Bloomberg News

California Democrats’ Budget Plan Cuts Reserve Sought by Brown

June 12, 2012

Democrats who control California’s Legislature unveiled a plan to erase a $15.7 billion deficit facing the most indebted U.S. state, while sparing some welfare cuts proposed by Governor Jerry Brown.

The plan, released yesterday, would reduce the rainy-day fund to $614 million for the fiscal year beginning July 1, instead of the $1 billion reserve Brown proposed. That would make it unnecessary to cut some of the $2 billion in human services, welfare and medical insurance for the poor that Brown, a 74-year-old fellow Democrat, has sought.

The Assembly and the Senate, both dominated by Democrats, plan to bring the package up for a budget committee vote as soon as today, while top-level talks with Brown continue. Lawmakers said they intend to vote on a budget June 15, the constitutional deadline for them to pass a spending package.

“We are on track to pass a balanced budget on time,” Bob Blumenfield, a Los Angeles Democrat who chairs the Assembly budget committee, said in a statement yesterday. “Our budget eliminates the structural deficit, includes a modest reserve, and differs only from Governor Brown’s plan by less than 1 percent of total spending. We are down to dotting the i’s and crossing the t’s.”

Gil Duran, spokesman for Brown, said talks are continuing.

Brown announced May 14 that the deficit had ballooned to $15.7 billion from the $9.3 billion he predicted in January, in part because he overestimated how much tax revenue the most indebted U.S. state would collect.

Higher Taxes

Brown’s plan to fill the gap depends on an initiative he’s pushing onto the November ballot to temporarily boost income taxes on top earners to the highest in the nation, and raise sales levies that are now higher than all other states. Without the taxes, he said he’d cut $6 billion, most of it from schools, midway through the year.

The Democrats’ plan likewise relies on the revenue from the tax increases, as well as the midyear cuts if the ballot measure is rejected.

The governor also wants to slice $1.2 billion from health care for the poor, $1.1 billion from welfare and in-home help for the elderly and disabled, and $500 million from courts. He is counting on reducing the state’s personnel costs by 5 percent, mainly by cutting workers’ hours.

A voter initiative passed in 2010 strips lawmakers of their pay for every day they’re late in passing a budget past the June 15 deadline. Brown has until July 1 to enact the plan.

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

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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