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A hope-and-a-prayer budget: Waiting for $4 billion to appear

If anything, the new budget is a gamble.

The budget that Gov. Jerry Brown and his fellow Democrats pieced together this week retains some aspects of the original budget blueprint that Brown vetoed on June 16.

But there is a big difference: It relies on an additional $4 billion in tax revenue that Brown says will be available for the 2011-12 fiscal year that begins July 1. This unexpected money may cover some of the most controversial items in the first budget — including cuts to First 5 commissions, local sales tax increases and the sale of state buildings.

The budget also reflects a looming political sea change in the Capitol. The document was approved solely with the votes of Democrats, who control both houses with simple majorities – an approval made possible by the passage last year of Proposition 25. Republicans, despite repeated efforts by Brown, declined to engage in meaningful negotiations, according to the administration. Marginalized and somewhat isolated, the budget’s passage may be a signal of what could happen to Republicans after next year’s elections in new political districts. Then, most observers believe, Democrats or their allies will pick up enough seats to have a two-thirds majorities in both houses, enough to pass budgets that include tax hikes.

The latest budget reflects some of the maneuvers that are common in Sacramento, including cuts, deferred payments, and fees.

Here is some of the fine print in the latest spending plan, which requires the governor’s signature to take effect by Friday.

Some $2.8 billion in payments that are owed to K-12 education and community colleges will be delayed into the new fiscal year.

About $150 million will be cut from both the University of California and the California State Universities. This is in addition to the $500 million that has already been cut from the UC system this year. According to UC officials, if this reduction is not restored, there could be another round of fee increases. This would come on top of the 8 percent hike already approved by the university.

As of July 1, vehicle registration fees will increase by $12 per vehicle. This would provide $300 million to the state’s General Fund.

State courts will also face a $150 million cut. This is in addition to another $200 million reduction in state funds that was approved three months ago. This could lead to two days of statewide court closures per month.

The state will now require online retailers, such as Amazon, to collect sales taxes. The tax requirements will apply to retailers who operate from out-of-state. However, there have already been questions concerning the legality of this plan, which may have a strong impact on smaller in-state businesses that have connections to the bigger online sites such as Amazon and eBay. This tax should bring in about $200 million in revenue to the state.

A new fire fee for rural homeowners will provide $50 million. This fee would require homeowners in rural areas more prone to fire to pay about $150 per occupied building.

The plan takes $1.7 billion from state redevelopment agencies. Effectively, this would eliminate redevelopment agencies and then create a voluntary new redevelopment program. In order to join the program, the agencies would have to give $1.7 billion to the state this year and then $400 million each year after that.

A sales tax swap of 1.06 percentage points redirects money to local state governments as opposed to the state as part of the governor’s “realignment” plan. As a result, on July 1 the sales tax rate will still go down by 1 percent to 7.25 percent.

Higher projected tax revenues amounting to $4 billion are expected to provide the state with additional funds in order to replace previous cuts to the budget. This projected increase in revenue is based on strong tax receipts amounting to $1.2 billion that have already come in from May and June.

However, the amount of actual revenue that comes in will determine the corresponding “triggered cuts.” If $3 billion to $4 billion of the money comes in there will be no additional cuts.

On the next tier, if $2 billion to $3 billion of the additional revenue is available, $600 million in additional cuts will have to be made. This would include $100 million cut from each the UC and CSU systems as well as $200 million from Health and Human Services and $100 million from corrections.

On the last tier, if the state only receives up to $2 billion of the revenue, there will be an additional $1.9 billion reduction which would involve both the first tier cuts and additional ones. $1.5 billion would be taken from schools leading to a possible seven fewer classroom days as well as a $250 million reduction in funds to school bus transportation.


Many Honeychurch is a Capitol Weekly intern.


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