No Happy New Year for California’s budget

After coping with over $60 billion in budget shortfalls this year, California will face a new nearly $21 billion budget gap in 2010. Republican Governor Arnold Schwarzenegger is expected to propose draconian new budget cuts in a message set for Jan. 8. But others propose different ways to close the looming shortfall.

The new gap was projected in a recent report by the state’s non-partisan Legislative Analyst’s Office (LAO). “Our forecast of California’s General Fund revenues and expenditures shows that the state must address a General Fund budget problem of $20.7 billion between now and the time the Legislature enacts a 2010-11 state budget plan,” the report said. The LAO said the gap includes a predicted deficit of over $6 billion in the 2009-2010 budget – partly because “fixes” attempted earlier this year didn’t work – and a gap of over $14 billion between anticipated revenues and spending in 2010-11.

Most states have been hit hard by drops in revenue during the economic crisis. But California’s budget gap leads the nation, both in its absolute size and the portion of the General Fund it represents. Besides the state’s high foreclosure rate and soaring joblessness, a major contributing factor is the requirement of a two-thirds legislative majority to pass budgets or new taxes. This has enabled the Republican minority in the legislature to overrule the Democratic majority’s efforts to boost revenues.

California’s shortfall would have been even worse this year without federal stimulus funds, and the governor is expected to seek new federal funds in the coming year. The House of Representatives last week passed a jobs bill to help states pay for infrastructure projects and prevent further public worker layoffs.

But if such funds don’t come through or fall short, Schwarzenegger reportedly threatens to renew his call to gut or even end the state’s welfare program, CalWORKS, and the In-Home Supportive Services program to help elderly and disabled Californians remain in their homes. The governor’s previous decimation of funds for these and other human needs programs brought widespread protests and in some cases, court actions.

Though Schwarzenegger and legislative Republicans – most of whom have signed a “no new taxes” pledge – are adamantly opposed to increasing revenues through new taxes, the California Tax Reform Association takes a different view. It lists 10 policies it calls “low hanging fruit in the tax system,” that it says would raise $20 billion.

One is an oil severance tax that could bring $1.2 billion; California is the only oil-producing state that doesn’t have such a tax. Another is reinstating top-income tax brackets that were in effect under previous Republican governors, bringing in $4 billion that could grow to $6 billion. Also: closing “secret corporate tax loopholes,” ending corporate property tax loopholes, broadening the sales tax base to include entertainment-related items and digital products, increasing tobacco and alcohol taxes, and improving tax collections.

Other efforts seek to change the state’s requirement of a two-thirds majority to raise taxes or pass budgets. University of California professor George Lakoff, renowned for his study of the use of language in politics, is spearheading an effort to gain signatures for a constitutional amendment stating that budgets and taxes would be decided by majority vote. Democrats in the legislature have authored bills to end the supermajority requirement. Others seek to undo the limits on corporate real estate taxes imposed by Prop. 13, passed in 1978, while keeping protections for home owners.

What is certain is that 2010 will see new protests against Republican efforts to further slash human needs programs when they are needed by more Californians than ever, along with new efforts in the community and legislature and at the ballot box to bring the state’s budget process into the real world.