Wednesday’s Child is Full of Woe

The Governor signed California’s budget last Wednesday. With optimistic revenue projections based on Facebook IPO earnings and a heavy reliance on voters passing a temporary tax hike on sales and high-income earners to raise $8.5 billion in the current budget cycle, it appears that the relatively quiet budget negotiations could be facing a more chaotic position in November.

The legislature sent the Governor the main $91.5 billion spending legislation on June 15, the constitutional deadline after which lawmakers would have lost pay and expense money had they not passed a budget. After signing the main bill Wednesday, the Governor used his line-item veto authority to cut another $195 million from final budget.

The court system was hard hit by budget cuts this year, which could end up hurting the business community with delayed trials and legal filings and “safety-net” programs also faced cuts in subsidized child care, health insurance for low-income children and a restructuring of welfare programs. College aid was also reduced. However, State worker unions have agreed to take 12 days of unpaid leave, saving the state nearly 5 percent in pay costs. Most contentious are the cuts that are looming for education should the Governor’s tax measure fail. A series of automatic cuts will be triggered, including three weeks less of public school for the next two years. A recent Field Poll found California voters divided on the initiative, with 52 percent in favor and 35 percent opposed.

As in previous budgets, the state is also relying on one-time funds to balance the budget, this year using $410 million from a multi-state settlement with banks over mortgage abuses, as well as $1.4 billion in assets that once belonged to redevelopment agencies before the Legislature eliminated them last year. CLICK HERE for detailed information on the budget. For more information contact Kate Klimow, Vice President of Government and Community Affairs.

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