Budget Hole of $13 Billion, Mid-Year Cuts to Public Schools Required, Legislative Analyst Predicts

State revenues will be $3.7 billion less than expected, triggering $2 billion in cuts – more than half to public schools – according to an economic forecast issued by the Legislative Analyst on November 16.

The gloomy assessment of the 44-page California’s Fiscal Outlook includes the state ending this fiscal year with a $3 billion deficit and being an additional $10 billion short of spending commitments in the next fiscal year, which begins July 1, 2012.

“One year ago, we wrote that the U.S. economic recovery was progressing more slowly than previously expected. Once again, we have to make the same observation,” the analyst says.

The annual forecast takes on greater significance this year because it’s one of the yardsticks used in determining whether to impose a series of as much as $2.5 billion in spending cuts approved as part of the budget signed by Gov. Jerry Brown on June 30.

As part of the budget deal, lawmakers and the Democratic governor said an additional $4 billion in revenue would materialize during the current fiscal year. If it didn’t a series of cuts would be automatically imposed to close most of the gap.

Brown’s Department of Finance is also completing its forecast. The higher of the two will be used to determine whether cuts will be made and, if so, how much.

A decision is required by December 15.

“Some level of trigger cuts will likely occur but the exact amount will be known in December,” said Ana Matosantos, Brown’s finance director, in a statement.

Two tiers of triggered cuts were created by the budget deal.

The first round of $601 million don’t impact public schools, which have been shorted at least $17 billion over the past several fiscal years, according to a June 2010 survey of nearly 390 districts by the state Department of Education.

One-third of the first round of cuts fall on the University of California and the California State University System, each shouldering $100 million reductions. Also cut by $100 million each are services to the developmentally disabled and in-home care.

Under the analyst’s predictions, the estimated revenue shortfall is well over $2 billion, the level at which public schools are affected.

The budget called for elimination of up to seven public school days for a savings of as much as $1.5 billion. State support for home-to-school transportation would also be cut by nearly $250 million.

The analyst says school transportation will be cut by $248 million and general support for schools by $1.1 billion, reducing the loss of instructional days.

 A $1.1 billion cut is approximately $180 per pupil. 

To avoid cuts to public schools the Brown administration’s revenue projections must be $1.7 billion higher than the analyst.

“Fewer children will get the child care critical to a good start in life, more families will have to scramble to get students to and from school and pupils will likely find more crowded classrooms once they get there,” said State Superintendent of Public Instruction Tom Torlakson in a statement. “That’s not the world-class education California’s children deserve.”

More than half of the projected budget shortfall for the next fiscal year stems from the state owing public schools $6 billion more under the formulas dictating the state’s annual contribution.

Elsewhere, the analyst predicts California’s unemployment rate will stay above 10 percent through 2014

 “Today’s news is no surprise.  Our economy’s sluggish growth means a tax windfall is unlikely,” said Controller John Chiang. “The governor and lawmakers were smart to backstop their hopeful budget projections with mid-year cuts but they may not have gone far enough.”

Brown and lawmakers were praised by the analyst for their actions on the budget this year, which halved the projected shortfalls in future years.

“By making very difficult budgetary decisions  — including the trigger cuts – the Legislature and the governor have strengthened the state’s fiscal condition considerably,” the analyst says.

Said Brown: 

“California’s budget gap is the result of a decade of poor fiscal choices and a global recession. This year, we cut the problem in half. Next year, we’ll continue to make the tough choices necessary until the problem is solved.”

 Now, instead of operating shortfalls of $20 million, California faces holes of between $8 billion and $9 billion, the analyst predicts.