billion in revenue.

In addition, the state will face a budget deficit of $13 billion next fiscal year, according to LAO.

Reaction to the Report

Republicans said LAO's data prove that Democrats approved a budget that did not actually control spending (San Francisco Chronicle, 11/17). Assembly member Jim Nielsen (R-Gerber) said the report shows "that the budget passed by Democrats with only a majority vote was overly optimistic and based on shaky assumptions" (Yamamura, "Capitol Alert," Sacramento Bee, 11/16).

Meanwhile, Senate President Pro Tempore Darrell Steinberg (D-Sacramento) said the report makes it "clear that the state's first priority must be to get to the ballot in November and raise needed revenues to avoid any more damage to Californians" (San Francisco Chronicle, 11/17).

Health and human services advocates joined Democrats in calling for tax increases to avoid further budget cuts. They also said they plan to sue to block additional cuts to services for residents with disabilities (York/Riccardi, Los Angeles Times, 11/17).

Editorials Weigh In on LAO Report

A San Jose Mercury News editorial states that the governor "should call lawmakers back into a special session to deal with this calamity," adding, "The best solution in a special session would be to find new sources of revenue" (San Jose Mercury News, 11/16).

Meanwhile, an Orange County Register editorial argues that "[l]est this state becomes Greece-afornia, those responsible in Sacramento need to substantially ratchet back spending and mounting debt," adding, "Sadly, such a grown-up response [may be] unlikely" (Orange County Register, 11/16).