Budget Gap Widens in Sacramento
$21 Billion Fiscal Shortfall Could Mean More Cuts, Higher Taxes and the Return of IOUs to Meet Obligations
California is deep in red ink again, according to a new report projecting that the cash-strapped state faces a $21 billion budget shortfall through June 2011.
The report, published Wednesday by the California legislature’s nonpartisan analyst, painted a grim picture of the state’s finances — with a $6 billion gap forecast in the current fiscal year that goes until June 2010 and another $14 billion deficit falling in the 2010-2011 fiscal year.
The California State Capital
Until at least June 2015, the report projected California will face annual budget shortfalls of about $20 billion.
Facing so much fiscal red ink, Californians could see another round of spending cuts and tax increases. Since September 2008, state lawmakers have enacted three budgets to close a cumulative $77 billion shortfall. They closed the gap largely through spending cuts and tax increases, but also with federal-stimulus funds and one-time accounting gimmicks. At one point, California was so close to insolvency it was forced to issue IOUs.
The report’s conclusions now raise the likelihood of another lengthy impasse among the state’s hyper-partisan legislators that could threaten California’s solvency and force officials to again resort to IOUs.
Republicans, including Gov. Arnold Schwarzenegger, are opposing tax increases. Democrats, who control the state legislature but fall short of the two-thirds majority needed to pass budgets, vow to resist new spending cuts. “It’s going to be, as Yogi Berra says, déjà vu all over again,” said Tom Harman, a Republican state senator.
“The numbers cry loudly for California to focus on rebuilding our tax base,” said Democrat Darrell Steinberg, the Senate president. “The only tried and true way to do so is to use our fiscal levers to increase the number of high-wage jobs.”
By Stu Woo
November 19th, 2009
