Golden State Faces $20 Billion in Red Ink

The California Legislative Analyst’s Office recently issued a report stating that the state’s General Fund is going to come up $20 billion short when its present budget ends.

The report said officials are going to need to deal with the red ink in the next few months before the legislature negotiates and adopts its next budget for the 2010-2011 fiscal year.

The report said the shortfall is largely due to the fact that the state has not been able to implement some of the measures negotiated when legislators forged the present budget. Those measures included a planned sale of the state workers’ compensation insurer, State Compensation Insurance Fund.

The report also noted that the state prison system and the Medi-Cal program have not been able to achieve anticipated savings.

The report said the impact of the shortfall could last for a long time if not addressed. Although the state economy appears to be growing somewhat, it is growing slowly, and spending is expected to outpace revenues for several years. At the same time, the state has skyrocketing costs for retired workers and for debt service, the report noted.

The California Budget Project said the report highlights the fact that the state must reform prisons and should consider cutting tax breaks given recently to some major corporations.

“It’s also clear that California cannot afford to subsidize the state’s largest and most profitable corporations through the tax cuts enacted in September 2008 and February of this year,” said Jean Ross, the executive director of California Budget Project, in a statement. “The Legislature should repeal corporate tax cuts that were included in these budget agreements that could cost the state as much as $2.5 billion per year when fully implemented.”

Topics California