Governor Jerry Brown

By Shane Goldmacher, Los Angeles Times
August 10, 2011

Reporting from Sacramento — California’s tax revenue plummeted in July, missing expectations by nearly $539 million and raising fears that deep education cuts will be needed to keep the state budget balanced.

The bad news, announced Tuesday, came less than two months after Gov. Jerry Brown and state lawmakers patched together a budget on the assumption that a budding economic recovery would produce a $4-billion revenue windfall. Those hopes are now fading.

The plunge occurred before the recent Wall Street gyrations that wiped away many of the year’s stock-market gains. If the economy remains sluggish and the $4 billion does not materialize, cuts in public schools, universities, libraries, child care, and services for the elderly and frail will automatically take effect.

“Every drop in revenues puts us closer to the drastic trigger cuts that could be imposed next year,” state Controller John Chiang said in a statement accompanying his July revenue report.

In Washington on Tuesday, the Federal Reserve sharply downgraded its outlook for the American economy, predicting a “slower pace of recovery” than previously forecast.

California’s education cuts will kick in if finance officials determine revenue to be $2 billion or more below expectations as of December. If enacted, the $1.5 billion in school reductions could shrink the academic year by as many as seven days in some districts.

If revenue is $1 billion below expectations, community college fees will rise by $10 per unit, in-home care for disabled and elderly Californians would be reduced further, and state grants for local libraries would be eliminated, among other measures.

“Clearly, the events of the last couple weeks have not been good ones,” Mac Taylor, the Legislature’s nonpartisan budget examiner, said in an interview. But he urged people not to place too great an emphasis on data from a single month.

“It’s still early,” Taylor said.

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