State budget meltdown looming

By CMTA Staff

Capitol Update, Nov. 16, 2007 Share this on FacebookTweet thisEmail this to a friend

The non-partisan Legislative Analyst, Elizabeth Hill, released her latest analysis of the state budget this week and warned that the state is facing a budget shortfall of nearly $10 billion. She noted that in less than three months since lawmakers passed the last budget (and projected a reserve of about $4 billion), the state has taken a drastic turn for the worst.

Property, sales and personal income taxes are down sharply as a result of the troubled housing market, and Hill predicted that the housing sector has yet to hit bottom. "The Legislature should start now" curbing spending and finding new revenue, she said. "All the easy solutions are gone."

Adding to the squeeze on tax revenue from the housing market slide is the fact that significant savings lawmakers assumed in the most recently enacted budget appear unlikely to materialize. Additionally, the budget took an unanticipated $140 million hit from the cost of fighting Southern California's wildfires a few weeks ago. Previous borrowing from the teachers pension fund has been declared unconstitutional in court, forcing the state to repay an additional $500 million this year.

Earlier this month the Governor ordered state agencies to plan to cut their spending by 10%.

"An honest dialogue about closing the budget gap must include exploring all options," said state Senate Leader Don Perata (D-Oakland).

"We must tackle this problem head-on, and now," said Senate Republican Leader Dick Ackerman (R- Irvine). "We need to look at cost containment, re-examine our budget priorities and maybe even" make mid-year cuts."

For the full report from the legislative Analyst's Office please use this link:
www.lao.ca.gov/2007/fiscal_outlook/fiscal_outlook_07.aspx

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