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No Tax Increases In New California Budget, But Plenty of Spending Cuts

Staff Reporters |
June 29, 2011 | 3:15 p.m. PDT

The state of California finally passed a budget on time, but that might be one of the few good things anyone has to say about it, despite the fact that there are smaller holes than usual 

According to Reuters: "If a compromise is something that no one likes, California has achieved one: Governor Jerry Brown, both political parties and even investors have plenty to complain about in the spending plan."

The budget, passed late Tuesday, closes a $10 billion budget deficit while avoiding tax increases. However, it will force deeper cuts to state services if the economy does not improve. Whether or not there will be cuts ultimately hinges on the gamble that California's recovering economy will generate $4 billion in revenues.

Both Republicans and Democrats were far from thrilled with the state's new spending plan.

 "This budget fails to include any of the reforms that Republicans have been seeking since January — reforms that address our massive unfunded pension liabilities and reforms that reduce our regulatory (burden) so we can put people back to work and make sure that California businesses thrive in this state," Republican state Sen. Mimi Walters said. "The budget before us is more of the same, kicking the can down the road."

"This plan relies primarily on cuts, brutal cuts, which place me and many other members well outside of our comfort zone," Democratic Assemblyman Robert Blumenfield, the chairman of the budget committee, said prior to the vote. "These cuts will forever haunt our consciences."

Brown's initial plan included tax increases, but the strategy was blocked by Republicans. Jean Ross, the executive director of the non-partisan California Budget Project, said it was "deeply disappointing" that the budget did not include "a balanced approach" of cutting spending while also increasing revenues.

"This is a very tough budget for families and communities across California. The new spending plan includes deep reductions to critical public programs and institutions," Ross said in a statement. "These cuts will make it more difficult for young Californians to get the college degree they need to get ahead in the job market, make it harder for kids and families to obtain basic health care, and scale back the social safety net at a time when the economy is still struggling."

One of the areas that will be hit hard by the new budget is the state's public education systems. The University of California and Cal State University schools, which have already seen $500 million in cuts to this year, had an additional $150 million slashed from their budgets. The result will likely mean even more tuition increases for students.

According to The Sacramento Bee:

UC and CSU set fall 2011 undergraduate tuition in November, with UC raising it by 8 percent to $11,124 a year and CSU raising it by 10 percent to $4,884 a year. Students in both systems must also pay an additional roughly $1,000 a year in fees charged by individual campuses.

When Gov. Jerry Brown released his budget proposal in January, both university systems said they could take his proposed $500 million cut without raising tuition any further. But university officials have said for months that cuts beyond $500 million would result in higher tuition.

Now facing a cut of at least $650 million, CSU trustees will likely consider raising tuition again before the fall semester begins, said Robert Turnage, assistant vice chancellor for budget. He said the increase could be around 12 percent – on top of the 10 percent already approved last year.

"Because cuts of this magnitude inevitably will drive up tuition for public university student and their families, we cannot stand silent," UC President Mark Yudof said in a statement.

The $85.9 billion spending plan has been sent to Gov. Brown, and is awaiting his signature.



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