California $16 Billion in the Red

0 May 13, 2012  State & Local Construction, Uncategorized

While many states have found ways to balance their budgets, California Gov. Jerry Brown (D) reported yesterday that California has a $16 billion mid-budget cycle deficit.  Nearly all 50 states, including California, are required to balance their budgets, so this news will likely trigger some combination of spending cuts and significant tax increases.

Here are the highlights from The LA Times, with my emphasis added:

Gov. Jerry Brown announced on Saturday that the state’s deficit has ballooned to $16 billion, a huge increase over his $9.2-billion estimate in January.

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“This means we will have to go much further, and make cuts far greater, than I asked for at the beginning of the year,” Brown said in the video.

Lawmakers and others were hoping that a rebounding economy would help the state avoid steep cuts to social services. But revenue in April, the most important month of the year for income taxes, fell far short of expectations, leading to a shortfall of at least $3 billion in the current fiscal year.

The state has also spent $2.1 billion more than expected, according to the controller, further worsening California’s financial health.

Advocates involved in budget discussions say they expect deeper cuts to social services than Brown originally proposed in January. Union officials are also in negotiations with administration officials about ways to reduce state payroll costs, an issue that wasn’t on the table earlier this year.

Brown has said there will be even deeper cuts, mostly to public education, if voters do not improve tax hikes in November. He is seeking a quarter-cent increase in the state sales tax for four years and a seven-year hike on incomes of $250,000 or more that will range from 1 to 3 percentage points. He says the measure would raise $9 billion in the upcoming budget year.

What does this have to do with wasteful and discriminatory project labor agreements (PLAs)?

Regular readers of this blog know that many California leaders at the state and local levels go out of their way to mandate the use of PLAs on public construction.  Recently, Gov. Brown signed bills that attempt to overturn the will of local voters and elected officials in 12 California communities by nullifying PLA mandate bans in general law localities, and attempting to deprive charter cities of state funding for construction.

California has the most dire state budget situation in America, at a time when most states have already turned the corner.  This should not be a surprise to anyone.  Governing has consequences.  If government officials are comfortable spending nearly 20 percent more for public construction projects just to help out construction union bosses, it is obviously that getting value for the taxpayers’ money is not a priority.

And that is how you end up with a $16 billion budget deficit.

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