Governor Reported as
Acknowledging a
$14 Billion Deficit for 2008-09
Less than a month after the Legislative Analyst’s Office projected a $10 billion State Budget deficit at the end of 2008-09, the Los Angeles Times reports that the Governor now indicates that the deficit will reach $14 billion. In an article published on Wednesday, December 12, 2007, the Times reports that in a meeting with social services advocates, the Governor acknowledged the further deterioration in the Budget.
As reported, the Governor stated his intent to try to reduce spending across the board. While no specific cuts were suggested or have been proposed, such reductions could affect numerous social services, health, and public education programs. However, in November, it was reported that the Governor did direct all state departments to cut their spending by 10% in the upcoming fiscal year.
The Administration, however, has a difference of opinion regarding the size of the deficit. On the same day, the San Diego Union Tribune quotes the Governor’s Director of Finance as saying, “I have heard numbers floating around. Somebody said $13 billion, $14 billion, $15 billion. Maybe they were guessing; I don’t know.”
In any event, it appears that state revenues are continuing to deteriorate, as the slowdown in the housing market, tighter credit, weakening property values, and falling consumer confidence take their toll on the state and national economies and tax revenues.
Moreover, a number of assumptions in the 2007-08 State Budget are not being realized. The Budget counted on $1 billion in additional revenue from the sale of Ed Fund in the current year, an assumption that many considered risky. To date, there has been no public acknowledgement that serious negotiations on the sale of this asset are taking place, and the LAO discounted the likelihood that it would occur in the current year and at the $1 billion level. Similarly, increased revenues from expanded tribal gaming compacts have yet to materialize, also threatening this year’s Budget.
Finally, there have been rumors of mid-year cuts, but there has been no formal word from the Administration that such a proposal will be advanced. No doubt Department of Finance analysts are compiling every option for the Governor’s consideration as they craft the Governor’s Budget for next year.
—Robert Miyashiro and Dave Heckler