SacBee — Dan Walters
However, Brown’s declaration that the economy is getting better and he doesn’t have to squeeze all automatic spending cut “triggers” also lessened the air of crisis and therefore complicated Brown’s efforts to persuade voters to raise taxes next year.
“The economy of California is recovering,” Brown said as he announced that about half of the $4 billion in questionable new revenue is materializing, adding, “We’re getting wealthier by the day but it’s slower than we like.”
Brown did decree about $1 billion of trigger cuts in state spending on higher education, social services, health care and criminal justice programs, but only a relatively small reduction in school aid, primarily for school bus service.
The tiered trigger cuts were placed into the budget in June because of uneasiness about the $4 billion in extra revenue that the administration suddenly decided was likely, thus avoiding more immediate reductions of that magnitude.
Among other things, bankers wanted more certainty that the state could repay billions of dollars in short-term cash flow loans.
Last month, the Legislature’s budget analyst, Mac Taylor, projected that very little of the $4 billion would materialize, thus triggering massive spending cuts. That had touched off something of a political/media frenzy with some school officials voicing fears about having to stop school early next spring to cope.
However, the budget specified that the cuts would be based on the higher of the revenue estimates from Taylor and Brown’s budget boss, Ana Matosantos, so the latter prevailed.
Had Matosantos validated Taylor’s projections, the frenzy would have continued into 2012, but now it will be dampened.
Brown says he will propose a 2012-13 budget in January with “many billions” of dollars in additional spending cuts – he hinted at about $6 billion – but that also assumes voters will approve a $7 billion tax increase in November, with more automatic triggers should the taxes be rejected.
“You can’t provide money you don’t have,” Brown said. “You either cut or you tax. There is no third way.”
If, however, the economy is finally pulling out of recession and personal incomes are increasing – by nearly $100 billion a year, Brown says – would that make passing a tax increase more difficult?
Would voters feel enough better about personal finances to pay more for schools and other public services? Or would they conclude that an improving economy and rising revenues make a tax increase unnecessary?
“I think this is going to be a very difficult campaign,” Brown said.