Legislative Analyst Office Projects Ongoing Budget Deficits of At Least $20 Billion Through 2016 – Sweeping Cuts to State Spending Likely To Be Considered Next Year by New Governor & Legislature

SACRAMENTO, CA (CDCAN) [Updated 11/10/2010 01:10 PM (Pacific Time)] – The Legislature’s chief budget analyst – the non-partisan Legislative Analyst Office (LAO), released a report today that projects that California’s budget deficit will swell to $25.4 billion by the end of the 2011-2012 State Budget year that will likely mean more sweeping spending cuts to major state programs next year. It will also likely mean a special session of the Legislature early next year to take steps to confront the crisis.

The Legislative Analyst, in its report said that “…we estimate that the Legislature and the new Governor will have to address a budget problem of $25 billion between now and the time that they agree to a 2011–12 state budget plan” and projects on-going budget deficits for the State of at least $20 billion through 2016 unless “corrective” action is taken by the Governor and Legislature.

The Legislative Analyst Office project is based on State general fund spending and revenues in the current budget year that ends June 30, 2011 and the next budget year – that begins July 1, 2011 and ends June 30, 2012.

That is the budget that Governor-elect Jerry Brown will be proposing by January 10th next year when he assumes office earlier that week, who said last week when briefed on the State’s budget situation that it was “..worse than anything I have seen”.

The Legislative Analyst Office projects that – assuming no action to correct the situation by the Legislature and Governor (meaning no additional spending cuts or additional revenues), the State will end the current budget year June 30, 2011 with a shortfall of $6 billion – but face on top of that a $19 billion gap between projected revenues and spending in the 2011-2012 budget year because of the following:

* Assumes that California will be unable to secure around $3.5 billion of budgeted federal funding during the 2010-2011 state budget year that ends June 30, 2011. This assumption is a major part of the projected $6 billion year–end deficit.

* The Legislative Analyst Office also projects higher–than–budgeted costs in prisons and several other programs.

* In addition, the Legislative Analyst Office projections assume that passage of Proposition 22 will prevent the state from achieving about $800 million of budgeted solutions in in the current 2010–2011 state budget year.

* The Legislative Analyst Office projects a $19 billion hole in the 2011-2012 State budget year because of “…the temporary nature of most of the Legislature’s 2010 budget–balancing actions and the painfully slow economic recovery …”

Legislative Analyst Projects Ongoing Budget Deficits of $20 Billion Through 2016

The Legislative Analyst Office’s report gives more bad news to California in the coming years, projecting budget deficits of about $20 billion each year through the 2015–2016 state budget year.

In the 2012-2013 State budget year the Legislative Analyst Office reports that when the state must repay its 2010 borrowing of local property tax revenues and the full effect of Propositions 22 and Proposition 26 are felt, the Legislative Analyst Office projects the State’s operating deficit growing to $22.4 billion.

But that shortfall is likely larger because the Legislative Analyst Office’s projections generally assumes no cost–of–living adjustments, so the magnitude of the state’s fiscal problems during the forecast period are “understated”.