Over the next year and a half California will face a nearly $21 billion budget deficite. Meanwhile, the fiscal crisis has already led to steep cuts to public schools, social services and health programs.
In a report Wednesday, the Legislature's nonpartisan budget analyst pins the blame on the deep recession and poor decisions by Gov. Arnold Schwarzenegger and state lawmakers over the past year.
Many of the steps they said would patch previous budget deficits have failed, creating a $6.3 billion hole in the current fiscal year ending June 30.
Legislative Analyst Mac Taylor said lawmakers should consider extending temporary taxes such as the 1 percent vehicle license fee. He said they need to look for longer-lasting and more realistic budget cuts. And he suggested lawmakers could go back to voters with a straightforward request to untie legislators' hands when it comes to cutting currently protected mental health and early childhood development programs, The Associated Press reports.
It was also reported, the current year’s gap comes from several provisions in the budget that won’t result in projected savings or won’t generate anticipated revenue. For example, the budget counts on $1 billion by privatizing a quasi-government agency that sells workers’ compensation insurance to companies. State officials have said they don’t expect that transaction to occur this year. Also, the state won’t realize $1 billion in budgeted savings from prison spending after lawmakers failed to pass the supporting legislation.
Tax-exempt, 6 percent bonds that California sold in April and due April 2038 traded today at a price to yield 5.52 percent, compared with about 4.66 percent on Oct. 6, according to data reported to the Municipal Securities Rulemaking Board.
Yields on AAA municipal bonds due in 5 years slid 2 basis points to 1.94 percent, the lowest since Oct. 14, according to a Bloomberg Fair Value index. A basis point equals 0.01 percentage point, Bloomberg reports.
Analysts say that so far this fiscal year revenues have been disappointing and the state's economy, which would be the world's eighth largest if California were a country, suggests revenues will weaken further.
The state's unemployment rate is in the double digits and there are signs seen in reduced spending and sales taxes that the recession is pinching the wealthy as well.
Schwarzenegger had pegged the deficit for the remainder of the current fiscal year at between $5 billion to $7 billion. His finance advisers had previously said the government would see a $7.4 billion gap in the next fiscal year beginning in July.
Schwarzenegger said he had no plans to seek public office after his term ran out next year. He stopped off in Milan, Italy's fashion and financial capital, after a visit to the Middle East, Reuters reports.