Last week I reported that California’s legislative analyst believed that the Bronze Golden State was looking at a $10 billion deficit. State Senator Tom McClintock (R-Thousand Oaks) thinks that’s wrong. Unfortunately, he thinks California is looking at a $20 billion deficit. Ouch.
Senator McClintock notes that the legislative analyst deducted the $4 billion reserve when computing the $10 billion deficit number so we’re really looking at a $14 billion deficit assuming the assumptions in the budget are correct.
The problem is that the budget assumes the status quo—that California’s revenues continue in 2007 like they did in 2006. That’s an unreasonable assumption. Senator McClintock put it well:
“Revenue growth last year was only 2.3 percent; the LAO admits that the economy will deteriorate in the fourth quarter of the fiscal year; and most ominously, our revenue receipts in the first four months of this fiscal year grew only 0.6 percent compared to the first four months of last year, according to the latest data from the state controller’s office. Even the Department of Finance reports only 1.7 percent growth through October 31st. If revenues continue to come within this range, the deficit will be in the $18 to $20 billion range by June.”