This just in from Bill Leonard:
I had an excellent discussion with Finance Director Mike Genest yesterday. Among things I learned is there is a difference between the way the Department of Finance and the LAO report their Budget numbers, although they arrive at the same conclusions.
On July 24, Legislative Analyst Liz Hill summarized the situation this way:
“Revenues and Expenditures. The budget assumes the state will start 2007-08 with a fund balance of $4.8 billion. It projects $102.3 billion in budget-year revenues, an increase of 6.5 percent from 2006-07. The budget authorizes expenditures of $103 billion, an increase of 1.3 percent from 2006-07. The resulting operating shortfall of $0.7 billion leaves the General Fund with a year-end reserve of $3.4 billion.
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Future Shortfalls Likely. Based on current estimates of the policies reflected in the package, the state would continue to face operating shortfalls of about $5 billion in both 2008-09 and 2009-10, requiring future corrective actions.”
Therefore, under the Assembly approved plan, the state will spend more than it takes in this budget year and only by drawing down reserves is the proposed Budget technically balanced. Unless the Budget deal is modified, we will end the fiscal year with $3.4 billion in reserves facing a $5 billion structural shortfall for 2008-09 and beyond.
In sum, I believe that had the Governor got the Calworks reform he proposed and with the savings paid down the recovery bonds sooner, while protecting public safety and education, then Senator Ackerman and his caucus in the Senate would have voted for the Budget long ago. The choices today are difficult but next year is going to be much harder.
