LAO Report Says Brown’s Budget Assumes Too Much Revenue

The Legislative Analyst's Office has released a budget forecast estimating that California's revenue will fall $6.5 billion short of what Gov. Jerry Brown (D) projected in his fiscal year 2012-2013 budget proposal, the Sacramento Bee reports.

The report raises concerns for Democrats who were hoping that a more positive forecast would help the state avoid certain cuts to health and human services programs (Yamamura, Sacramento Bee, 2/28).

Background

Brown's $92.6 billion spending plan calls for cutting:

• $946.2 million from CalWORKs -- the state's welfare-to-work program -- by limiting the amount of time most adults could be on the program from four years to two years;
• $842.3 million from Medi-Cal -- California's Medicaid program -- by merging services for beneficiaries eligible for both Medi-Cal and Medicare;
• $163.8 million from In-Home Supportive Services -- which provides services for the elderly and people who are blind or have disabilities -- by eliminating domestic assistance for beneficiaries in shared living environments; and
• $64 million from Healthy Families, California's Children's Health Insurance Program, by moving children out of the program.

Different Estimates

The administration's Department of Finance estimated that California will face a $9.2 billion shortfall in the next fiscal year (California Healthline, 1/6). LAO's latest estimates are similar to projections it made in November 2011, when it forecasted a $13 billion shortfall in the next fiscal year (Sacramento Bee, 2/28).

The disparity between estimates released by Brown and LAO are due in large part to how they estimated income tax revenue, which fluctuates based on changing financial markets (Small, "KPCC News," KPCC, 2/27).

In addition, officials used different methods to estimate California's capital gains revenue.

The LAO report stated, "We can identify no strong rationale for the administration's assumption that capital gains will grow very rapidly in 2012 and later years."

Recommendation

LAO recommended that legislators wait for Brown to revise his budget proposal in May before passing a state budget (Sacramento Bee, 2/28).

Broadcast Coverage

On Monday, Capital Public Radio's "KXJZ News" reported on LAO's budget forecast (Adler, "KXJZ News," Capital Public Radio, 2/27).