In a word, it was ugly. The bet the Legislature and governor made on greatly increasing revenues did not materialize.
Instead of the $9 billion shortfall that the governor and his finance team anticipated in January, the deficit has grown by almost $7 billion more. It’s a $16 billion problem the governor and the Legislature will attempt to deal with over the next month.
Of course, the governor failed to note that the spending plan approved last June included a surge of revenues in April that was based on nothing and, not surprisingly, failed to materialize.
Since January, the governor has been touting his tax increase plan that includes a one-quarter cent increase in the sales tax for four years plus 30 percent income tax increases for individuals earning $250,000 or couples earning more than $500,000 for seven years. Signatures to qualify it for the November ballot have been submitted so it’s likely voters will determine its fate come fall.
The governor’s original plan anticipated these tax increases generating about $7 billion, making a major dent in the shortfall. Now, thanks to personal income taxes were $2.7 billion short of the very optimistic (that’s been charitable) budget, the problem is much larger. That’s coupled with court challenges and federal requirements that stopped additional cuts that were budgeted.
For parents and college students wrestling with tuition that has increased sharply, prepare for more hits. The UC Regents are considering a 6 percent increase—with no further support likely from the upside down state, the regents will not have many options.
The governor’s May revise included a series of additional program cuts that included a notice to state employee unions to expect 5 percent reductions in compensation.
It is ironic that Gov. Brown, who is his first term 30 years ago signed the law allowing state employees to collectively bargain, now must deal with the consequences of that action.
Wouldn’t it be nice to figuratively blow things up and start over?
Who says it takes public employees to run prisons. Why not privatize and outsource and get away from prison guards making $100k a year.
The same goes for maintenance and other functions that could easily be handled by the private sector. Wise city leaders have used contractors for landscape and street maintenance for years. Doing so controls costs and frees them from dealing with large numbers of employees.
The governor, in a Saturday video message, said he wanted to protect schools and public safety and his revision did that pending the November election.
His May revise does exactly that—raising funding for k-14 schools by 16 percent with more to come if his tax increase—designated to school funding—passes. That’s not a very good bet because recent polling showed the governor’s proposal ranking in the low 50s, which historically is not good this far out from election day.
For school districts that must complete any layoffs of teachers today, it’s yet another difficult guessing game—hard on everyone involved.
For Pleasanton and its teachers, that meant another year of concessions by the teachers unions with furlough days that can be required if the tax initiative fails. If the May revise holds and the tax increases pass, the funding future will be brighter.
Of course, until the state addresses its horrific business climate, economic growth could remain fleeting.
Remember, these income estimates include Facebook’s initial public offering, which is expected to be the biggest ever.