Governor Proposes 'Tough Budget for Tough Times'
Gov. Jerry Brown released a state budget proposal Jan. 10 that calls for $12.5 billion in spending cuts, a “vast and historic” realignment of state and local responsibilities and a five-year extension of temporary taxes.
Calling the spending plan a “tough budget for tough times,” Brown said it will close the state’s structural deficit and return decisions and authority to cities, counties and schools, ending a “shuffling back and forth” of revenues and responsibility that has gone on for decades.
The budget proposes total spending of $127.4 billion for the 2011-’12 fiscal year. Of that amount, $84.6 billion is proposed as general fund spending. The budget proposal identifies $12.5 billion in spending reductions, $12 billion in revenue extensions and modifications, and $1.9 billion in other solution
“For 10 years, we’ve had budget gimmicks and tricks that pushed us deeper and deeper into debt,” Brown said at a Capitol news conference. “We must now return California to fiscal responsibility and get our state on the road to economic recovery and job growth.”
Detailed budget documents and a summary are available here.
Local Government Realignment
The local government realignment plan calls for eliminating the current funding mechanism that provides local property tax dollars to redevelopment agencies. The move would free up billions in property tax revenues that would be redistributed to cities, counties and schools to fund public safety, education and other services. A share of the funding would also go to non-enterprise special districts. Enterprise special districts would not receive any of the redirected funding.
Brown’s budget does not attempt to reallocate any existing property tax revenue received by enterprise special districts such as water and wastewater districts. Current property tax allocations would remain unchanged but enterprise special districts would not receive a piece of the redistributed former redevelopment agency property tax funds.
The governor said he would work with the Legislature to make the statutory changes necessary to implement the spending cuts and to place the revenue component of the budget before voters in a special election in June. Under the proposal, voters would be asked to continue temporary sales and income taxes as well as the Vehicle License Fee rate for five years. If approved by voters, the revenue would be transferred directly to local governments to finance the first phase of the realignment plan.
He said he would seek to have the spending cuts enacted by March but would hold off on passing a final budget until later in June after the election on extending the temporary taxes. If voters do not approve the extension, he said, it would then be necessary to make another $12 billion in “extremely painful spending cuts.”
State Board Fees
As expected, the proposed budget calls for $12.8 million in fee increases for waste discharge permits and water rights activities. The fee increase would offset the backing out of general fund spending for those areas within the State Water Resources Control Board. ACWA and its member agencies successfully fought off similar fee increases originally proposed by Gov. Schwarzenegger last year.
Next Steps
The governor’s release of his January budget is just the first step in the months-long budget negotiations. Assembly and Senate budget subcommittees will likely revise the proposal with input from the Legislative Analyst’s Office and the Department of Finance. The governor typically reassesses and releases an updated version in May.
ACWA continues to analyze the budget proposal and will keep members apprised as developments unfold.
