Size of California’s New Budget Gap Hinges on Special Election

California will face a $12 billion budget deficit in fiscal year 2009-2010 if voters reject measures on the May 19 special election ballot that would shift money from special funds for mental health services and early childhood health care and education and permit the state to borrow against future lottery revenue, according to a report California's nonpartisan Legislative Analyst released Friday, the San Francisco Chronicle reports.

Even if the measures are approved, the state will face a budget deficit of at least $6 billion because state revenue is falling about $8 billion short of expectations, according to Legislative Analyst Mac Taylor.  Taylor's estimates project that the state will have to tap into its $2 billion reserve fund to bring the deficit down to $6 billion for FY 2009-2010 (Yi, San Francisco Chronicle, 3/14).

Details of Health Care-Related Measures

Proposition 1E would shift $226.7 million from mental health care programs that Proposition 63 funds to the existing Early Periodic Screening, Diagnosis and Treatment Program for low-income children for two years. In 2004, voters approved Proposition 63, which increased the state income tax on high-income Californians to fund mental health services.

Proposition 1D would temporarily shift $608 million from First 5 programs to fund services for children, including programs for foster children and kids with developmental disabilities. First 5 was created in 1998 when voters approved Proposition 10 to increase the state tobacco tax to fund early childhood health care and education programs.

The measures would complete the budget Gov. Arnold Schwarzenegger (R) signed last month that uses tax increases, spending cuts and borrowing to cover California's projected budget deficit through fiscal year 2009-2010 (California Healthline, 3/13).

Sizing Up the Stimulus

In other budget news, state Finance Director Mike Genest and Treasurer Bill Lockyer (D) will hold a public meeting Tuesday aimed at determining whether California will receive at least $10 billion from the federal stimulus package for budget aid, the San Jose Mercury News reports.

If the state receives less money for budget aid from the stimulus, state taxes would see further increases and Medi-Cal and other programs would experience deeper cuts.