Ana Matosantos, finance director for Governor Jerry Brown, outlines the Governor’s proposal to balance the state budget this year and into the future at the first CalChamber Luncheon Forum of the year on January 13. Photo by Megan Wood

(January 14, 2011) In focusing on balancing California’s budget “this year and into the future,” Governor Jerry Brown’s budget proposal for 2011–12 proposes the lowest General Fund spending as a proportion of state personal income since 1972–73, state Finance Director Ana Matosantos told a California Chamber of Commerce audience yesterday.

Speaking at the first CalChamber Luncheon Forum of the year, Matosantos said that by the same measure, General Fund revenues are at historic lows as well, projected to be the lowest since 1972–73, except for 2008–09.

The Governor’s proposal calls for $12.5 billion in spending cuts, $13.8 billion in new taxes—including a five-year extension of several taxes that were increased temporarily in 2009—and a realignment of responsibility and spending back to local governments.

Matosantos walked the Luncheon Forum audience through a presentation depicting the magnitude of the state’s budget problem. Without action, the Governor estimates the deficit will reach $25.4 billion in 2011–12, with $8.2 billion carrying in from 2010–11; $19.2 billion in 2012–13; $17.4 billion in 2013–14 and $21.5 billion in 2014–15.

One reason for the projected increased deficit in 2014–15 is a phasing in of the costs of implementing the federal health care reforms, Matosantos explained in response to a question.

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

Maintaining the existing taxes will help stabilize K-12 education funding, Matosantos noted.

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.

	Members of the media interview CalChamber President and CEO Allan Zaremberg following the Finance Director’s budget presentation. Photo by Megan Wood

• 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.

Staff Contact: Marc Burgat