Governor Calls for Over $17 Billion in Spending Cuts

The Legislature and the Governor – even if the Governor withdraws his veto threat and the Democratic plan is approved – still will need to tackle how to resolve the $20 billion or so remaining deficit – which Genest and other state officials says will grow worse unless immediate action is taken. The Governor and both Democratic and Republican legislative leaders have previously agreed that resolving the remaining deficit will mean more major spending cuts – though Democrats and the Governor also want more revenues – though differ on how that should be achieved.

Never Before Has Budget Information Been Released Officially So Early

Never before has budget information for the next budget year been formally released – even in summary form – so early and on the eve of New Years Day – and the unscheduled press conference by senior Schwarzenegger Administration officials and budget staff reflects what the Governor said earlier that the State was facing as “fiscal Armageddon”.

The release of this budget information at this point is being viewed as another step in a much longer budget process that will likely mean more details and proposed cuts in the coming months, including May.

The Governor previously warned, as did Genest today, that continued inaction on resolving the budget crisis will make the situation worse – and would result in the need for even deeper cuts.

State Controller John Chiang yesterday released a bulletin that warned that California would run out of cash by March 1st and unable to pay its bills to many vendors, including those who provide community-based services to children and adults with disabilities, mental health needs, seniors and low income children, unless the Legislature and Governor took immediate action to resolve the budget crisis.

No Details In Budget Summary

The budget document released today did contain some new proposals that established spending reduction targets without detailing how those targets would be met, including $334 million impacting regional centers. The Governor’s proposals declined to label those targets as a reduction at this point – but a target to keep spending at the level it was budgeted for the current 2008-2009 State Budget year.

Genest did say that the Governor’s proposal does not call for the suspension of the 1988 Proposition 98 – the school funding guarantee in the State Constitution, but would fund public education at the minimum required by the proposition for the 2008-2009 and 2009-2010 State Budget years. Education advocates say that would result in reductions in spending however. It is not certain how those reductions will impact special education for over 650,000 children with disabilities and other special needs.

Other details and proposals will be released when the Governor releases his budget officially next week on January 9th, Friday.

Genest, who oversees the department that puts together the Governor’s budget, said in an unscheduled press conference this morning at the State Capitol that the Governor believes that the immense size of the budget deficit means that “we have to solve this problem with every tool available” including tax increases and spending cuts.

He said the major part of the solutions to bridge the budget gap – estimated at over $41 billion by the end of the 2009-2010 State Budget year (June 30, 2010) is spending cut which he said the Governor felt was “appropriate” because the State cannot spend more than what it brings in as revenue.

Asked by a reporter if the proposals released today that call for massive cuts and also significant revenue increases is meant to drop a “doomsday scenario” to force the Legislature to act, Genest said that “It wasn’t us that dropped the dooms day scenario on the Legislature – it was the economy.” He said he expected further updated budget numbers to be released in the coming weeks to be a “disaster”.

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