Two years ago, California had a surplus of almost $100 billion --- no state in history had ever amassed such a huge surplus.
But we spent that money on things like high speed rail, billions to solve homelessness that only got worse, and at least $30 billion in fraudulent unemployment claims. Despite the fact that our sales, income and gasoline tax rates are among the highest in the nation, our massive surplus has now morphed into a $68 billion deficit, with $30 billion annual shortfalls projected to continue years into the future.
This precarious financial situation has been analyzed by the nonpartisan Legislative Analyst’s Office (LAO), which forwards its analysis to the Legislature for use in debates over drafting the final budget plan. Under California’s Constitution, the Governor must introduce a budget by January 10th, the Legislature must pass it by June 15th, and it must be signed into law by June 30th. But how to overcome such a huge deficit? Here are a few solutions offered by the LAO:
- Tap into the Rainy Day Fund (the Governor would need to declare a budget emergency)
- Do not exceed Prop 98 minimum guarantees for education funding
- Cost shifts and special fund loans
- Pull back one-time limited term spending
- Overall spending cuts
In past fiscal emergencies, the state has taken other steps as well, including reducing state employee costs through furloughs and even cutting court funding and spending on higher education.
State leaders and policymakers must agree on priorities and focus on those. Actual needs must be prioritized over politically expedient wants. The cuts proposed by the LAO will be considered along with other proposals likely to be introduced, including the Governor’s budget in January. Putting our fiscal house in order will be priority number one next year.