California Governor Unveils New Budget

By Heide B. Malhotra
Heide B. Malhotra
Heide B. Malhotra
May 18, 2011 Updated: May 18, 2011

LOS ANGELES—Gov. Jerry Brown has declared that state government will be downsized, while education, which has proven to be a generator of higher paying jobs, and California employers will be ‘protected’ along with public safety.

“California’s economy is growing, but we still face a $10 billion structural deficit and a wall of debt for years to come,” said Brown. “California’s finances were plunged into turmoil by the Great Recession and a decade of short-term fixes and fiscal gimmicks. This is not the time to delay or evade. This is the time to put our finances in order.”

According to his office, the newly revised budget “reduces by nearly $3 billion the amount of taxes needed to balance the budget, spurs job creation through new tax incentives, and pays off most of the $34.7 billion debt built up over the last decade.”

Tax incentives involve the use of tax credits to create new jobs only for Enterprise Zones, and “encourage manufacturing jobs through reduced sales tax on equipment purchases; and revamp a hiring tax credit to encourage additional job creation.”

In his declared reduction of excess state assets, the list goes well beyond the initial classes of property announced earlier this year. From little used cars and cell phones, the assets have gotten bigger: “the Los Angeles Coliseum, the Montclair Golf Course in Oakland, the Capital Area Development Authority in Sacramento, and the Ramirez Canyon property in Southern California. These properties serve no state function and should be sold off to pay debt.”

Shifting the Burden From State to Municipal Levels

Moving from state to local governments are various social service programs, which Brown said were inefficient uses of money. “The departments of Mental Health and Alcohol and Drug Programs will be eliminated [at the state level]."

Various boards, departments, offices, and task forces will be eliminated.

It appears that though these programs have been partially supported with federal funds, the shift, if not augmented from state coffers, will require funds from local coffers. There is no mention of the estimated cost burden that will be shifted to local taxpayers.

The budget proposal looks to merge two social programs, the Healthy Families Program and the Medi-Cal program, creating a single health care program for low-income families. This will reduce administrative cost redundancies and simplify access.

According to the governor, in last year’s budgeting process, the costs of two large state programs were underestimated, causing a substantial $465 million shortfall. To address this, the governor stated that in order to “restore honesty to the budget process,” both the Department of Corrections and Rehabilitation and Department of Mental Health will have “new controls to prevent future overspending.”

Unspent Cash in the Bank

Improving debt management will save taxpayers more than $700 million per year in debt service. Brown said that over $11 billion from bond sales was sitting idle in government accounts meant to fund projects not yet completed. Interest must be paid on bond funds, yet the money is sitting idle, according to the governor.

He said, in a statement “Completing these projects will create jobs and improve state infrastructure.

Spending Cuts Already Made

Since taking office in January, Brown and the Legislature have cut spending by $9 billion and have taken other steps to reduce the deficit.

Heide B. Malhotra
Heide B. Malhotra