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UPDATE: Gov. Brown Unveils New Budget in Face of $16 Billion Deficit

Dawn Megli |
May 13, 2012 | 1:21 p.m. PDT

Executive Producer

Gov. Jerry Brown unveiled his revised budget plan Monday which relies heavily on increased sales and income tax from a proposed November ballot measure to avoid cuts to K-12 and higher education. 

Brown said other cuts to social services were unavoidable. According to the San Jose Mercury News

He proposed cuts to hospital and nursing home funding to lower MediCal costs; a 7 percent cut in In-Home Supportive Services; barring colleges and universities that can't meet minimum performance standards from taking part in the Cal Grant program; reducing state workers' pay by 5 percent through contract renegotiations; and using assets that used to belong to local redevelopment agencies, among many other efforts, to help fill a $15.7 billion budget gap.

His measure calls for a five-year increase in income taxes for those making $250,000 or more per year and a four-year, half-cent increase in the state's sales tax; 89 percent of the new revenue would go to K-12 education, and 11 percent would go to community colleges. Asked whether he wishes he had asked for more money in this November's ballot measure, he replied it's a balancing act: "This is a matter of judgment — what will the people vote for, what is fair, what will address our budget problems?"

Projections of the state's budget deficit have swelled from $9 billion in January to the most recent estimate of $16 billion. 

The increased estimate is due to tax revenues which were $3.5 billion below expectations, according to the Los Angeles Times. At the same time, both lawmakers and the courts prevented cuts to healthcare programs. The state has spent $2 billion more than expected. 

"We will have to go much further, and make cuts far greater, than I asked for at the beginning of the year," Brown said in a YouTube video on Saturday. 


The budget shortfall means Brown will have to revise the $92.6-billion proposal he presented in January down to between $85 and $90 billion. This has both educators and healthcare advocates concerned that Brown's new budget will be the "anti-Christmas."

But for news outlets like Politico, the manner in which Brown delivered his message was as significant as the announcement itself. Brown, who started in California politics while Ronald Reagan was governor, has used YouTube and Twitter to connect with constituents just as he did during his campaign. 

It is unknown how Brown will propose to close the deficit. But he used his YouTube video to push support for a referendum scheduled for November.

"We can’t fill this hole with cuts alone without doing severe damage to our schools," Brown said. "That’s why I am bypassing the gridlock and asking you the people of California to approve a plan that avoids cuts to schools and public safety."

According to the SF Examiner:

California is expected to raise $7 billion in new revenue if voters approve a ballot measure in November that would increase the state tax rate on earnings above $250,000 and the state sales tax.

Original measures which were expected to balance the budget were cuts of $4.2 billion in health, welfare and education spending.

If the tax increases are rejected by voters, Brown had suggested further spending cuts for another $5.4 billion mainly focusing on schools, communities colleges and state’s two university systems.

S&P rates California’s general obligation bonds A minus with a positive outlook which was reviewed from stable in February.

One reason for optimism, however, is Facebook's impending IPO. Revenues from stocks held by California residents may reach $2 billion, adding much-needed taxes to state coffers, according to the Economist. Facebook will announce its final pricing on Thursday and trading will begin Friday. 



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