California’s budget deficit has grown another 10%, from $14.5 billion to $16 billion. Why? Because all sources of tax revenues are down: sales tax, personal income tax, and corporate income tax. This will be the year that our Legislature has to make tough choices—band-aid fixes will no longer work.
The non-partisan Legislative Analyst, Elizabeth Hill, doesn’t think that Governor Schwarzengger’s 10% across the board budget cut will work. She proposes “a combination of cuts and $2.7-billion in new taxes, including reducing tax credits for dependents, adding a dime to every gallon of gasoline bought in the state, increasing tuition by 10-percent at all Cal State and U.C. campuses and closing the yacht tax loophole.”
There’s no way that this budget deficit will be closed without major program cuts. The math just doesn’t work without them. And there are many, many programs that a state shouldn’t have that California does. I’ll post about that over the weekend.
In any case, I think we’re going to have a very bad budget season in Sacramento. And we will see some new taxes and major cuts. Businesses will again start looking across the borders to Arizona, Nevada, and Oregon (and elsewhere) if the tax increases are too high.