California Budget Deficit Has Grown to $16B, Brown Says

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In a video released on Saturday, Gov. Jerry Brown (D) said that California's budget deficit has grown to $16 billion, nearly twice as high as the $9.2 billion shortfall he estimated in January when he released his fiscal year 2012-2013 budget plan, the Sacramento Bee's "Capitol Alert" reports.

Details of Deficit Announcement

In the video, Brown said that the higher deficit estimate is the result of a slow economic recovery and decisions by the federal government to block proposed state spending cuts (Yamamura, "Capitol Alert," Sacramento Bee, 5/12).

In February, CMS rejected a proposal to require Medi-Cal beneficiaries to take on copayments for physician visits and prescription drug purchases. Brown and state lawmakers said the requirement would have saved $511 million annually (California Healthline, 2/7). In addition, a federal judge in February granted a preliminary injunction to block a 10% cut to Medi-Cal reimbursement rates, saying the payment cuts could cause irreparable harm (California Healthline, 3/26).

Brown said in the video that the state will "have to go much further, and make cuts far greater than I asked for at the beginning of the year."

He then asked voters to approve a compromise tax hike initiative that he developed with supporters of the "Millionaires Tax" ("Capitol Alert," Sacramento Bee, 5/12).

Details of Tax Hike Plan

The tax hike plan would:

  • Increase the personal income tax by one percentage point for individuals who earn $250,000 annually or couples who earn $500,000 annually and by two percentage points for individuals who earn $300,000 annually or couples who earn $600,000 annually;
  • Extend the income tax increases on wealthy residents from five to seven years; and
  • Increase the sales tax by a quarter of a cent.

The sales tax hike would expire in four years.

The proposal would raise an estimated $9 billion over the next fiscal year.

Last week, Brown began submitting voter signatures to qualify the plan for the November ballot (California Healthline, 5/11).

Brown To Release Revised Budget Plan Today

Brown is scheduled to release his revised May budget today at 10 a.m. on Monday ("Capitol Alert," Sacramento Bee, 5/12).  Last week, Brown said the revised spending plan would fall between $85 billion and $90 billion, down from the $92.6 billion plan he released in January (York/Megerian, "L.A. Now," Los Angeles Times, 5/13).

Advocates for low-income residents expected more proposed cuts to health and welfare programs beyond those included in Brown's initial budget plan. They said Brown likely will proposed additional Medi-Cal cuts that will affect beneficiaries.

Anthony Wright, executive director of Health Access California, said, "It's bad, it's big and it'll mean brutal cuts." He added, "The kind of cuts left to make will have huge impacts not just on families but the economy. There's no good news here" (Yamamura, Sacramento Bee, 5/13).

Broadcast Coverage

Headlines and links to broadcast coverage of Brown's announcement of the $16 billion budget deficit are provided below:

For details on Brown’s May budget revision, check California Healthline's Capitol Desk later in the day.

Sandra Griggs
I think California voters may have some tolerance for higher taxes. Much depends on the ability of Brown, who was elected last November, to secure a special election to ask voters to extend tax hikes to narrow the budget gap. To my mind, Brown is right at aiming to root out waste and profligacy, such as cutting state officials' cell phone use, but in this way he exudes belief in government as a positive force.

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