California’s deficit has dropped to under $10 billion because of increasing tax revenues, and Gov. Jerry Brown wants to raise education spending by $3 billion under his major revision of the budget plan released at the Capitol on Monday.
Brown said that although California’s economy is looking better, the new revenue collected by the state does not eliminate the need for more taxes. He plans to seek approval from the Legislature to impose the additional taxes and then allow voters to rescind or extend them, a strategy the governor floated during meetings in Riverside last month.
The plan instantly becomes the new framework for lawmakers and the governor to craft a spending plan for the next 14 months and, if approved, would begin to chip away at what Brown called the “wall of debt” that California has built in passing previous budgets that relied on borrowing or unrealistic assumptions.
“Our finances were plunged into turmoil by the Great Recession and a decade of short-term fixes and fiscal gimmicks. This is not the time to delay or evade. This is the time to put our finances in order, and that’s precisely what this May revision intends to do,” Brown said at a Capitol press conference unveiling the new plan.
Brown said the new deficit is $9.6 billion, down from the $15.4 billion shortfall the state faced following the Legislature’s actions in March to cut into what started as a $25.4 billion deficit in January. The governor wants to include a $1.2 billion reserve as well.
The reduced deficit is a result of tax revenue – largely personal income tax from upper-income Californians, according to the Department of Finance – coming in $6.6 billion higher than projected.
Taxes still needed
Despite that increase, Brown said the state still needs to extend for five years higher rates in the sales tax and vehicle license fee that are set to expire July 1 in order to put California back on solid fiscal ground. Even with his plan, the state still faces a $10 billion structural deficit in future years, though that is about half of what it would be without the plan.
Brown dropped proposals to increase one tax, a surcharge in the personal income tax, for this year and it would only take effect if voters decided to increase it. A reduced credit for dependents would still be in place for 2011.
The governor did not propose a specific date for the election, but said he wanted it “as soon as possible” and that fall seemed like the most logical time. Senate President Pro Tem Darrell Steinberg, D-Sacramento, said he would prefer no election at all, and if there was one for it to happen in 2012.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/05/16/BAQ51JGP5U.DTL#ixzz1Mk1RTidI
