California’s Budget Shortfall Estimated at $14 Billion

by Rene Villaroman/

SACRAMENTO — Governor Arnold Schwarzenegger reportedly told a gathering of social services advocates in Sacramento on Tuesday that California’s expected budget shortfall has widened to $14 billion, according to the Los Angeles Times. The budget crisis is feared to be the worst since Schwazenegger took over in 2003.

The State Legislature’s chief budget analyst has computed that the State is on track to come up with a $10 million shortfall by the end of the state’s next fiscal year. The shortfall would equal more than 12 percent of California’s budget if spending continues to rise as projected.

Last month, Legislative Analyst Elizabeth Hill suggested to legislators to considering doing without some State programs created in recent years like abolishing tax breaks, raising taxes and cutting benefits for beneficiaries of government programs. The centerpiece of Schwarzenegger’s campaign is not to raise taxes.

Gov. Schwarzenegger reportedly told the group that he wanted to try reducing spending evenly across the State’s programs, including running prisons, providing healthcare for the poor and the disabled, and paying for public schools. He had also asked State agencies in November to trim at least 10 percent of their spending immediately.

“It was more of a ‘we want a fair and across-the-board approach’ rather than picking on one particular sector,” said one social service advocate.

However, H.D. Palmer, a spokesman for the State Department of Finance, declined to confirm these accounts, saying, “we’re not going to discuss the specific number until the governor has completed briefing the legislative leadership on what we project the scope of the problem will be.”

The spokesman added that he attributed the State’s woes were accelerated because of the housing slump that has lowered property tax revenues, delays in expanding Indian gambling that lawmakers had approved in hopes of earning more revenues.

This State’s budget troubles comes at the heels of the governor’s and Assembly Speaker Fabian Nunez’s (D-Los Angeles) efforts to reach an agreement on how to overhaul the California healthcare system. These efforts have occupied the leader’s focus for almost the entire 2007, having been stymied on how to pay for it and how much it would cost.

The healthcare plan’s details are still unresolved, but it apparently includes a need for businesses to spend 6 per cent of their payroll cost on healthcare. It also includes plan to increase tobacco tax, which would help buying medical insurance for lower-income and some middle-class families, and requires everyone else to purchase private insurance plans. The cost of that healthcare plan has been estimated at $14 billion annually, and proponents that the cost would not affect the state’s budget shortfall in any way.

Observers, however, believe that even if Legislative leaders reach an agreement on healthcare this week, the plan would still face some daunting hurdles, including winning approval in the Legislature and being approved by voters next November.

Blue Cross of California, the State’s largest healthcare insurer, and tobacco companies are reportedly poised to fight the bill if it passes the Legislature.


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