May Revise Today, Backgrounder & Webinars Tomorrow - May 14, 2012

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May 14, 2012

Dear Colleagues,

Today, the 2012-13 budget sprint begins as the governor releases his "May Revision" to the budget proposed in January. The press conference is expected at 10am and can be watched on the website. The details should be available at around the same time.

We'll be sending out an update this afternoon, and you can still register for one of our two budget webinars tomorrow at 10am and 3pm.

Here's a stage-setter for today's budget release that I wrote to some friends (pardon the casualness!):


In case you took time off the Interwebs to play in your garden, you might have missed the governor's message to the people via "The YouTubes," as mom might say. The message: the deficit is now $16 billion, rather than the $9.2 billion projected in January. The increased deficit is due to 1) lower revenues in the current year, 2) lower projected revenues in the budget year, and 3) increased expenditures in the current year due to court decisions and higher workload in health and human services.

Okay, since most of us have been watching politics and not the budget, let's do a reset. The governor proposed to close the January gap by making $4.2 billion in cuts and $6.9 billion in tax increases. The LAO initially said that the receipts from the tax increase would only reach $6.9 billion at the top of the projection range of $4.8-6.9b. Meanwhile, advocates for an alternative tax on millionaires got a $6-9.5 billion scoring from the LAO in 2012-13.

As the tax debate continued, Assembly Democrats rejected more than $2 billion of the governor's $4.2 billion in cuts, primarily to health and human services and Cal Grants.

In March, the governor and proponents of the "millionaires tax" combined forces on a plan to raise sales taxes by 0.25% for four years and personal income taxes on earnings over $250,000 for seven years. The LAO scores the receipts for this tax in 2012-13 as between $6.8-9 billion. Thus, if the governor takes the high end of the range as he did in January, he would need $7 billion in cuts even if the tax measure passes. This is an increase in cuts of $2.8 billion, assuming he could get the votes for the original cuts that Assembly Democrats have bucked.

The governor's January plan relied on "trigger cuts" to balance the budget in case the November ballot measure failed. Specifically, $5.4 billion would be cut, including $5.2 billion from K-University education. Assuming the governor uses the "best case" revenue scenario of $9 billion for the compromise tax plan, he would need at least $2.1 billion more in trigger cuts based on the January framework. And, it is unclear if the original $5.4 billion in triggers would be accepted by the Legislature, as it relies on changing precedent by requiring general obligation debt service to schools to be paid for under the Proposition 98 guarantee. Further, the Proposition 98 guarantee may actually have increased from the January proposal.

This is my seventeenth state budget and, while the headline numbers are smaller than in past years, the options are far fewer. While there will be a sprint between June 6 (after the election) and mid-to-late June to ensure legislator paychecks continue, I have no clue how you begin to assemble the votes for this spending plan.


Scott Lay
President and Chief Executive Officer, The League
Orange Coast College '94

Community College League of California
2017 O Street, Sacramento, California 95811
916.444.8641 .

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