Posted on 11/16/2005 5:23:47 PM PST by NormsRevenge
SACRAMENTO (AP) - California lawmakers won't have to worry about a multibillion budget deficit next year for the first time in four years thanks to an unexpected jump in tax income and ongoing spending cuts, according to a report released Wednesday.
But Legislative Analyst Elizabeth Hill tempered the good news with a warning that the state has not solved its long-term spending problems and warned that big deficits will return in 2007-2008 unless additional steps are taken.
"The state has to keep its foot on the gas peddle of getting its fiscal house in order," Hill said at a news conference at her office near the Capitol. "We are not out of the woods yet and those operating shortfalls are very important."
The report from the nonpartisan Legislative Analyst stands in sharp contrast to a prediction the office made in July that the 2005-2006 fiscal year will generate a shortfall of at least $6 billion.
Now, a combination of factors have drastically changed the outlook. First, an improving economy will produce billions more in personal and corporate tax income both through the end of this fiscal year and next. Second, spending cuts imposed in the current budget are also reducing the problem.
Hill said that the state will have $5.2 billion more than expected at the end of next fiscal year, which will more than cover a project shortfall revised downward to $4 billion and leave a reserve of $1.2 billion.
The improved outlook also put a twist on arguments made by Gov. Arnold Schwarzenegger during this month's special election in support of Proposition 76 - a measure that would have given the governor new authority for cutting spending without legislative approval.
Schwarzenegger told voters that the state was in crisis and if the initiative wasn't passed, taxes might have to be raised. Voters did not seem to accept his argument and overwhelmingly turned down the proposal.
A spokesman for Schwarzenegger's Department of Finance said decisions about the governor's budget proposal for next year are still in the works - but the report from the Legislative Analyst was clearly good news.
"When the governor took office he said he was going to put the state on a multiyear workout program, just like a company facing bankruptcy," said H.D. Palmer, Finance Department spokesman. "The report, we believe, indicates that the governor's work plan is paying dividends."
Hill said that she expects the California economy will soften somewhat in the 2005-2006 fiscal year because of higher interest rates and higher energy costs. But, the economy will begin growing again at a modest rate in 2006-2007.
She noted that business activity last year and this year accounts for a big share of the windfall of tax money. She warned lawmakers to be careful not to assume that improved conditions will continue again next year.
On the spending side, a big part of the saving came from a controversial decision by Schwarzenegger not to give schools an addition $2 billion they wanted - money that would have exceeded the voter-approved funding guarantee for education.
Some critics said lawmakers should not forget those costs to schools.
"California still owes a large debt to California students," state Superintendent of Public Instruction Jack O'Connell said in a statement. He estimated that the bill owed to schools now stands at $3 billion.
School funding, which represents almost half of the state budget, will again pose the biggest issue in next year's budget debate.
Education funding is dictated by Proposition 98, approved by voters in 1988 to provide a minimum amount of funding for education. The measure relies on a complex set of formulas to determine how much schools will receive each year. Hill pointed out that because of a variety of factors, the Proposition 98 mandate next year will fall about $731 million short of the actual cost of running the school system.
Among the options for making up the education shortfall, she said, would be dipping into reserves or cutting other programs.
Palmer said no decision has been made about how to handle education funding next year.
O'Connell said that voters sent a message last week that education remains a priority. "Ignoring the need to fully fund our schools would be a costly mistake that ignores the will of voters in this state," he said.
Since the state takes a fixed percentage of that price in taxes, as the price of gas skyrocketed, so did California's share.
The surge in gasoline taxes are a substantial percentage of the revenue increases Hill described as windfall.
(Denny Crane: "I Don't Want To Socialize With A Pinko Liberal Democrat Commie.Say What You Like About Republicans. We Stick To Our Convictions. Even When We Know We're Dead Wrong.")
BINGO WE HAVE A WINNER!!!
"School funding, which represents almost half of the state budget, will again pose the biggest issue in next year's budget debate.
Education funding is dictated by Proposition 98, approved by voters in 1988 to provide a minimum amount of funding for education. The measure relies on a complex set of formulas to determine how much schools will receive each year. Hill pointed out that because of a variety of factors, the Proposition 98 mandate next year will fall about $731 million short of the actual cost of running the school system.
Among the options for making up the education shortfall, she said, would be dipping into reserves or cutting other programs. "
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And if the CA voters had passed Prop. 76, we wouldn't have to worry about this.
Thanks to all those who voted against Prop.76. :(
If only we could have borrowed the 5 billion that Prop 76 largely served as a cover for doing so, we wouldn't be in this predicament of having to learn how to cut spending instead of borrowing more to support the addiction that even the Gub shares.. :-}
November 2005
California's Fiscal Outlook
LAO Projections 2005-06 Through 2010-11
http://www.lao.ca.gov/2005/fiscal_outlook/fiscal_outlook_05.htm
"If only we could have borrowed the 5 billion that Prop 76 largely served as a cover for doing so"
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NOT TRUE.
"If only we could have borrowed the 5 billion that Prop 76 largely served as a cover for doing so"
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NOT TRUE.
LOL..
Now we may never know for sure, huh? ;-)
Actually, we won't have a government surplus... What we'll have is SURPLUS GOVERNMENT!!! (exactly like under Gray Davis)(snort!!!)
And what Norm said is too true! And you know it!
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