Because of California’s sluggish economic growth, this year there will be around $ 3.7 billion less that forecasters expected for state expenditures, according to a report by the Legislative Analyst Office (LAO). The independent office said the state’s lethargic economy was primarily due to a weakness in the housing market, construction industry and financial services sector.
The report says the shortfall triggers $2 billion in budget cuts beginning with the following reductions:
$100 million University of California
$100 million California State University
$100 million for funding developmental services
$110 million In-House Support Services
$99 million California Department of Corrections and Rehabilitation
$30 million for community college staff
$17 million for child care
$16 million to libraries
$15 million for prosecutors
$15 million in Medi-Cal
$6 million for pre-schools
Furthermore, the LAO said that the state will need to address a $12.8 billion budget deficit between now and the time that the state adopts a 2012-13 budget plan. The report acknowledges that the state faces an ongoing, multibillion-dollar annual deficit, even as revenues expand.
The LAO recognizes that there are few easy options for balancing the state budget. Accordingly, the remaining work of eliminating the state’s persistent, annual deficit will require complicated cuts in expenditures and/or increases in revenues.
The report concludes that if the Legislature and the governor were to find a solution to the state’s ongoing budget deficit problems, they could focus on solving some of the state’s long-term problems.
Finally, some of the report’s warnings are predicated on whether the “congressional super-committee” would come up with a federal deficit reduction plan, and extend the federal payroll tax holiday; however, these plans have stalled and will significantly affect California’s budget negatively.