California Tax Hikes, Benefit Cuts to Stay

SAN FRANCISCO - The trigger was not pulled.

On Friday, both California Treasurer Bill Lockyer and the state's finance director, Michael Genest, issued determinations that the state will not get enough federal stimulus money to trigger reductions in recently approved income tax hikes and benefit cuts.

The trigger determination was written into the state budget compromise that emerged from the legislature in February to close a $42 billion deficit.

The budget language required the treasurer, an elected Democrat, and the finance director, an appointee of Republican Gov. Arnold Schwarzenegger, to determine if the state would receive $10 billion in federal stimulus funds that can be used to offset expenditures that would otherwise be made from the state's general fund.

Because they determined that threshold was not reached, about $1.8 billion of increased taxes and $1 billion in welfare program cuts will remain in effect.

Lockyer, in a letter released Friday, said his office and consultants largely concur with the Department of Finance's estimate that about $8.2 billion will be available under the definitions in the February budget bill.

Lawmakers will still have to deal with a new $8 billion revenue shortfall projected by the state's budget analyst this month, as well as the prospect of voters rejecting a May ballot measure authorizing the state to issue $5 billion in lottery revenue bonds - money that was built into the February budget.