October State Revenue Short by $810M, Raising Prospect for Cuts

TOPIC ALERT:

State Controller John Chiang (D) has released data showing that California fell $810.5 million short in October revenue expectations, bringing the total shortfall this fiscal year to $1.5 billion and raising concerns that deeper cuts to health and human services programs could be triggered, Reuters reports (Reuters, 11/10).

Gov. Jerry Brown (D) said that the falling revenues could lead to more budget cuts next year but that it is too early to tell whether more spending cuts will be needed before the end of this fiscal year (York, "PolitiCal," Los Angeles Times, 11/10).

Background

Brown signed an $86 billion state budget plan in June.

Lawmakers relied on an assumption that the state would receive $4 billion in new revenue over what previously was expected through June 2012.

If officials determine that revenue has fallen $1 billion short of expectations for this fiscal year, additional cuts could take place automatically. Most cuts would become effective Jan. 1, 2012.

Additional cuts could include:

  • $100 million from services for individuals with developmental disabilities; and
  • $100 million from the In-Home Supportive Services program for the elderly and people who are blind or have disabilities (California Healthline, 11/4).

Details of the Shortfall

October's $810.5 million shortfall in revenue expectations brings the total to about 6% below expectations this fiscal year. California has spent $1.7 billion more than it budgeted for since the fiscal year began (Marois, Bloomberg, 11/10).

Part of the shortfall is tied to the fact that the state's personal income tax collection was $451 million below budget estimates.

Prospects for Automatic Cuts

Chiang said, "Unless revenues and expenditures begin to track with projections, the state will face increasing cash pressure in the months ahead" (Yamamura, Sacramento Bee, 11/11).

The decision whether to enact the automatic cuts will be based on upcoming revenue projections from the Legislative Analyst's Office and the state Department of Finance ("PolitiCal," Los Angeles Times, 11/10).

Department of Finance Director Ana Matosantos will decide whether the trigger cuts will take effect, according to the San Francisco Chronicle.

Deborah Doctor, a lobbyist for Disability Rights California, said the cuts could force IHSS workers to reduce their hours by 20%. She added that advocates for IHSS and other programs that would be affected by the automatic reductions could call on lawmakers to rescind the cuts if they take effect (Buchanan, San Francisco Chronicle, 11/11).


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