California hit with $1 billion trigger cuts

California will ring in the New Year with nearly $1 billion in trigger cuts after the latest state revenue estimates failed to meet the Budget Act requirements. 

“The trigger cuts are going into effect, but fortunately not the full $2.4 billion but actually slightly less than a billion,” said Gov. Jerry Brown.

The figures released Tuesday by the Department of Finance projected the state revenue to reach $85.2 billion for fiscal year 2011-2012. Although the $85.2 billion exceeded earlier estimates due to increased tax revenues from higher income earners, the projected revenue fell short of the revenue estimate in this year’s Budget Act by $2.2 billion.

“The good news is that the economy of California is recovering,” said Brown. “But it’s still not enough to close the California deficit that has been built up for years.”

As a result, nearly $1 billion in additional cuts will be made to the state’s universities, K-12 education, Medi-Cal, developmental services, and public safety programs between January and June 2012. Education will take the biggest hit with $668.5 million or 68% of the cuts. Health and human services will follow with $210.1 million or 21% of the cuts, and public safety will take in 11% of the cuts with $102.2 million.

“These cuts to universities, to in-home supportive services, to schools, to prosecution – they’re not good. This is not the way we’d like to run California,” said Brown. “But we have to live within our means.”

The trigger cuts are just the beginning. Although the painful cuts have made a significant dent in what was a $26.6 billion deficit, the Legislative Analyst’s Office projected that the state will face a nearly $13 billion budget deficit in fiscal year 2012-2013. To close the deficit, Brown will likely propose billions more in cuts in the upcoming year’s budget, which he will present in January. Additionally, the governor has filed for a ballot measure for temporary tax income and sales tax increases to address the deficit, fund the public safety realignment, and prevent further cuts to education and public safety programs.

“Going forward, we’ll have an opportunity in November for the people to vote [for] additional revenue – almost $7 billion – or not. If they vote [for] the revenue, the our taxes will be extended for a few years. If they don’t, we’ll have even bigger cuts,” said Brown. “So all I can say is that you can’t provide money you don’t have, and that’s really the point here. You either cut or you tax. There’s no third way. There’s no alternative.”

The $980.8 million trigger cuts will include:

Education: $668.5 million 

  • $248 million from home to school transportation
  • $102 million from community colleges apportionments and increasing fees by $10 per unit. The June budget slashed community colleges apportionment by $400 millions, making the total cuts to $502 million for FY 2011-12.
  • $100 million from the University of California. The June budget cut $650 million from the UC system so the trigger cuts will bring the total reductions to $750 million for FY 2011-12.
  • $100 million from the California State University. CSU absorbed a $650 million cut from the June budget, and the trigger cuts will bring the total reductions to $750 million for FY 2011-12.
  • $79.6 million from Proposition 98 apportionment reductions
  • $15.9 million from eliminating state grants to local libraries
  • $23 million from a 4% across-the-board reductions in child care services. (Non-Proposition 98 cuts will be $17.1 million and Proposition 98 cuts will be $5.9 million.) Non-Proposition 98 child care services budget was already reduced by $180 million in June. The trigger cuts will bring the total child care services reductions to $203 million for FY 2011-12.

Health & Human Services: $210.1 million 

  • $101.5 million from in-home supportive services for seniors and people with disabilities, including 20% cut in service hours and eliminating anti-fraud funding. In June, in-home supportive services took a $413 million cut. The trigger cut will bring the total reductions to $514.5 million for FY 2011-12.
  • $100 million from the Department of Developmental Services, the state agency that supports people with developmental disabilities such as mental retardation, cerebral palsy, autism, and others. The department had $567.2 million cut from its budget in June. The trigger cut will bring the DDS reduction to $667.2 million for FY 2011-12.
  • $8.6 million from Medi-Cal – affordable health care for low-income people, children, seniors, and the disabled – by extending reimbursement cuts to providers and requiring co-payments for all managed plans. Medi-Cal already suffered a $2 billion cut in June.

Public Safety: $102.2 million 

  • $20 million from the Department of Corrections and Rehabilitations
  • $67.7 million from juvenile justice programs
  • $14.5 million from vertical prosecution grants (i.e. prosecutors who specialize in gang crimes, sex crimes, homicides, etc.)

Background on the trigger cuts:

Faced with a $26.6 billion deficit at the beginning of the year, the governor and state legislature approved $15 billion in cuts for the fiscal year 2011-2012 budget. The governor had proposed closing the remaining deficit with temporary tax extensions but could not get the four Republican votes needed (two in the State Assembly and two in the State Senate) to place a tax measure on the November 2011 ballot.

To avoid deeper cuts to education and social services programs during a weak economy, the 2011-2012 budget relied on $4 billion in funding from anticipated higher tax revenues. As a compromise, the Budget Act included two tiers of trigger cuts if state revenue falls below the $87.45 billion revenue estimated in the legislation.

The Tier 1 trigger cuts would kick in if the revenue falls short by more than $1 billion; Tier 2 cuts will go into effect if the revenue shortfall is more than $2 billion. The Tier 1 cuts would take away more than $600 million from various education, health and human services, and public safety programs. The Tier 2 cuts would reduce Proposition 98 (K-12 education guaranteed) funding by as much as $1.86 billion.

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5 Comments on “California hit with $1 billion trigger cuts

  1. Pingback: Transcript: CA Gov. Jerry Brown's remarks on passage of Prop. 30 tax increases | What The Folly?!

  2. I’m not paying higher taxes just so police and deputies can continue to rake in $100,000 a year plus excessive benefits and THEN retire at the young age of 50 with 90% of benefits for the rest of their lives while the rest of us can’t retire for an additional 15 years at age 65.

    Message to government bureaucrats… when you reduce the pay of “public safety” people, then I’ll consider voting for more taxes.

  3. Pingback: Gov. Jerry Brown: "California is on the mend" | What The Folly?!

  4. Pingback: Painful 'trigger cuts' likely for California in 2012 | What The Folly?!

  5. Pingback: Competing tax measures could jeopardize Gov. Jerry Brown's ballot initiative | What The Folly?!

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