New billion-dollar hole in California's budget

State revenue has already fallen more than $1 billion short of assumptions in the budget lawmakers passed less than three months ago, according to a new report from the state controller.

Disappointing income tax receipts are the main culprit, falling 11% below what lawmakers and Gov. Arnold Schwarzenegger expected when they agreed on a patchwork budget during the summer, halting the state’s issuance of IOUs. Sales and corporate taxes have also slid below projections.

"While there are encouraging signs that California's economy is preparing for a comeback, the recession continues to drag state revenues down,” said Controller John Chiang in a statement. He called the new figures “a major blow to a budget that is barely 10 weeks old.”

Even before the bad fiscal news, policymakers were bracing for a big budget deficit next year. The Department of Finance anticipates a $7.4-billion deficit in 2010-11. That’s a conservative estimate, because lawsuits have tied up or reversed some planned budget cuts.

“I urge lawmakers and the governor to prepare for more difficult decisions ahead," Chiang said.

--Shane Goldmacher in Sacramento

Comments

[Pat]

We will continue to have shortfalls as they raise taxes. People are not going to spend money, create jobs or doing anything in a heavily taxed state!

[Dave]

I suggest the L.A. Times staff keep this headline handy. You will likely be running it once a month for the foreseeable future.

[Marsha Keeffer]

It's time for another budget revision - and perhaps a new strategy.

[lsm]

What did Albert Einstein purportedly say about doing the same thing over and over again and expecting different results? Our state government with its two-thirds rules and safe districts is perfectly designed to keep us in perpetual budgetary crisis. We are insane to settle for more of the same; we need a functioning government; we must adopt a new constitution.

[Marc Blitstein]

Tell the Los Angeles City Counsel and City Attorney to regulate medicinal marijuana dispensaries instead of trying to shut them all down. The taxation of medical marijuana sales city (and state wide) would shut the $1b tax gap.

How silly is it that all the City Counsel and City Attorney did today was to weaken our state. Go spend the taxpayer's money on the real criminals like big tobacco and the firearms dealers. Let sick people have safe access to their medicine.

[jwillx]

Good luck on "[preparing] for more difficult decisions ahead"!

Our Legislature can only be described as "HAPPY-GO-LUCKY", because they always assume they can spend anything they want and will be lucky enough to be out of office when future years' budgets fail to pay for what they spent.

The Legislature doesn't care about consequences; it includes mostly members who want to rake in their excessive salaries and take cushy jobs in industry as they are termed out. Most of them are rich or millionaires already. They have little or no dedication to principle and almost no sense of responsibility to serve their State well.

Look at the worthless budget they passed this year! Tell me that it wasn't happy-go-lucky, with the emphasis on happy Legislators and lucky economics.

Now we have 700 completely useless bills suddenly submitted for the Governor to sign, and STILL work as yet undone on the budget. There should be a Constitutional Amendment forbidding any bill to be submitted to the Governor until a complete and balanced budget has been approved for the current and the following years.

[phillip]

What did they THINK would happen when they raised the Sales Tax AGAIN. I cant afford to pay over 9% and Im not going too. I just stopped making so many purchases.

Why oh WHY do we keep reelecting the same clueless people?

[Don of Cali]

The state seems to have plenty of money to investigate, arrest, prosecute and incarcerate non-violent people for the victimless marijuana "crimes". If they still have money to spend on that, then they must have more than enough.

[Sara]

The Governor of Iowa just cut the budget in expectation that this economic revival being touted is nonsense. He said they could add back in the money if the economy actually improved. Never common sense in California.

[NarNar]

OH MY GOD!! CAN WE EVER GET IT RIGHT!!! The budget is only 10 weeks old and now we are another 1 BILLION in the hole!

CAN YOU SAY OUR ELECTED OFFICIALS ARE FAILURES! Good Lord, a Blind Penguin, lost in LA could do better then this.

While we suffer Antonion Villarigosa is making $200K+ and each of the LA Council man is making $170K. Hell Benard Parks is making $40K a month in Pension and Council Member Pay? What are these people doing!! AARRGGHH.

[Jason Evans]

Anyone with a brain could have predicted this before the last budget was even signed. Looks like they didn't cut deep enough the first time around... paper-pushing state-workers are going to kill this state if it's the last thing they ever do!

[Andre Walker]

Good Job Governor and senates of california

[Doug]

State and local government cutbacks and layoffs have a ripple effect. I know that my income has dropped significantly, meaning that the taxes I pay have dropped significantly. It is unfortunate that Prop 1A did not pass.

[Korean vet]

Just think the federal govt is in the same boat "BROKE" the only thing is they can print more dollars.

[kooo]

We need a California Constitution Amendment regarding the budget process NOW. No more late budgets every year due to political holdouts, compromise and bring a budget on time!
The only silver lining from this black hole budget deficit is that it will force politicians and various interest groups to compromise and unveil PORK and other misuses of public funds that should have been deleted a long ago.

[Joseph Freeman]

Mr. McGreevy,
Thank you for the eye-opening article regarding retirees that are fleecing the California taxpayers by retiring to obtain their pension, only to return to work in order to obtain a substantial boost in their take-home pay. I wish there were a place to comment just below that article, but for some reason there is not, thus my comment placed here.

While this practice may not be technically illegal, I certainly do not believe it fits within the spirit of the law. Shame on the 5,600 former/current "public servants" (con artists may be the more appropriate term) and shame on our legislators that are responsible for drafting laws with such burdening loopholes. It's no wonder why California is broke; recession or not. We are one of the most mismanaged states that I am aware of. It's almost embarrassing to know these are the people I consider "leaders".

Absolutely ridiculous and shameful. Our laws regarding public worker compensation need immediate restructuring.

[socalinvestor]

Starve the Beast!

[Ian Robinson]

A billion dollar hole was a forecasted by lawmakers assumptions, this lack of foresight does reflect an unfair negative ambience onto the states very own Mr Motivator Governor Schwarzenegger.
The Governor has had to deal with exceptional circumstances ranging from unprecedented bushfires ravaging the state to a severe financial drought brought on by the unruly fat cats on Wall St, who created the global financial meltdown.
I do believe we need to stop the back stabbing ridicule and start showing genuine support for a genuine hero with a big heart who genuinely cares for the people of California.So go and bake the big guy a pie.

Regards

Ian Robinson

[bobby]

yo bro y''all deserve it vote for more of same

[Pepper from CA]

Our State Government is inept! If they aren't having cigars outside the captital they are having sex talk on the taxpayers dime.

I am so ready to vote them all out!

[Peter]

"While there are encouraging signs that California's economy is preparing for a comeback...” said Controller John Chiang in a statement

What encouraging signs is he talking about?

[Gala]

A budget shouldn't be made from assumptions. If sales and corporate taxes are also below projections, maybe the state should reconsider its fiscal policiy in order to enocurage investments and have more companies moving in, rather than out of the state.

[Kent]

Amazing? How could these brain-scientists have been so wrong? Just raising taxes should raise more revenue, you would think. Of course a lot of those scally-wags just moved their business elsewhere to get away from California's high taxes and onerous regulations. Lets see if it happens again. Raise the sales tax again and watch the revenue...dwindle. Lets leave all those work-rules and regulations in place so no one will want to start or move a business to California. Keep sending the same kind of liberal spending politicians to Sacramento and help California fail. Don't stop the spending, don't trim the payrolls, don't worry about the looming pension crisis. If Obama keeps bailing California out we will be just fine...you think?

[Bob]

You shouldn't blame Schwarzenegger if this thing blows and you people are all running around suing over budget cuts because the state doesn't have the money. Maybe you need to give up life as usual for a little awhile.

[ColoradoRob]

You have to many Unions and Illegals out there that you have to take care of!

[El Patron]

Why am I not surprised?

[D. Wilson]

Low income tax revenue? IT'S CALLED PROP. 13!!!

We don't even need to repeal it. We should tweak it to make it the sensible piece of legislation it should have been, instead of the draconian law it is.

If you support Prop. 13 in its current form, then please do not complain about government services. California was a shining example of a forward-looking state, one that built freeways, aqueducts, universities, etc. and invested in its population. Blaming other things, especially immigrants, for our troubles is irresponsible at best.

Property taxes were very high in '78, but ,again, Prop. 13 as it is is way too severe.

[Yoga2009]

What did they expect when they raised the sales tax? Particularly when you have many tax free internet companies? You can buy your big screen HDTV from Amazon or buy it from Best Buy and pay an extra $200 in taxes. Let's have another tax hike so we can have a 2 billion dollar hole.

[T.Y.]

Didn't we see the same thing last year?

I can't imagine anymore cuts on top of the ones that were already made. Where is the compassion in people for those less fortunate? For the elderly, disabled and the children?

If new state budget cuts are made in response to this new short fall, I can't imagine anyone who has half a conscious endorsing such cuts.

Anybody proposing such idea is truly mean and heartless.

[adoptivefather]

Here's an easy fix.

Tiger Woods is playing in the Presidents Cup up in SF this weekend. All we have to do is hold him hostage and tax him into poverty.

Tiger was born he so he owes us!!

Uh......maybe out of control taxes are why people like Tiger are fleeing California.......

[Mike]

Their is no mystery here. Any 4th grade kid can tell you that you can not continue to spend more than you take in forever. Who runs California, why the unions and special interest groups. We can no longer rob Peter to pay Paul. The fact is that paul is flat broke. You can no longer pay state employies the highest salarly in the world. You can no longer have employees retire early and pay them more money in retierment than while they were working. You can no longer let them collect retierment and hire them back at the same time. I am suprised the latest budget made it 10 weeks before signs poped up atha its failing. And last but not least you can no longer rob the residents in taxes and raise fees that are nothing more than taxes in disguise. For one you are talking almost every penny in taxes and people no longer have any money to pay higher fees or buy anything to generate any income for the state.

Mike

[jerrydawn86]

For anyone who is looking for correct information on what the heck is going on in this state and country I recommend Peter Schiff.

He called this perfectly right when the budget was passed @ 6:50 in his "Californian Dreams" vlog. Go to youtube search and enter the following - "peter schiff today's markets" - to find the video.

Also, he predicted the financial crisis spot on, and spent years trying to warn us. Search on youtube for "Peter Schiff was right"

Really, he's got tons of smarts and a hell of a track record.

[jerry]

Get rid of prop 13.
get rid of the voter initiative process.

Those two things alone will fix California's budget problems.

[POLICESTATE]

Not even the British taxed us as much as these money junkies in this state as well as the federal government do now. And for what? Nearly all of it is wasted!

No taxation without representation!

Come 2010 people had better wake up and start voting every incumbent out of office in this state, regardless of party affiliation. EVERY incumbent, state and federal level. Send a message these so-called representatives will never forget.

[dan d]

Well... no surprise. Howard Jarvis and Reagan effectively REMOVED governance in Sacramento via unfunded (and unfundable) ballot initiatives, 2/3 majority, Prop 13, and on and on. It's so pathetic that a lot of the criticism in these posts is towards the legislature. The legislature no longer has the power to do ANYTHING budget related!!! It's the whack-job anti-government anti-tax crusaders that have brought this state to its knees. The right wing should be happy... they wanted to destroy government, and they got their wish.

[H Frost]

I hope that more cities won't have to file for chapter 9 bankruptcy as the state consumes more and more of the steadily declining revenue!