How Ugly Will Next Year’s Budget Be? Find Out November 10

Recently, Assembly Speaker John Perez predicted the state might face a budget shortfall of between $12 billion and $15 billion during the fiscal year that begins July 1, 2011.

Hopefully, the Los Angeles Democrat is right — although evidence suggests otherwise.

Californians will know whether Perez is or not on Wednesday, November 10, when the Legislative Analyst publishes its 2010 fiscal outlook, which examines the state’s economy and projects the condition of California’s budget for the next five years.

The analyst’s November 2009 Fiscal Outlook paints a very grim picture for the entire first term of Jerry Brown’s governorship.

According to the 2009, forecast, the budget Brown will propose in January must close a $21.3 billion gap — $2.4 billion higher than this year – in large measure because a series of temporary tax increases expire.

The problem for the fiscal year beginning July 1, 2011 is also compounded by the state no longer receiving billions of dollars federal economic stimulus funds.

Some 25 percent of this year’s budget “solution” is premised on the receipt of $5.4 billion in additional federal funds. So far, California has received just $1.3 billion.

Passage of this year’s budget more than three months late also means that one fourth of the savings from $7.8 billion in spending reductions won’t be realized.

Unemployment has not decreased. And while tax receipts are expected to be $1.4 billion higher than May estimates, that boon has already been factored into this year’s budget.

Last year, the legislative analyst also predicted for the fiscal year beginning July 1, 2012, the hole would deepen to $23 billion because the state must pay back nearly $2 billion it borrowed from local governments to “balance” last year’s budget.

The gap falls to $20 billion in the fiscal year beginning July 1, 2013 and to $18.4 billion the following year.

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