SAN FRANCISCO — California’s budget problems will be back in the spotlight this week.
Gov. Arnold Schwarzenegger will release his formal budget proposal on Friday, following his state of the state address on Wednesday.
And once again, there are big budget problems to solve, despite a series of budget actions in the last year that included spending cuts and tax increases.
In November, the state’s independent Legislative Analyst’s Office estimated that California is on pace to run up a $6.3 billion deficit in the current fiscal year, which ends in June, as well as a $14.4 billion structural gap in fiscal 2011 if no actions are taken. That is on a general fund revenue base of about $88 billion.
“In many ways closing the coming year’s budget gap is going to be more difficult than closing last year’s,” said H.D. Palmer, spokesman for the Republican governor’s Department of Finance.
Several budget actions have been blocked by adverse court rulings or lawsuits preventing their implementation, he said, noting that the state expects fewer federal stimulus dollars in the coming year.
And “a number of the solutions adopted in 2009 were clearly and admittedly one-time in nature,” Palmer added. “For those reasons and many more it’s going to be arguably more challenging to close this budget gap.”
It all points to tough, painful decisions the Legislature will be asked to implement by two-thirds majorities, a level of consensus lawmakers have found difficult to achieve even in good times.
The majority Democrats have resisted spending cuts, while the minority Republicans — who have power in the process because of the two-thirds rule — have resisted tax increases.
Schwarzenegger will not ask for tax increases, according to Palmer.
“The governor does not believe that at this time, in this economy, additional taxes are a good idea,” he said.
During the state’s long budget negotiations in 2009, liquidity pressures forced the state controller’s office to issue about $2 billion in IOUs to some creditors in order to conserve cash for creditors with stronger legal or constitutional protections, like bondholders. The IOUs were ultimately redeemed.
But California’s continuing budget woes have left it with the lowest credit ratings among the states: BBB from Fitch Ratings, Baa1 from Moody’s Investors Service and A from Standard & Poor’s.