The state's nonpartisan budget analyst on Wednesday said California will fall $3.7 billion short this fiscal year, likely resulting in fewer public school days, cuts to libraries and further reductions in developmentally disabled services.
Gov. Jerry Brown and Democratic lawmakers counted on that money to be generated by projected tax revenues in a fit of summer optimism when they drafted the state budget. But Legislative Analyst Mac Taylor now predicts California will land 4 percent shy of the $88.5 billion in revenues they banked on in their plan.
Unlike previous years, when the analyst's forecast was advisory, his report this time could trigger automatic cuts. Brown and lawmakers designated $2.5 billion in midyear reductions dependent on the strength of revenues as determined by the analyst and the Department of Finance.
Public school students and social services recipients will have to wait another month to learn their fates from the Department of Finance, which is conducting its own forecast. But Finance Director Ana Matosantos gave early confirmation Wednesday that some cuts are on the horizon.
"The budget the governor signed recognized that economic uncertainty could force the trigger cuts to take effect," Matosantos said in a prepared statement. "Some level of trigger cuts will likely occur, but the exact amount will be known in December."
Compounding matters, California faces a $12.8 billion deficit through June 2013, the analyst said. That's because forecasters believe the economy will grow at a slower pace than leaders predicted, demand for public programs has increased and the state has to compensate for past budget solutions, such as borrowing $2 billion from local governments in 2009.
But the midyear cuts will have more immediate impact. If Taylor's report holds true, the state would carry out $2 billion in prescribed cuts starting in January.
All three higher education systems in the state face the knife, though they have assured students they will not increase fees for the current school year.
K-12 public school districts would lose $1.1 billion in classroom funds and $248 million in school bus funding for the second half of the school year. Some districts can survive by relying on reserves or furloughing teachers and staff under contingency plans already in place. Taylor said most districts would be able to absorb the cuts without taking drastic measures, such as seeking an emergency state loan.
Locally, officials at the San Juan Unified and Sacramento City Unified school districts said Wednesday they are in talks with their employee unions to discuss ways to cut spending.
In crafting the state budget, Brown and lawmakers said districts could absorb the cut by reducing as many as seven days in the school year. But because that option requires furloughing teachers, districts must renegotiate contracts to save money.
The California Teachers Association won job protections in the budget that prevent midyear teacher layoffs, so school districts cannot easily shed employee costs.
Schools lobbyist Kevin Gordon said Wednesday he expects lawmakers to reopen the budget in December or January to avoid the deepest education cuts. Senate Majority Leader Ellen Corbett, D-San Leandro, called for lawmakers to do just that.
"There was a strong assertion when this budget was wrapped together that we would probably never see the triggers pulled and, as a consequence, districts were not really given the kind of tools they needed to prepare for this kind of reduction," Gordon said. "I fully expect the governor and legislative leaders to reshuffle the deck on this trigger mechanism so it doesn't hit schools so hard."
Encouraged by a brief surge in spring tax receipts and the high-flying tech sector, Brown and Democratic lawmakers balanced the last piece of the state's budget in June by adding $4 billion to their revenue forecast. To satisfy Wall Street investors, they said the state would impose up to $2.5 billion in midyear cuts to education and social services if that money never came.
"Certainly, the $4 billion was something that even the Legislature and the governor knew was risky," Taylor said. "That's why they put the trigger reductions in."
Taylor cautioned against rolling back the midyear cuts, given the looming $12.8 billion deficit next year: "I think it would be unwise to make significant changes in the triggers."
The analyst's forecast serves as a perennial kickoff to the Capitol budget season, and on Wednesday it reignited the partisan fiscal clash between Democrats and Republicans. The two parties never resolved their budget feud last summer, leaving Democrats to pass the spending plan with new majority-vote budget powers.
Several Democrats used the analyst's report to rally behind taxes. The governor and Democratic lawmakers are counting on tax ballot measures next year to help resolve the state's ongoing budget problems, though they face a challenging political landscape.
"Today's numbers make it clear that the state's first priority must be to get to the ballot in November (2012) and raise needed revenues to avoid any more damage to Californians," Senate President Pro Tem Darrell Steinberg, D-Sacramento, said. "The notion of cutting deeper into education, public safety and services for those in need is unthinkable. I imagine an overwhelming majority of Californians agree."
Republicans, meanwhile, emphasized that the analyst predicts 4.7 percent growth in the three largest tax sources sales, income and corporate taxes. They said the state should focus on spending cuts.
Assemblyman Jim Nielsen, R-Gerber, said the situation "does not call for tax increases."
"After three years of tough budgets, we still have not gotten control over our long term systemic problems," Nielsen said.