Bloomberg News

California Revenue Off by $1.5 Billion, Controller Says

November 16, 2011

(Updates with timing of trigger cuts in last paragraph.)

Nov. 10 (Bloomberg) -- California tax collections since the start of the fiscal year have fallen $1.5 billion behind projections, raising concern that the most-populous U.S. state will face automatic spending cuts.

Revenue was $810.5 million less than budgeted in October, bringing the total to 6.2 percent below expectations for July 1 through Oct. 31, according to figures released today by Controller John Chiang. Since the start of the fiscal year, the state has spent $1.7 billion more than it budgeted.

The $86 billion spending plan Governor Jerry Brown and fellow Democrats adopted in June included a series of cuts to be activated if revenue falls below certain levels. In December, Brown’s finance department will estimate whether the rest of the year’s revenue can meet the original projection.

“October’s poor revenues capped a very disappointing first four months of the fiscal year,” Chiang said in a statement. “Unless revenues and expenditures begin to track with projections, the state will face increasing cash pressure in the months ahead.”

The first tier of cuts, if the shortfall is $1 billion, would trim University of California and California State University budgets by $100 million each, increase community- college fees by $10 per unit and cut in-home services for the elderly and disabled who need help.

Seven Days Off

If the gap widens to $2 billion, it could mean a seven-day reduction in the school year to save $1.54 billion and an end to $248 million in student busing subsidies.

Brown and Democrats enacted the triggers after failing to get Republican support for a referendum that would have extended expiring taxes and fees to help erase what was a combined $26 billion shortfall.

To balance the budget, lawmakers cut spending by $12 billion. They also counted on an equal amount of higher revenue, including $4 billion Brown and fellow Democrats said the recovering economy would deliver.

The December decision on whether the triggers will be reached won’t be based on the level of revenue at the time. Rather, it will depend on an economic forecast for the fiscal year that Brown’s office will begin conducting this month, said H.D. Palmer, a Finance Department spokesman. Tier one cuts would take effect Jan. 1; second-tier cuts, if needed, would begin Feb. 1.

--Editors: Pete Young, Ted Bunker

-0- Nov/10/2011 18:17 GMT

-0- Nov/10/2011 18:18 GMT

-0- Nov/10/2011 18:20 GMT

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net -0- Nov/10/2011 18:14 GMT


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