Governor Presents Plan to Close State Budget Gap

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CalChamber Comment

California Chamber of Commerce President and CEO Allan Zaremberg commented, "We appreciate Governor Brown’s frank assessment of the situation California faces.

"As we delve into the details of what the Governor has proposed, we will need to carefully weigh the cumulative impact of the budget proposals against their impact on the economy.

"We must remain focused on California’s need for continued investment in private sector job growth, since private sector job creation is the key to long-term budget solvency."

Governor Brown described his proposed cuts as "painful, requiring sacrifice from every sector of the state, but we have no choice." He commented, "For 10 years, we’ve had budget gimmicks and tricks that pushed us deep into debt. We must now return California to fiscal responsibility and get our state on the road to economic recovery and job growth."

Characterizing his realignment plan as "vast and historic," the Governor said it will return decisions and authority to cities, counties and schools, and "allow government at all levels to focus on core functions and become more efficient and less expensive" by reducing duplication of services and administrative costs.

Cuts/Realignment

The proposed budget maintains K–12 education funding for 2011–12 at the same level as 2010–11.

Other proposed budget items of interest to job creators include:

• The proposal to extend for five years the increases in the personal income tax, sales tax and vehicle license fee rates, subject to voter approval this June, when the tax hikes would otherwise expire. The Governor estimates continuing the increase will raise $9.19 billion through 2011–12. Business would pay about a third of the total tax increase.

• Phasing out the state’s authority for local redevelopment, which the Governor estimates will return $1.7 billion for state use. He proposes instead that a constitutional amendment be adopted in 2012 to give local voters the option to raise funds for economic development with 55-percent voter approval. Existing project contracts would not be affected. Redevelopment funding has been used to help reinvigorate downtown economies throughout California.

• Repeal of enterprise zone tax credits, restoring $924 million to the state’s General Fund through 2011–12.

• Mandating the single sales factor method for multistate/multinational companies to determine their California income for tax purposes. Current law allows companies to choose between two methods. The Governor estimates the mandate will yield $1.4 billion for the state’s General Fund through 2011–12.

• Reductions of $500 million each for the University of California and California State University systems, assuming the tax extensions pass in June. The UC president reports that the state’s annual per student contribution will, for the first time in the university’s 143-year history, be less than what students pay for operating expenses. For CSU, the reduced support is equivalent to 1999–2000 levels, although there are nearly 70,000 more students, according to the CSU chancellor.

The Governor’s full budget proposal is available at www.ebudget.ca.gov.