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    News

    Governor Davis Delivers Grim News: CA's Budget Gap Isn't $20-Something Billion Previously Estimated...It's Now $34.8 Billion


    (December 18, 2002) -- In a grim admission of the depth of CA's budget chasm -- the amount by which the legislature has authorized state spending beyond expected state revenue -- Governor Gray Davis today announced the deficit is no longer $20-something billion previously estimated to amass over the rest of the current fiscal year and through the next (over the next 18 months).

    It is now an estimated $34.8 billion.

    In a written release, Governor Davis described the budget gap as a "shortfall," a term implying the problem results from revenue falling short of expectations. Others argue the state's budget woes stem from too much spending, which is ultimately controlled by the Assembly and CA Senate.

    "This budget shortfall is larger than any expert predicted," the Governor said in a written release, adding "A shortfall of this size represents 45 percent of the current year General Fund."

    At a Sacramento news conference, Governor Davis (who on Dec. 6 proposed a $10 billion package of cuts when the estimated deficit was $20 billion over two years) refused to rule out new taxes in response to nearly $35 billion in red ink estimated now.

    The Governor's announcement comes roughly six weeks after a November election returned him and most incumbent legislators to office. It also comes three weeks earlier than the annual release of the January 2003-04 Budget.

    "I am releasing information on the size of the shortfall now so that the Legislature and the public can grasp the importance of swift action," the Governor's release continued. "This is a national problem. 46 states and the federal government are also facing serious budget shortfalls. To address this challenge in California, it is clear that everyone must be part of the solution."

    The Governor's office blamed what it called the "economic challenge" largely on "a dramatic decline in revenues. 51 percent of the problem ($17.7 billion) is due to underperformance of the economy. 13 percent ($4.5 billion) results from required increases in spending to address caseload growth and the loss of anticipated federal funds. The last portion of the shortfall, ($12.6 billion), results from one-time solutions used to close the current budget that are no longer available."

    As reported on December 6 by LBReport.com, LB area Assemblywoman Jenny Oropeza, who chairs the powerful Assembly budget committee, has called for "responsible revenue increases" [our translation: tax/fee increases] to help balance the CA state budget. That was when the deficit was expected to be "only" roughly $21 billion over the next two years.

    At that time, Governor Davis urged the state legislature to enact $10.2 billion in cuts, recaptures and other budget changes in virtually all governmental areas, including education. In a written release, the Governor said his proposal "reflects tough decisions made to deal with a tough situation. Reductions will be made in every state agency, nearly every department, nearly every program and in all areas of state spending. In times like these, everyone must be part of the solution."

    In response to the Governor's Dec. 6 proposed cuts, Assemblywoman Oropeza released a statement saying she was "pleased the Governor has made this first set of recommendations to address the more than $20 billion budget shortfall we face" but added:

    "As we begin the process of thoroughly reviewing his reduction proposals, I again call for balance in closing the shortfall. This budget cannot be balanced by cuts alone. The time has come for responsible revenue increases. Every time California has faced severe budget shortfalls, Democrats and Republicans have come together to pass a balanced package including revenue increases. Historically, this approach has successfully stabilized our state’s economy. The key to solving California’s current budget crisis is no different."
    The CA Assembly and Senate ultimately have the last word on spending. On December 6, Governor Davis said of his package of proposed budget reductions that he urged the legislature to enact:

    "All of these [proposed] reductions are painful, but they are absolutely necessary if we are going to be in a stronger positions to meet this challenge in the coming year. If all of these actions are taken immediately, they will maximize savings and ease the pain down the road. I urge the Legislature to approve this package as fast as humanly possible."

    [LBReport.com comment: Merry Christmas.]


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