California Budget problems grow !

Legislative Analyst’s Office;  Budget Projections

$25 Billion Budget Problem Needs to Be Addressed in Coming Months
Our forecast of California’s General Fund revenues and expenditures shows that the state must address a budget problem of $25.4 billion between now and the time the Legislature enacts a 2011–12 state budget plan. The budget problem consists of a $6 billion projected deficit for 2010–11 and a $19 billion gap between projected revenues and spending in 2011–12.

2010–11 Deficit. We assume that the state will be unable to secure around $3.5 billion of budgeted federal funding in 2010–11. This assumption is a major contributor to the $6 billion year–end deficit we project for 2010–11. We also project higher–than–budgeted costs in prisons and several other programs. In addition, our forecast assumes that passage of Proposition 22 will prevent the state from achieving about $800 million of budgeted solutions in 2010–11.

2011–12 Deficit. The temporary nature of most of the Legislature’s 2010 budget–balancing actions and the painfully slow economic recovery contribute to the $19 billion projected operating deficit in 2011–12. This gap is $2 billion less than we projected one year ago. Actions taken during the 2010–11 budget process to reduce Proposition 98 education spending are a major contributor to the decline.

Additional Savings From Proposition 98 [ Schools] Will Be Very Difficult

Our forecast indicates that General Fund revenues and transfers will decline by over $8 billion in 2011–12 due to the expiration of the temporary tax increases adopted in 2009. Because the Proposition 98 minimum school funding guarantee is affected by this drop, our budget forecast already reflects a $2 billion fall in the minimum guarantee between 2010–11 and 2011–12. This reduction would come at the same time that school districts exhaust the billions of dollars of one–time federal money they have received through the stimulus program and other legislation. For these reasons, it may be very difficult to achieve substantial additional budget reductions in Proposition 98 in 2011–12, compared to the levels already reflected in our forecast. In other words, if the Legislature funds schools at our projected minimum guarantee in 2011–12, it would mean billions of dollars in programmatic cuts to education but not contribute a single dollar to closing the $25 billion budget problem.