Wyatt Buchanan, Chronicle Sacramento Bureau
Friday, November 11, 2011

Sacramento –State Controller John Chiang delivered bad news Thursday when he reported that the state is collecting much less in taxes than expected so far this year, and he warned that mid-year trigger cuts to social services and higher education appear more likely to happen.

For the first four months of the fiscal year, California has collected $1.5 billion less in revenue than anticipated, Chiang said. Tax revenue for the month of October alone was short nearly $811 million.

Other state financial officials say it is too soon to predict whether trigger cuts will be needed and that month-to-month cash projections are increasingly unreliable, even as advocates for those who would be most impacted by the cuts say they are preparing for them.

The trigger cuts happen automatically Jan. 1 if revenue is projected to fall short by $1 billion for the entire fiscal year, according to the budget legislation signed by Gov. Jerry Brown in June. The University of California and California State University systems would each lose $100 million in state aid. The department overseeing people with developmental disabilities and the In-Home Supportive Services program, which overlap with clients, would also lose $100 million each. Those cuts would come on top of reductions made earlier this year.

A second round of trigger cuts, affecting K-12 public schools and community colleges, would occur if that projected shortfall increases to $2 billion.

But the “projection” term is key: It refers to what financial officials predict will come into the state treasury by June 30. That prediction will come over the next two months through a forecast produced as soon as next week by the Legislative Analyst’s Office, and the Department of Finance’s forecast, which will be made public in December.
Pulling the trigger

The decision of whether the trigger cuts take place will be made by Ana Matosantos, director of the Department of Finance, by Dec. 15. In the closing days of budget negotiations last June, Brown projected that an additional $4 billion of revenue would come to the state, but he demanded the triggered cuts if that money did not materialize. Critics called it “phantom money.”

In total, the budget is based on the state receiving $88.4 billion this fiscal year.

Chiang acknowledged that the fiscal year is only a third over, but he said shortfalls on the front end don’t help.

“Obviously, the estimates of what’s going to occur in the back half of the fiscal year is critical,” Chiang said, adding that, “when you have the two big fiscal months of the year being April and June, it’s better to have a cushion against the estimates than to not have a cushion.”

In addition to the shortfall, Chiang noted that the state has spent $1.7 billion more than budgeted so far this year, though he said there may be a simple explanation for that. It may be due to the timing of when some payments were made, such as a payment scheduled for early November that actually went out in late October, but Chiang said that is something he is still trying to determine.

He said if the payment “was something unforeseen or not in the normal trend, then that’s a matter of great concern.”
A matter of timing

H.D. Palmer, spokesman for the Department of Finance, said most of that amount is due to timing, though about $400 million is attributable to delays in federal waivers for spending on programs like Medi-Cal.

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