California Seal

Capitol Alert
The latest on California politics and government
May 17, 2013

Legislative Analyst Mac Taylor projected state revenues Friday that are $3.2 billion higher than those projected by Gov. Jerry Brown this week in his revised budget proposal.

The difference translates into $400 million for the current fiscal year and $2.8 billion for the year that begins in July. The projection sets up a potential battle between Brown and fellow Democrats in the Legislature. who want to spend more than he proposes.

Both Brown and Taylor urge fiscal restraint, however, because revenue projections are largely dependent upon economic factors ranging from employment to housing prices. Both also agree that the bulk of the money will go to schools under state law.

Brown, in his new proposal, had lowered projected revenues by $1.8 billion from his January estimate.

Though tax revenue has run about $4.5 billion ahead of projections through April, Brown said much of that money is unlikely to carry over into future years.

The Democratic governor attributed much of this fiscal year’s tax windfall to wealthy taxpayers shifting income from 2013 into 2012 to avoid higher federal tax rates.

Revenue projections are pivotal for crafting a budget deal with Democratic legislative leaders, who face heavy pressure from social service advocates to restore key safety net services slashed during California’s budget crisis.

Assembly Speaker John A. Pérez, in a written statement, said that the LAO”s projections are consistent with his own expectations. He vowed to work with the Senate and Brown’s office to craft a “responsible budget.”

“No one should interpret these figures as an automatic green light to increase spending, but rather to pay off debt, build the reserve, and strengthen the middle class – key principles of our (Assembly budget blueprint),” Perez said of the LAO’s analysis.

The gap in revenue projections between Taylor and Brown is due partly to differing views of California’s near-term economic prospects and partly to the LAO accounting for sharp recent increases in stock prices.

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