HEADLINES : California

Report set for Thursday release will determine the level of California's triggered cuts

by Cory Eucalitto | December 13, 2011

Year end revenue numbers from the California Department of Finance dictating the depth of the state's triggered budget cuts will be released Thursday. The state's fiscal year 2011-2012 budget, signed into law by Governor Jerry Brown, projected an extra $4 billion in yearly revenue over what was originally assumed. A key provision triggers a set of specific budget cuts in the event that actual revenues fail to meet the budget's projections. 

The level of budget reductions implemented will be decided by one of two sets of calculations. The first set, already published by the Legislative Analyst's Office, found revenues lagging $3.7 billion behind the budget's assumption. The findings contained in the second report, to be released by the Department of Finance on Dec. 15, 2011, remain unknown. Cuts will be based on the findings of the report with the higher revenue calculation.

The cuts are divided into two tiers, with the first tier taking effect if projections fall short by more than $1 billion. Tier 1, as it is referred to, slashes $601 million of state spending. Most of these reductions will come to higher education and anti-crime efforts. Both California State University and the University of California will see their budgets shrink by $100 million. The Department of Developmental Services and In-Home Supportive Services will lose $100 million. 

Tier 2 cuts include an additional $1.9 billion, bringing total reductions to $2.5 billion, and will be enacted should estimates fall $2 billion short of actual revenues. Unless the Department of Finance's findings are radically different from the LAO's, there is a very real possibility of this level being triggered. 

The most controversial spending cut included in Tier 2 is $1.54 billion to the state's K-12 education system, which is expected to knock a many as seven days off the 2011-2012 public school year. Home-to-school transportation would lose $248 million, and community colleges would see a $72 million reduction. 

Many invested groups are already up in arms over the possible reductions. The Wall Street Journal reported that various labor groups are planning rounds of protests Thursday to coincide with the release of the finance department's numbers. While Governor Brown has stated his intention to follow through with the cuts as required, many Democrats in the state hope to restore much of the funding. State Senator Loni Hancock, for example, was quoted in the San Jose Mercury News supporting legislative action to raise taxes in order to offset the reductions.

The triggered cuts may in fact be in the Governor's best interest. He recently formed a campaign committee focused on placing a sales tax increase and an income tax increase for those earning over $250,000 on the November, 2012 ballot. If passed, they are expected to generate an additional $7 billion in state revenue. While the Governor's 2012-2013 budget will assume a successful run at the ballot box, it will also include another round of triggered cuts should the tax hikes be rejected by voters.