In keeping with the notion that California leads national trends, states hit hard by the foreclosure crisis that have taken desperate measures to shore up their budgets. Arizona and Colorado are highlighted in this article but a total of 22 states have reported revenue shortfalls for the current fiscal year. Economic crunches tend to be worst in states 12 to 24 months after a recession. With tax revenues lagging, the worst is apparently yet to come.
November 01, 2009
LOS ANGELES - Just three months after Gov. Arnold Schwarzenegger cut, taxed and line-item-vetoed away a two-year budget gap of $26 billion, California faces billions of dollars in new shortfalls, with the problem likely to deepen in the next fiscal year.
At a recent conference here on the condition of California's fiscal health, the state treasurer, Bill Lockyer, called the budget "a train wreck." And, he added, "It's going to get worse."
California finance officials say the state is facing a shortfall of roughly $7 billion for the current fiscal year, which ends on June 30, and several estimates have that gap ballooning to between $10 billion and $20 billion the next fiscal year.
Like many other states around the country, California is facing continued revenue shortfalls as personal income and corporate taxes falter. But California lawmakers are also facing the implosion of expected cost savings, as lawsuits and other factors have reduced or eliminated savings that were figured into the budget passed in July.
For instance, the budget called for moving at least $1 billion earmarked for transportation uses into the general fund, a move challenged by transit advocates, who have prevailed in court. Further, the state was recently enjoined from making an $80 million cut to social service programs. Then there is the assumed revenue from the sale of part of the State Compensation Insurance Fund, a move that the state insurance commissioner, Steve Poizner, has filed a lawsuit to block.
California's Fiscal Health Continues to Deteriorate, Despite Many Deep Cuts
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