Balancing California’s Budget

Last week California’s incoming Governor Jerry Brown unveiled his proposed state budget for 2011. Despite the fact that Brown’s budget has deep cuts to nearly all state programs, the success of the budget – even if it should be approved by the state legislature – depends on tax rates staying the same. And California’s voters, regardless of whatever else their contrarian behavior may indicate, do not like taxes. If you read the Governor’s Budget Summary, on page 10 you can view the projected state general fund tax revenues – assuming voters approve an extension of the tax increases:

Also on page 10 of the Governor’s Budget Summary is a table showing the projected state general fund expenditures, already reflecting the proposed cuts to expenditures (note that the tables have been altered here for simplicity’s sake, such that only the column of numerical data showing the proposed amounts is retained). From comparing these tables, one will see the general fund according to these projections will enjoy a $5.0 billion surplus in the fiscal year 2011-12. But is Jerry Brown going far enough with his cuts? Because not only is California a state with some of the highest taxes in the U.S., but it is very likely voters will not approve extending the tax increases.

Areas where Brown did not propose cuts include pensions, and because state employee pension funds are not adequately funded, if benefit formulas are not reduced, more […] Read More