Falling tax revenue could trigger more cuts in Calif.

August 9, 2011 12:00:00 AM PDT
The craziness on Wall Street won't help California's budget any. In fact, new numbers on state revenue suggest that Californians could be facing another budget crunch by the end of the year.

Just one month into the fiscal year and tax receipts missed the mark by more than 10 percent. California collected $539 million less than budget plan projected for July.

While income tax was up, sales and corporate taxes were down. Without Republican approval, the state sales tax rate dropped July 1.

"Obviously, we wanted to be on the upside, above estimates; let's keep a careful watch on the economy," California State Controller John Chiang said.

The lower numbers are worrisome because the state budget Gov. Jerry Brown signed in June relies on a $4 billion windfall. If that doesn't fully materialize by the end of the year, more budget cuts are automatically triggered in January.

Less than $2 billion in extra revenue means public schools will be in session seven fewer days, dropping the school year from 180 days just three years ago to 168 days.

Kids from industrialized countries go to school more than 200 days.

"If the trigger occurs, there will irreparable harm done to a generation of kids," Stanford University School of Education Prof. Linda Darling-Hammond said.

With budgets and lessons already in place, school administrators wonder how to re-adjust in January.

"Are you going to cut the Civil War? Are you going to cut learning T to Z in the alphabet? What exactly are you going to trim out of those 7 days of learning," Visitation Valley Middle School Principal Jim Dierke said.

If $2-$3 billion in extra revenues come in, the academic year stay intact, but then cuts to UC, CSU and certain social programs are automatically triggered -- $100 million apiece.

Optimists, though, point out this is just the first month and things could pick up by December.

"Obviously, there's some concern and we've been assured numerous times that the Legislature is very doubtful the triggers will be pulled," San Fernando Valley teacher Gregg Solkovits said.

Chiang's office believes consumer spending should pick up in the second half of the year, but that could be blunted if capital gains taxes fall with stock market returns.


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