The announcement about the state budget adjustments couldn’t have been worse. The situation is so desperate that Governor Jerry Brown pleaded with voters to approve a tax increase in November, while revealing a deficit nearly twice as much as expected.
The lack of stability of California’s tax system combined with the optimism of the Brown administration, legislative intransigence and court proceedings that froze previous cuts are partly responsible for the state deficit reaching almost $16 billion, up from an estimated $9.2 billion four months ago.
Now the solution is to cut $8.3 billion from the already decimated social benefits network of public health programs and from student loans. It’s very hard to digest these massive cuts that will have a devastating effect on the most vulnerable population, which has for years endured the majority of budget cuts.
Brown’s plan is to make up 50% of the deficit with cuts, 35% through revenue (if the tax hikes are approved) and 15% through debt restructuring. If voters in November don’t approve the two tax increases, on wealthy earners and sales, this would trigger cuts of almost $6 billion in education.
There are few options. The fire must be put out without long-term planning, and the deficit balanced without considering a tax reform to stabilize the tax revenue system.
The governor has set a November deadline to resolve the deficit. However, the California Constitution has a June 15 deadline to approve the budget.
Meaning, only one month is left for Sacramento Republican and Democratic lawmakers to agree on an expense plan. As we have seen, this will be a complicated task.
In November, voters will decide whether they want more taxes or cuts. Meanwhile, an agreement with the flexibility the situation demands needs to be reached. This situation won’t be resolved until November, but the budget is due by June 15.