Second in a Series of Essays by Sheila Kuehl on the 2008 California State Budget: The Budget Originally Proposed by the Governor

[courtesy of California Progress Report]

By State Senator Sheila Kuehl

This is my second essay on the California budget. The first set out some background information on California’s budget, beginning with the actions taken on the 2007-2008 budget earlier this year. This essay will set out the 2008-2009 budget originally proposed by the Governor in January. Following essays will detail the new budget proposals contained in the May Revision (usually called the May Revise) to the January budget, divided into sections by subject matter along with analyses of the winners, the losers, the false scares, the posturing, and some possible conclusions.

The Governor’s original budget, as introduced in January, for 2008-09

The Governor’s budget seemed to have been introduced with the aim of scaring the lights out of every segment of California. Education was slashed. Parks were to be closed. Health and human services were proposed to be decimated (actually more, as “decimated”, from the root “dec”, means to cut by one tenth). Every department, tasked with enforcing every kind of California law, was proposed for a 10% cut, which would have pretty much guaranteed no serious enforcement at all.

Why so dire? Income

As you have probably read elsewhere, revenues for the state of California, since the adoption of Prop 13, limiting property taxes (which went to local governments), and the Governor’ refusal to reinstate the 60 year long automobile license fee (which went to local governments), have dropped precipitously as the economy has worsened. The two changes set out above have also meant that the state has become virtually the sole source of all expenditures for state, county and city services. Since the state now, unhealthfully, is forced to rely on personal income taxes (55% of revenues), sales taxes (28% of revenues) and corporate taxes (11% of revenues), the state has experienced a great drop in revenue, because when the economy slows, these are the sectors (and the tax revenues) that sink.

Why so dire? Expenditures

Cuts cannot, under the Constitution and certain statutes, be made at all in several items in the budget. California, because of all its bond indebtedness, has a high interest payment, which remains the same, and cannot contribute to overall cuts. 1.5 billion goes every year for transportation bonds. 3.5 billion goes for general obligation debt. 1 billion goes for the debt reduction bond.