California’s deficit balloons to $10 billion amid slowing economy

first_imgSACRAMENTO – California’s budget picture has deteriorated significantly since the summer amid a slumping housing market and slowing economy, leading to a nearly $10 billion revenue shortfall, the state’s legislative analyst said Wednesday. Without immediate spending cuts or other fixes, the state’s $4.1 billion reserve will evaporate. California will be nearly $2 billion in the red by the time lawmakers vote on a new budget next summer, according to the analyst’s report. In addition, the shortfall for the budget year that will begin next July has mushroomed by more than 50 percent, leading to the combined $10 billion shortfall for the two fiscal years. That’s more than the state spends for the University of California and California State University systems combined – about $7.2 billion for the current fiscal year. He ordered state department heads to draft plans for a 10 percent across-the-board reduction. If enacted, it would be the largest round of budget cuts since Schwarzenegger took office after the 2003 recall of then-Gov. Gray Davis. The state had faced a projected $5 billion to $6 billion deficit in 2008. Schwarzenegger’s administration has in recent months warned that the continued housing slump and weakened credit markets could exacerbate that shortfall. Some analysts said the governor should have seen the problem coming sooner. When Schwarzenegger signed the state’s overdue spending plan in August, he touted it as a balanced budget. Even before then, however, turmoil in the housing and credit markets had begun biting into state tax revenue and threatening to make next year’s budget even worse. Economists warned that the continuing decline in new home sales and construction, layoffs and bankruptcies in the mortgage-lending industry, and an increasingly volatile stock market had begun erasing revenue that lawmakers assumed would materialize to cover California’s $145 billion budget. Falling revenue will make it harder for lawmakers to close the gap without considering painful cuts to schools, transportation projects and an array of social services. Schwarzenegger said his administration has been studying ways to address the deficit. “I have not made any final decisions yet, but it’s clear that the decisions that will be involved will be tough,” the governor said in a statement. “I have a constitutional requirement to submit a balanced budget to the Legislature in January, and I will fulfill that responsibility.” He also said the revenue forecast should be an incentive for lawmakers to reform the state’s budgeting process. During last summer’s budget stalemate, Republican and Democratic legislative leaders said they were open to doing so. In many ways, the state’s budget is besieged by what economists view as the delayed effect of the depressed housing market on California’s economy. Despite more than two years of warnings about a housing bubble and more than a year of sluggish home sales across the state, California’s coffers had until recently seen few ill effects of the housing downturn. As recently as May, Schwarzenegger’s finance team revised state job growth figures upward, saying there was little evidence that problems related to housing and lending would spread to other parts of the economy. That forecast now seems overly optimistic. State cash flow figures released Wednesday show revenue is off more than $1.1 billion since August. 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREStriving toward a more perfect me: Doug McIntyre The future looks equally grim, with multibillion-dollar deficits projected to spiral upward for the rest of the decade, Legislative Analyst Elizabeth Hill said. “Addressing the state’s current budget problem is even more urgent because we forecast a continuing gap between revenues and expenditures,” Hill wrote in her analysis. Assemblyman Roger Niello, vice chairman of the Assembly Budget Committee, called the legislative analyst’s report a wake-up call for lawmakers. “We cannot continue to put off the tough decisions required to get our fiscal house in order without facing serious consequences for our state,” he said in a statement. “While tax revenues to the state have softened, the problem continues to be overspending. We must get our spending in line with revenues.” Gov. Arnold Schwarzenegger last week directed state agencies to prepare for possible deep spending cuts. last_img read more

No protests against President Chinchilla in Guanacaste celebration

first_imgNo major incidents deterred President Laura Chinchilla from celebrating the 188th anniversary of the annexation of the Northwestern province of Guanacaste.Nicoya Mayor Marco Antonio Jiménez, who did not participate the celebration, had announced days ago that civil groups would be on the streets“ in protest against government neglect of the province.” But this did not occur.During the celebration, president Chinchilla signed a decree to declare top priority “a project for the full electrification of the province.”The only protests were peacefully conducted in the cantons of Cóbano, Paquera and Lepanto, where people are asking the Legislative Assembly to have a referendum, which would allow the communities to choose whether they belonged to the province of Puntarenas or that of Guanacaste.Chinchilla said that the project is of high interest for her administration, but in order to be more forward, her government  need to negotiate with lawmaker Agnes Gómez (National Liberation Party) to withdraw some 500 motions filed against the project.On July 25, 1824, the province or “Partido de Nicoya,” residents voted to make the region today known as Guanacaste, part of Costa Rica. Facebook Comments No related posts.last_img read more